Welcome to Apple Computer, Inc.
While most eyes at MacWorld were on the iPhone, Apple TV was generating a decent amount of interest as well. I spent some time in front of the many Sony plasma monitors hooked up to demo models of the new set-top box and talked to some Apple product specialists about the device. My impression? Cooler than I thought, but not for me, at least not yet...

"It Basically Plays What an iPod Can Play"
Apple TV has an Intel processor, a 40 GB hard drive, an 802.11n antenna, and a bunch of I/O ports (Ethernet and A/V). It ships with a remote and comes loaded with a proprietary software package that looks a lot like Front Row. Between Apple TV and iPhone, you can't not be impressed with Apple's new breed of user interfaces - the Apple experience is perhaps slicker on consumer electronics than it is on a Mac.

The jist of Apple TV (ATV) is that you use it to watch and listen to content streamed from a computer to ATV, which is hooked up to your entertainment system via analog and digital a/v outputs. ATV supports high definition video content up to 1080i and 720p (so no "Full HD" 1080p) and digital audio output, though neither Dolby nor DTS surround sound formats are currently supported. That could be changed via a software update, but for now it looks like ATV can't handle 5.1/6.1/7.1 movie soundtracks. ATV also basically requires a very new TV set as it lacks the composite or S-Video outputs more common to non-HD sets.

During my demo of ATV I asked about support for various media formats and was told, "It basically plays what an iPod can play. iTunes supports more video formats, but Apple TV can't handle all of them - the iPod is a better comparison." So essentially ATV is a "better" way to get iPod media onto a big screen; sure you can connect your iPod directly to your home theater system, but ATV is a permanent setup with a bundled remote, snazzy UI, and high definition video and digital audio connectivity that hopefully will be of more use down the line.

The built-in hard drive is for caching of media files. You can use ATV without a connected Mac to play back content stored on the hard drive, but 40 GB is the limit (ATV's USB port does not support additional storage via external hard drives). As the Apple rep explained it, "The hard drive is there so that if you take your laptop with you on a business trip your family can still watch movies you've already downloaded to Apple TV. You need another computer to sync content, but once it's synched the hard drive lets you watch and listen to it even when your other computer isn't connected to the network." ATV can also directly access previews from the iTunes Music Store, but only a limited selection. ATV cannot be used to purchase and download iTMS content on its own.

Like iPhone, an Apple Step Towards the Future
The more I think about iPhone, the more I think it's a very cool precursor to an amazing product (I'm hoping that when it actually ships in June, iPhone's specs have been bumped to at least include 3G data connectivity). ATV looks great, but I already have cable TV service with a DVR and On Demand programming, so I have no real need to buy content from iTMS, let alone stream it to my home theater system. The hard drive makes it a little tempting as a stand-alone music server, but I've already got a 60 GB iPod that I don't mind docking and undocking with the various stereo systems in my home. So I've got no real need to worry about dropping $300 on an impulse buy when ATV ships (though I'd be happy to play with a review unit).

That being said, Apple could - and should - make future revisions of ATV quite attractive by way of content partnerships. Netflix comes immediately to mind: While it's doubtful that an Apple-Netflix deal is in the future, if I could rent movies on demand via ATV for a subscription price comparable to what I now pay for Netflix, I'd be very tempted. Apple could easily build a DRM rental scheme into ATV allowing for downloadable content that expires after a certain length of time of number of views. HDTV over broadband isn't too far off, either, and ATV already has the hardware (HDMI, component, and digital audio) to support High Def content; lots of folks would jump at the chance to purchase/rent movies in hi-def without having to go to the store or wait for the mailman to come.

So again, I see ATV as the second of Apple's two MWSF '07 steps to expand into a full-fledged media company. They've got the technical knowhow to build competitive hardware bolstered by state-of-the-art user interfaces. They've got the infrastructure to sell media over the Net. They've got a few deals to distribute video content using that hardware and that infrastructure. So sit back and watch: it'll be really interesting to see what they do to make the experience compelling enough to get consumers to throw down their credit cards and sign up for Apple-branded TV.