Cypher

The new Apple TV media extender is supposed to ship this month, perhaps even by the time you read this column, and if you are like me you are wondering what that 40-gig hard drive is doing inside. I'm guessing we won't know for sure until later this year, though of course I also think I know the secret answer, too.

It will be interesting to hear Apple's explanation for the hard drive. It would make good sense, for example, to keep storage close to the attached TV if Apple had some doubts about the speed of the network connection between the Apple TV box and the Mac or Windows machine running Front Row. If we squint hard and enter a state of suspended disbelief that might be plausible. Only that makes no sense.

The native speed for Apple's 640-by-480 streams is 1.5 megabits per second, which could be easily handled by the Apple TV's 802.11g or 802.11n wireless connections and probably even by old 802.11b. The box's wired connection is 100-megabit-per-second Ethernet. No, it's not a network problem that has Apple putting that drive in the Apple TV; if there's a network problem it is between the host PC or Mac and the Internet, and Apple handles that simply by forcing users to download files, rather than streaming them. To a certain extent with downloaded files, slower doesn't matter.

Apple might tell us that the Apple TV can play video from the hard drive without requiring a Mac or PC on the network. This is an answer that I would believe and I really hope it is the case, because wouldn't it be great to still watch a movie even when your computer isn't running in the next room? And it might be true because Apple loses nothing since you'd still need the host computer to load video into the Apple TV.

Or maybe Apple won't mention the hard drive at all, saying only that it is intended for some future software release. I believe this, too, but people are going to have a hard time paying for hardware they can't even use. So I think it is likely Apple will have at least something we can do with that drive.

At $299 the Apple TV is a pretty expensive video extender, but if you think of it instead as a computer, it is darned cheap. It might, in fact, be the prototype for a whole family of Mac Sub-Minis. We know it has an Intel processor, though nobody says WHICH Intel processor. We know it runs an operating system and has a GUI. It wouldn't surprise me at all if the Apple TV hardware is based on the iPhone, with the exception that the mobile phone transceiver is replaced with Apple's WiFi bits.

We'll know soon enough the answer to these hardware questions as Apple starts shipping and hackers start tearing apart Apple TV's on the day they are purchased. My wish list for those hackers, by the way, isn't to know the clock speed or the type of processor or the amount of memory installed. I want to know the identity of the Apple TV's H.264 decoder chip. There's a lot to be learned from the identity of THAT chip. Remember you heard it here first.

I'll tell you my theory about the Apple TV in a moment, but first I want to riff a bit on the other components in the new ministack -- the Mac Mini and the new AirPort Extreme Base Station. All three components have the same form factor, very similar cases, and they stack beautifully one atop the other. But why? Under what circumstance would you even want to stack all three together? It makes no sense to me.

If you have an Apple TV next to your plasma screen, why do you need a Mac Mini there, too? The Apple TV runs its own GUI and has its own storage for 50 hours of video or thousands of songs and pictures. You may as well put the Mini in another room and connect by WiFi or Ethernet. Or you could forgo the Apple TV and just connect your Mac Mini to the TV through a DVI or S-Video connection and still use iTunes and Front Row: again no stacking required. The AirPort base station makes the least sense of all since the Mini and the Apple TV can communicate ad hoc just fine using 802.11g.

There is simply no imaginable situation where you would want to stack together these three components that are clearly made to be stacked. Unless what you want to do is somehow connect the Apple TV to the Mac Mini through the AirPort at a range of three inches just to take advantage of 802.11n, which the Apple TV and the AirPort Extreme have but the Mac Mini doesn't. Well that's just crazy.

And yet the components are clearly designed to be stacked, so either there is a part of this story we have not yet been told or Steve Jobs is just screwing with our brains.

I wouldn't put it past him.

/.../

/.../ Here is what I think is happening with the Apple TV hard drive. I think sometime this summer Apple will ship a firmware upgrade for the Apple TV and it will suddenly gain an important new capability. That's when the Apple TV becomes a node on the iTunes peer-to-peer video network.

If the Apple TV is plugged in it is turned on. Did you notice that? That means the hard drive will have at least the capability of running 24/7. Now envision a BitTorrent-like file distribution system that is controlled primarily by iTunes, rather than by you or me. A centrally controlled P2P system is VERY powerful because it allows for the pre-positioning of content.

Say Disney releases Cars 1.5 -- a direct-to-DVD release expected to sell millions of copies in its first few days. There is no way iTunes could even hope to participate in a launch like that simply because there isn't enough bandwidth at a good price -- or any price. Even BitTorrent would have troubles handling a small part of such a launch until enough seeds were populated and running. But what if the movie was effectively pre-seeded -- loaded over a few days on a distribution tree of thousands of Apple TV boxes which could then deliver the movie locally at high speed if purchased. Or if not purchased the seeded copies could still work together to serve other Apple TVs on the same ISP subnet.

Go back over my columns for the last three weeks and you'll see nearly all the information required to either understand or implement such a system.
There are products like this already in operation, such as GridNetworks from Seattle or Mike Homer's Kontiki network, now part of VeriSign. It isn't rocket science, but to succeed, networks of this sort need lots of nodes, especially nodes that remain on 24/7.

If you are wondering what Apple might accomplish with such a peer-to-peer distribution system, it would be nothing less than the undermining of TV. First Apple would eliminate its current dependence on Akamai, reducing its network costs for iTunes by about 100X, making the network costs effectively free. Hello HDTV!

Second, Apple would have one or many content channels roughly equivalent to an HBO, Showtime, or perhaps Discovery. Yes, I think Apple will do direct content deals, buying programming that it will then either distribute to subscribers or support with Google ads, thanks to Google CEO Eric Schmidt's position on the Apple board. Apple's network will give you the same content with or without ads, delivered from the same servers, one of which may be underneath your TV.

There are only two forces I can see necessary for this P2P deployment: gaining a big enough installed base of Apple TV boxes and the removal of some or all Digital Rights Management (DRM) code from the content. Gaining a critical mass of Apple TV boxes simply comes down to keeping the real purpose secret until there are 500,000 to 1 million units in the field.

Oops, did I just let that secret out?

And removing DRM is what Steve Jobs started preaching about last week and will continue to do so until he gets his way.

Steve ALWAYS gets his way, you know.

The business case for Apple is downright amazing. Lowering network costs by 99 percent will enable the company to add to its portfolio the equivalent of half a Time Warner. Apple becomes a cable company without trucks or network costs. It becomes a whole bunch of cable networks with an instant audience the exact size of the iTunes registered user base, which is frigging enormous. Add $40 billion to market cap, no waiting.

But I STILL don't know why those components were made stackable.