We know that you will have to travel far and wide to find an Apple TV in someone’s home — assuming you don’t have one of course. We also know that Steve Jobs officially regards the product as a hobby, something they are working on, testing, enhancing, hoping that it’ll take off some day.

Now as it stands, Apple TV appears to be a pretty neat gadget. Looking for all the world like half a Mac mini, roughly speaking, in terms of height, its purpose is to funnel media from your Mac or PC to your flat panel TV. For that purpose, the newest software updates and other refinements appear to have done the job. Certainly the lower price of admission can’t hurt.

However, where does Apple go from here to improve Apple TV, or is it ultimately a dead end? Now, unless they give us some solid sales figures during their next meeting with financial analysts — and that’s doubtful unless it’s really successful — we’re apt to be left guessing, and with Apple, that’s always plenty of fun.

So what do I mean by modular? Well, basically, the ability to build your own custom Apple TV by the sum of the parts. This would require some sort of docking feature or large case to contain all the components, or maybe a new case design.

Here’s how it will play out: If you want to record TV shows, in the fashion of those ubiquitous DVRs that come from your cable or satellite provider, you would be able to add that capability, perhaps with a module containing software licensed from TiVO. Certainly TiVO’s legal victories against Dish Network for patent infringement would give Apple pause about attempting to develop their own technology when a perfectly good alternative is already available.

Don’t think this is anything unusual. Right now, both Comcast and Cox are busy rolling out TiVO software upgrades for their existing set top boxes. That, no doubt, will protect them from possible patent-related issues too, not to mention the superior user interface that is the hallmark of TiVO’s technology.

Another possible addition to the Apple TV would be CableCARD 2, a two-way standard that lets you receive signals from your cable provider (but not satellite, alas), and also use their VOD (Video On Demand feature). The original CableCARD technology only worked in one direction, from the cable service to you. That, of course, is a trivial endeavor, as the card is a small credit card type component that slides into a tiny slot.

The other part of the equation would be a Blu-ray DVD player. Now, on the basis of his brief comments on the matter during this week’s Mac note-book refresh, Steve Jobs talked of difficult license issues. But certainly it’s also a matter of price. The cheapest Blu-ray players are priced in the same range as the Apple TV, so this would double the price with no real indication that the victorious high definition DVD standard is poised for a major takeoff.

Forgetting the price, that may also be the reason why you’re not seeing Blu-ray in new Macs either, although the drives are readily available from third parties. Apple isn’t going to jump into the fray until they see a real marketing benefit. But if Blu-ray ends up as just another failed format, supplanted by downloadable high definition content, there’s no reason for Apple to spend development dollars on it.

That, of course, has yet to be determined, though certainly the holiday sales results will give the industry a chance to see if Blu-ray has legs.

Adding all these together, of course, means you’ll get a fully-equipped digital media device capable of handling pretty much all the content you’d want. Making it mix and match means you aren’t stuck with the whole shebang, but could buy just the separates that meet your needs. In the end, though, a souped up Apple TV might be regarded as the counterpart to the home theater receiver, where all the electronics are installed in one box, with no option for removal or replacement.

Another possibility would be for Apple to license Apple TV technology to the TV makers.

Now this would make no sense when it comes to personal computers, since Mac hardware sales would be gutted. I realize some tech pundits keep talking of operating system licensing, but we all saw what happened the last time Apple tried that in the last decade. Unless Psystar, that upstart company selling generic PCs equipped with Mac OS X, somehow emerges victorious in its legal action with Apple, this simply won’t change. What’s more, the chances for such a legal victory are evidently quite slim.

On the other hand, Apple TV may prove to be a different cup of tea. You see, it hasn’t been a great sales success, at least so far. Flat panel TVs today are mostly commodity products using parts sourced from the same handful of vendors. While the product reviews will demonstrate differences, they are generally quite minor except to hard-core videophiles, and may, in part, be due to sample-to-sample variations.

Apple would gain no advantage entering that business, where even existing companies are scaling back or merging their efforts. But offering Apple TV technology would give HDTV makers an opportunity to push higher-end products and gain an advantage in a hotly competitive environment.

In the end, of course, I have no idea what Apple should do. Regardless of my feelings, the marketplace will ultimately tell them in what direction Apple TV should go.

This article was posted on Thursday, October 16th, 2008 at 6:30 PM and is filed under News and tagged with: Apple, Apple Tv, Blu Ray, case design, comcast, Dish Network, DVD, Financial Analysts, Flat Panel Tv, Mac Mini, Mac Os, no doubt, patent infringement, Price Of Admission, satellite, Satellite Provider, Software Upgrades, Steve Jobs, Tivo, User Interface.