Here’s why Apple’s TV needs to be an actual television, and not just a cheap add-on box

One of the most frequently asked (and smartest) questions about the supposedly forthcoming Apple television is: Why does it need to be an actual TV set? Why can’t it just be an accessory like today’s $99 Apple TV thing?

That line of thinking generally goes like this: If the Apple TV remains an inexpensive add-on device, more people could buy it for less money, and Apple could get more users. Then, in theory, it could potentially disrupt the TV industry — the content and distribution side, that is — more effectively.

Plus, who wants to buy another new TV already? Many people just bought one within a few years to upgrade to HD. And isn’t the TV itself just a giant monitor, which Apple’s software can easily take over via an external box? (You can listen to Instapaper’s Marco Arment articulate something along these lines in his most recent podcast episode.)

That’s a fine argument, and it has been a decent way for Apple to practice its living room “hobby” so far. But here’s why I think Apple will eventually make an actual television set:

Apple sells complete experiences, not just devices.

That’s everything from the box it comes in to the status and emotion that owning and using one of its products provides.

There’s not much special about plugging an Apple TV box or Blu-ray player or game console into your HDTV, turning the TV on with one (obnoxiously complex) remote control, toggling over to the right HDMI input, and then resuming with the Apple remote.

Watching Apple TV on an off-brand display is the equivalent of running Mac OS on a Dell laptop. It works, but it’s not as magical. Apple sort-of tried this with the Mac mini — hook up your old PC monitor, keyboard, and mouse to this tiny new Mac — but I don’t think it converted as many people to the Apple brand as, say, the cool all-in-one MacBook.

Apple wants to be your primary interface.

Right now, the Apple TV box is aiming for “input 2” on your TV — most people still reserve “input 1” for their cable or satellite box. (Believe it or not, the average American still watches more than 5 hours of TV per day.) If you have a game console, maybe Apple TV is even input 3 or 4 — if your TV even has that many hi-def inputs. This was smart on Apple’s part, because for most TV watchers, today’s Apple TV box is still only a part-time solution.

But long-term, Apple probably wants its TV platform to be “input zero.” That is, the first thing you see when you turn your TV on. The only thing you need to watch video, make FaceTime calls, download apps, play games, and maybe even use Siri to order a pizza. The only remote control you need. The heart and soul and brain of your living room.

Importantly, the opportunity is growing for Apple — and Google, Microsoft, and others — to become the primary TV interface, as more cable companies test and deploy IP-based TV service. (Meanwhile, the first Google TV device already aimed for “input 1” and flopped. But it had a bunch of problems, not just being too early to market.)

Apple sells tightly integrated software, hardware, and services.

Let’s say Apple wants to enable FaceTime calls and Siri voice controls in the living room. Is it going to sell you an iSight camera/mic add-on to stick on top of your Vizio and run another cord into your Apple TV box? Is it going to rely on your having another camera and mic — say, on an iPhone or iPad — handy at all times?

Or is it going to make the most gorgeous HDTV imaginable with a built-in HD camera and amazing speakers? Over the long run, my bet is on the latter. It’s not like the 27-inch iMac is even very far away from that!

Selling TVs could be the better business.

Recall that Apple makes its profits by selling hardware, not by selling apps or iTunes rentals.

It may be harder and take longer for Apple to sell 10 million television sets at $1,000+ than 10 million set-top boxes for $100. But the opportunity for Apple to generate several hundred dollars in gross profit per device is greater than it is on the existing Apple TV, where profits are probably in the tens of dollars per device. (And competitors like Roku are driving market prices down.)

So far, the Apple TV set-top box is not enough of a business for Apple to even break it out as its own category. But selling high-end televisions could potentially become a multi-billion-dollar business for Apple.

Don’t expect anything crazy.

Expectations seem to be insanely high for this device, and they shouldn’t be. Apple rarely leapfrogs — it usually just makes great products using the Apple formula.

The iPod wasn’t actually that different of a concept than existing hard drive-based MP3 players — it just had a novel and simple user interface (the wheel), better software, a neat name, and Apple’s intangible cool-factor. The iPhone, yes, was a complete leapfrog. But the iPad mostly applied Apple’s formula to the tablet format that had existed for years.

An Apple television may not look or work that much different than today’s TVs. (Then again, it might — I have no idea.) But Apple’s combination of hardware design, software and platform depth, services like iCloud, a novel user interface like Siri, and the overall Apple experience could set it apart from today’s TVs.

And that’s what’s so attractive about the idea — and why I think Apple will eventually make an actual television, and not just more set-top boxes.

Previously: Here’s how Apple could finally put the “TV” in Apple TV