The Apple TV, in its "Take Two" revival still faces some serious challenges in breaking out of the pack and delivering what people want, according to Ross Rubin at engadget on Tuesday.

"As Steve Jobs noted during his Macworld keynote, Apple now ’gets’ that video is what consumers want on their TVs," Mr. Rubin wrote. "And Apple TV should deliver. In fact, the movie rental and purchase proposition is now very similar to that of the device and service offered by Vudu, Inc., which has a head start on content but a higher price and nowhere near Apple’s brand or distribution power."

Apple TV

The problem now is that Apple has changed the proposition from being an iTunes broadcaster to a movie box connected to the Internet. In that realm, it faces competition from other boxes, like the Vudu, as well as customer confusion over which of many of these kinds of boxes to buy.

Another challenge faced by Apple is the dynamics of the content. Free music obtained by ripping drove the success of the iPod." With Apple TV, the tail is wagging the dog. Fresh content acquisition drives the need for the device. This is a much slower path to hardware adoption," Mr. Rubin noted.

The net result is that Apple falls in with all the other competitors in terms of the restrictions placed on HD movies by Hollywood. Because they must be streamed, the bit rate is necessarily low. [There’s no opportunity to accumulate a large, modestly compressed file on the user’s hard disk, then beam it to the TV.] Other companies like Sony, Samsung and Vizio can integrate content more easily into their systems because they manufacture TVs. In addition, game consoles which are very popular, like the Xbox 360 and PS3, have the ability to download movies as well.

One advantage that Apple has is their retail stores. [Even so, those stores pale in comparison to the number of Best Buys and Circuit Citys in the U.S.] The challenge for Apple will be to exploit their retail stores and brand recognition in order to rise above the competition.

"Apple could also choose to take its Apple TV ’hobby’ more seriously by entering the TV market," Mr Rubin noted. "Without the subsidization enabled by service providers, in the case of cable, or software, in the case of video games, Apple TV will likely continue to be a big fish in the small pond of digital media adapters and video rental venues that haven’t sneaked their way into the living room."