boxee is an app for Windows, Linux or Mac that collects, in one place, feeds from Hulu, Netflix, CBS, ABC, Joost and others. The user can access local content or that on the Internet, and it's also a social site that promotes sharing. This kind of product creates new problems (or opportunities) for Apple in converting the Apple TV from a hobby to a big money maker during a deep recession.

I've been curious about boxee for some time because there's a version that runs on Apple TV in addition to the major OSes. (However, the installation on Apple TV is not for everyone, and it likely voids the warranty.) To get a feel for boxee, I installed the alpha version 0.9.8 on a MacBook Pro and started to, well, have an amazing experience.

boxee Internet options (Mac OS X screen shot)

The first thing I learned was the reason to have an account on hulu.com. That's so that one can login via boxee. That said, it appears that not all the content and features available on a direct connect to hulu.com are available through boxee. ABC.com was not available via boxee during my testing, however CBS.com was, and I was able to watch part of the latest NCIS that I missed lately. I was also able to check out the latest episode of 24. That's good because a DIRECTV technician, fixing an issue with my dish, reset the family DVR and blew away all the episodes I'd been saving up to view later.

I was also able to catch the hilarious Colbert Report from February 4 with Steve Martin. I am beginning to see why there are reports of people canceling their cable TV accounts and living on the Internet with boxee. In addition, for those with a Netflix account, boxee provides access to streamed movies, even if in HD.

The picture is starting come into focus here.

First, in a time of economic slowdown, people are looking to watch content without paying a lot of money. If one can connect a computer on the Internet to an HDTV, there's a wealth of material that doesn't need to be arranged as legacy "appointment television." That is, one can watch the latest episode of many popular TVs shows ... whenever, not just on the appointed night. And if there's no DVR in the house and an episode of, say, Chuck was missed, just backtrack and catch up on hulu.com.

That means that the day of just blatantly paying for episodes on an Apple TV with a credit card to avoid commercials may be slightly imperiled. Netflix was one of the companies to report good earnings and revenue last quarter. There's a reason for that: people can stay home and watch TV shows and movies on their big LCD HDTV - as many as they want for about $10/month.

While there were recent reports on the Apple TV doing quite well at Christmas, Apple TV sales had not been that great prior to then in my estimation. In October, 2008, in a Hidden Dimensions column, I estimated that Apple had sold about 450,000 units from introduction up until then. Even if the Apple TV sales rate tripled in the Christmas quarter, the total is likely still significantly under a million. However, Piper Jaffray analyst Gene Munster puts the number at over 2 million in 2008 alone. I liked my math better. In any case, Apple still declines to report sales, which means they're nothing to be proud of.

In contrast, Reuters reported today that Netflix claimed one million accounts on Xbox consoles. That's just a piece of Netflix's distribution model. As a result, one has to wonder if Apple is missing the boat by not striking a deal with Netflix. Apple absolutely wants to sell content, but in a recession, working with Netflix could help sell a lot more Apple TVs. Forget about all that DVR and tuner chatter.

Finally, I wonder if Apple has pulled a fast one by jumping to DisplayPort and bypassing HDMI. Indeed, DisplayPort is more modern and supports a higher resolution than 1080 x 1920. But it also has the distinct advantage of keeping Macintoshes from easily connecting to HDTVs while Apple gets its act together with Apple TV. It was a clever move.

There are boxes that convert USB video and DisplayPort video to HDMI, and I'll be reporting on one soon. In the meantime, boxee may be able to succeed where Joost failed - lots of desirable content all collected in one place.

The delicate balance for Apple is to weigh the income from hardware and that of content sales on the Apple TV. Apple isn't making a whole lot of money on the Apple TV, compared to Macs and iPhones, so something dramatic has to be done to make the Apple TV hardware more desirable. Meanwhile, the rest of the industry is about the business of giving people tremendous choices. Those multiple choices, DIRECTV, VOD, AT&T U-verse, Cable, Internet, Blu-ray are creating such a fragmentation that many users are now content to focus on a single, unconventional method. For example, hulu.com to the exclusion of everything else.

That's probably why the Apple TV is lingering. Apple can't figure out which of these new "channel" methods to approach its users on, especially in light of the high cost of single high definition TV episodes, that will ignite demand for the hardware. Whether Apple likes it or not, to make the Apple TV hardware more attractive, the company may have to open the doors a little with strategic partnerships. Boxee and/or Netflix, with back room revenue sharing deals, looks pretty good right now.