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Is Apple's TV upgrade too pricy for consumers?

Louis Abate | Flickr Vision | Getty Images

Television is an essential part of American life. But are we willing to pay, say, twice as much for the latest TV technology?

That's exactly what Apple is betting with its new Apple TV model, slated to be unveiled in less than two weeks. The fourth iteration of the over-the-top (OTT) smart home device could have a price tag between $150 and $200, according to reports by 9to5Mac, a technology website. That's a steep increase from the $100 debut price of the current Apple TV 3 model, which dropped to just $70 in March.

Apple TV already lags behind similar devices from Amazon and Google in user adoption. But the new price point is less about attracting widespread adoption and more about marketing an aspirational, premium technology to those looking to upgrade from cheaper models, experts said.

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Apple TV attaches to an existing TV set, and accesses Internet-based content, such as movies on Hulu or Netflix. The new model, rumored to be debuted at a Sept. 9 event, would add features like Siri voice control, a touch-screen remote, an operating system with the App store, and more powerful processing speeds, sources told 9to5Mac.

The new model comes at a time when streaming content is more popular than ever. But Amazon's premium model sets buyers back just $125, with the Roku 3, which already has voice controls, coming in at just under $100. Add the cost of the speedier Internet needed for higher-quality streaming, and that has people asking, as they have in the past, why pay more for Apple products?

The price of Apple TV is less about the device itself, and more about setting a tone that future Apple TV services will go above and beyond competitors, according to Daniel Ives, managing director in the technology, media and telecom research group of FBR Capital Markets. In particular, a $40-per-month live streaming service to rival cable, anticipated to launch in 2016, would justify a premium over competitors like Amazon Fire and Google Chromecast, Ives said.

With the expansion of Beats, Apple Music and iTunes, Apple is as much a content company as a mobile phone company, said Rye Clifton, experience director at advertising agency GSD&M. And after conquering markets like tablets, the TV screen was one of the few devices missing from a seamless iOS-based content experience for Apple users, Clifton said.

TVs are still the device Americans spend most time watching, at an average of 36 hours per week, even with screen-time competitors like mobile phones, tablets and computers, according to a June report from Nielsen. Though younger viewers tend to watch less TV in general, according to Nielsen, teens who do watch TV prefer to do so on a television, according to a separate Piper Jaffray study.

But if Apple TV is the tip of a streaming-revolution iceberg, it's plainly a pivot from Apple TV's current place in the market.

"The Apple TV device has been a weak link within the overall Apple product footprint for the past few years," Ives said.

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Indeed, Apple TV trails Roku and Google for most-used streaming devices, according to research firm Parks Associates, while it is almost neck and neck with Amazon's Fire devices. By offering lower-priced, basic models such as the Fire Stick, Roku and Amazon have been able to rapidly meet and surpass Apple's market share, said Barbara Kraus, director of research at Parks Associates.

While the lower-end sticks and more powerful cube models each take about half the market now, Kraus predicted that by 2019 sales of lower-cost stick streaming devices, like Google's Chromecast, would grow faster than the more-powerful cubes, like Apple TV and Roku 3. She predicts the low-cost alternative will be two-thirds of the OTT market in four years.

So why would Apple push toward the opposite end of the spectrum? Maybe a low market share isn't a problem for Apple: It's part of an overall separation of streaming devices into a low- and high-end market, Kraus said. Kraus said the most similar high-end product out there now, Nvidia Shield, is around $300.

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"The market [in 2019] is not going to be as the market is now," Kraus said. "As more people stream, more people will learn of different benefits and upgrade to higher level models."

Disclosure: FBR Capital is a market maker for Apple.

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