Apple Should Not Build a TV Set
Having thought about this for a while, I've come to the conclusion that the Apple TV really should not be an actual TV set. People don't update their televisions that often and I can't see Apple making the 5-10 different TV sizes that it would take to keep people happy. A one-screen-fits-all approach is not going to work for the television the way that it does for the iPhone and iPad. Its also worth noting that neither iphone nor iPad screens could have been considered small when they were first created. The best thing that Apple could possibly do is to be the world's smartest cable box ala TiVo. The cable box is the way most people interact with TV, and I believe Apple could change that space with an impact just as dramatic as what they did for the phone.
Most of the people that have TiVo have loved TiVo but the cable company will give you a DVR with little to no upfront costs and a lower monthly fee. TiVo is better than the standard cable box but it isn't amazing. I just got one and it feels just fast enough to not be slow. than The only thing that has made TiVo compelling to me is the upcoming product that makes it easy to take shows with you on your iPhone or iPad. The interface certainly doesn't feel as natural as iOS nor does it feel like its made the sort of advances the iOS has over the years. I haven't seen this in action yet but if it works it will be a very good reason for people to buy a TiVo instead of just using the cable box.
That is why Apple should just work with the cable companies. There are some people who will be disappointed if Apple doesn't release the ultimate device for cord cutters. But look at what the cable company did to Google. Apple could get blocked just as easily. Most people still have cable. Yes it's expensive but people don't hate it. I don't sit around and talk to people about cable but I imagine what people hate is the slow jumbled interface of the current cable box especially when my computer and even my phone seem so fast.
Most of the TV I watch is on the DVR or on Xbox. I didn't even start using Netflix and Hulu to watch TV until I realize that with connect all I had to do was talk to the Xbox. My first thought was why can't TV be like this.
All Apple has to do is
1) make a DVR that's is at least Tivo Premiere XL4's equal. 4 tuners and lots of storage. 2) make it even better at finding, organizing, and managing the DVR from anywhere. I want to be able to add shows as soon as someone recommends them, but I want the DVR to be smart enough to find episodes, place them in order for me, and let me know where I am in the series.
3) let me take the TV shows with me on my iPhone or iPad as simply as the iphone handles podcasts.
4) run the UI on flash memory so you can get the fastest user interface but store the shows on a hard drive.
5) use Siri for at least core functions like finding shows (what time/channel is the Bears game), changing the channel and volume, and turning the TV off.
Over time they can grow this into a gaming console and much more but TV is the biggest unsolved problem right now.