Should Apple make its own TV?

There’s a good amount of buzz about a Piper Jaffray report handicapping a possible move by Apple to reinvigorate its Apple TV lineup and even enter the living room with a television set. Should Apple make its own TV?

The possibilities, outlined here by Sam Diaz, boil down to the following:

Piper Jaffray analyst Gene Munster argues that Apple will launch a new Apple TV product with support for subscription iTunes services and digital video recording (DVR).
This digital living room takeover revolves around iTunes, which will connect your TV with the iPod and iPhone.
In the long run, Apple will manufacture a TV set that’s connected.
Thus far, Apple TV hasn’t been a runaway hit, but a retooling could work. The bigger issue is that your living room already has too many set-top boxes. That’s not going to change. And for a subscription iTunes service to work, Apple would have to cut carriage deals with a bevy of media players who are a suspicious bunch. We’ll also table the fact that Apple chief Steve Jobs has talked down subscription services at every turn.

The most intriguing idea here is Apple making a connected TV. Would enough consumers pay a premium for an Apple television set?

Munster argues:

Yes, TV hardware is a challenging business if you don’t change the rules of the game, but we see potential for Apple to offer best-in-class software and hardware and charge a premium. As of November 2008, 40 million US homes (35% of households) owned an HDTV, and the Leichtman Research Group estimates the number will double in the next four years. This equates to a US addressable market of 10 million units a year. The argument that Apple will not enter the television market because prices have declined by ~70% in the past three years is a similar argument used to conclude Apple would not enter the cell phone market, given phones had seen similar price declines. The bottom line, 10 million HDTV’s sold in the US a year is a real market, and if history repeats itself, Apple will find a way to compete in a commoditized market with a premium priced product.