Shifty Geezer said:
To win the living room, you need to sell to more than just the Mac users. You need a device that doesn't cost a premium because the average person isn't going to spend a premium.
It depends on your definition of "Success".
(A) Economics
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One of the toughest part of doing "digital distribution to the masses" is that few can come up with numbers that make sense for consumers, and also appease the many parties involved. Granted, the size of the company is an advantage (i.e., they can afford to invest and lose lot's of $$$ initially), unfortunately it does not guarantee that the final economics will play out according to their plans.
As in the iPod case, the "closed" Mac user base (and the high margin allowed by them) is instrumental in crafting an initial economic arrangement that works. Once the beachhead is established, it will be easier to move down the tier should they choose to. In practice, this allows Apple to move forward as fast as possible while remaining viable.
(B) Good Grasp of Consumer Behaviour
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Apple has completed many successful marketing experiments with consumers since they launched iPod+iTunes a few years ago. The recent video distribution over iTunes is one of them, but hardly the final chapter.
Their deep understanding of a layperson's world allows them to refine a "killer" end-to-end solution over the past few years. Apple's famed simplicity applies more than just use ease-of-use. The entire concept is simple, razor-sharp (easy to understand), relatively easy to execute and so can "ignite" easily when paired with their savvy mass marketing push.
The gaming world has an inherent "hard to use" limitations as alluded to by Nintendo. It's a double-edged sword. While we can leverage on the gamers' loyalty and the established console economics, they are also restricted within the gamers' crowd. We still do not know whether "casual gamers" is as big as people claimed.
(C) Capability
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They have the talent to do it well.
Unlike next gen game consoles that are hard to manufacture, Apple's solution is relatively simpler to make. Home Media PC has its own problems associated with a PC. If the ThinkSecret rumor is true, a small set-top box based on their Mac-mini's experiences is certainly possible.
Also, I think we have missed out the telcos and cable operators for the fight for the living room. You can look at 2wire.com for a strong entry (Yes, they are profitable and making inroads).
(D) Proprietary Platform that Works
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If like iPod+iTunes, Apple's solution is focused on a small but common need, a man on the street may not mind being locked in to the Apple world. In fact the flip side side is: they might cherish the work of Apple for taking care of their needs.
Apple's living room plan may not be as grand as MS's multi-platform media hub strategy. But as long as it works 100% of the time, that's what count during the early stage. I already see quite a few XB360 support issues regarding connecting to XB360 to Media PC. And I don't know how to fix them (They should work, but didn't).
As for common complains about Apple's DRM platform, well...
(i) The final picture will be a few incompatible standards anyway (Think Cell Security, Think RIAA's Upcoming 'standards', Think UMD, Think BluRay, ...). Apple just got there early
(ii) Find workaround. I wrote my own Windows convertor to convert iTunes DRM'ed songs to play on my PSP. There are entrepreneurial folks who will try to bridge these gaps.
(iii) Should matters get out of hand, Apple will be taken to task in the future. They'd either adjust their strategy to compete better, or get hump'ed by regulations. In the latter case, it'd just be a slap in the wrist for them by that time, just like MS. But we'd have a de facto standard then (if it's that bad, I assumed Apple has squeezed others out).
