Apple's long shadow at CES

Apple doesn't have a booth here at CES, but probably no company's products are being talked about more. My take from here in Las Vegas is that "iPhone" will be a fantastic device but not revolutionary, while Apple TV will be more mundane and will have a larger and more lasting impact.

I talked to people here who have seen the Apple phone and they were practically frothing with excitement. But even if it were more reasonably priced, it will be primarily attractive to early adopters and those who either have to replace their existing phone or whose cellular contract is up.

Even at that, Cingular, while the largest cellular carrier in the U.S., only accounts for, roughly a third of all U.S. cellular customers. So two-thirds of its potential market in the U.S. can't buy the device. So don't expect it to grab huge market share, no matter how fantastic it is. Its design, of course, will impact on the design of competing devices but Apple's phone will be, to be blunt, product-line filler for Apple. Very exciting product-line filler, perhaps, but product-line filler nonetheless.

Apple TV, however, is another matter because the stakes are so high. For one thing, Apple's market share for desktop and laptop computers has increased significantly because of the iPod. Think of how many computers Apple will sell if Apple TV does for home media what iPod did for mobile music players. But that's only part of the equation. Apple is also making a lot of money by selling the iPod and music via iTunes. Microsoft obviously wants a cut of that action, too.

Here, Microsoft's answer is Media Center, which is built into some versions of Windows Vista. But to make that work, you have to install extenders and a handful of other items. In other words, Microsoft is clumsily trailing far behind Apple in this high-stakes game.

The only problem Apple may face is if Apple TV only works with media downloaded from iTunes. Apple has succeeded, so far, with its closed ecosystem approach to music, but that's largely because it was first to market and grabbed extraordinary market share with iPod/iTunes. Now, however, there are other options available for downloading video and feature-length movies and many users may not like being limited to Apple's ecosystem.

But selling the movies isn't as important to Apple as owning the living room so if they do, in fact, meet resistance, they likely will open up the system a bit. If they do that, and if Apple TV is as simple to install as I'm told it is, they'll have a huge hit on their hands that could really take a bite out of Microsoft.