Apple TV has clearly not lived up to expectations, since Steve Jobs now refers to it as a "hobby". The product was always a little ahead of its time, in two respects. Firstly, it envisages a day when optical media (such as DVDs and CDs) are abandoned, despite the fact that Blu-Ray and HD DVDs are just now hitting shelves, and secondly, the iTunes Store does not yet offer a large enough range of movie downloads, and no high-def or rentals.
As a result, Apple TV is effectively a product in search of a market. In my view, the solution to this is clear - address early adopters with the best solution for a Blu-Ray player (better still if it can play both Blu-Ray and HD DVD formats, but since Apple's in the Blu-Ray camp, this is unlikely).
Right now, a lot of people are considering purchasing a high-def player, and for those who don't go for a Playstation 3, a Blu-Ray Apple TV could become the most popular choice.
Combined with an improved Apple Remote (see previous article) the one other enhancement that would broaden the potential market for Apple TV is a display. This would make it ideal for hooking up to audio systems to play music without the need to turn on a TV set to navigate menus.
A Blu-Ray drive and a display will inevitably push the price up, but could potentially turn this much-forgotten product into a smash hit. Naturally, at some point in the future, the optical drive can be dropped in favour of downloads again!