Apple is working on a web-connected TV set with built-in iTunes access, if some Wall Street analysts are to be trusted. It would be the next step from the AppleTV that enjoyed a lukewarm reception.

According to the report recounted by AppleInsider, Piper Jaffray analyst Gene predicts that Apple will sell 6.6 million AppleTV units this year. He also expects to see new AppleTV hardware with live TV signal input for DVR functionality this year. As for a connected television set, Munster writes in his note:

We expect Apple to design a connected television over the next two years (launching in 2011) with DVR functionality built in. These recorded shows could then sync with Macs, iPhones and iPods over a wireless network. The device would push Apple further into the digital living room with interactive TV, music, movie, and gaming features. With its iTunes ecosystem, Apple could develop a unique TV without any set-top-boxes or devices attached.

With the use of a CableCARD for digital HD TV signal, Apple could effectively replace the home entertainment system (including a music stereo, cable box, Blu-ray/DVD player, and gaming console) with an all-in-one Apple television. Such a device would command a premium among a competitive field of budget TVs; we believe Apple could differentiate itself with software that makes home entertainment simple and solves a pain point for consumers (complicated TV and component systems).

Among the firm's rationale for such a move are comments from COO Tim Cook on Apple's Q1 2009 earnings call that Apple TV sales are up three times year-over-year, as well as Apple's recent DVR-related patent filings.
Apple's recent five-year, $500 million partnership with LG, a leading manufacturer of display units, was a big flag for this potential development.

Story filed 09.02.09