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Apple has grabbed a solid piece of almost every digital media market its entered, every market but one.   Apple TV has never been much more than a sideshow.  In nearly three years on the market, the device aimed at bridging the digital divide of the living room – the elusive TV to Internet gap – hasn’t really lived up to its promise.

That may soon be changing.  It’s too soon to know but there’s an increased volume of chatter suggesting Apple will overhaul the device Steve Jobs has downplayed as “a hobby” sometime this year.

Expected changes include a shift to the iPhone/iPad operating system and a reduced price point.  One of the theories behind the concept is that the modification would allow user’s to run select “Apps” through their TV platform.

If true, that upgrade, might represent a much more compelling value proposition than the current incarnation of Apple TV.

Instead of being another piece of clutter in an already crowded living room landscape, an App-friendly version could bring the prospect of a truly connected cross platform media experience.   A Netflix stream watched partly on an iPad could be resumed from the comforts of the couch on the widescreen TV.  Digital Video Recording (DVR) functionality could theoretically (license issues not standing in the way) allow streams of copyright protected content to become portable.   Big Red Sox vs. Yankees game interrupted? Record it with the DVR functionality and through a cloud based iTunes watch the finale, even link to a highlight reel or other web content, on an iPod or iPad while on the go. 

Movies on demand pushed and streamed to different devices? No problem.  Multi-room contenting sharing?  No problem.    

A shopping Application on an App friendly Apple TV could even, in theory, power a holy grail of retailers: a remote control triggered purchase.   Picture being plopped in your couch, comfortable, but hungry.  A pizza commercial comes up and you think?  Sounds good…..   In a testament to laziness, without so much as a shift in your seat, you could order and arrange delivery through the Apple TV interface. Want something from Amazon…check an eBay auction during a commercial? Want to learn more about a product you saw advertised  Same thing.

The promise is here and so is the potential.

Thing is – there’s heavy competition for living room device real estate and offerings presently available paint a picture of a market fragmented by different technologies, standards and commercial relationships.  Apple has the means and market power to improve the picture.   The question is whether the company deems the living room opportunity ripe enough to pursue now or whether it wants to remain focused on more portable devices.