Apple TV isn’t dead yet: $99 version to run iPhone OS

After years of ignoring the Apple TV, and many rumors of a revamp, it appears that Apple is now readying a complete overhaul of the device. The next Apple TV will feature a much smaller form factor, run the iPhone operating system — and perhaps most importantly, it will retail for a mere $99, Apple sources tell Engadget.

The news couldn’t come soon enough. Since 2007, Apple considered the device “a hobby”. One of the most common observations after the Google TV unveiling was just how much Apple dropped the ball with Apple TV. We brought it up when the Roku Netflix set-top box was unveiled two years ago, and former VentureBeat writer MG Siegler wrote an impassioned piece on how Apple could fix it last year.

At last, there appears to be some vision behind the device. Instead of the practically useless stripped down version of OS X running the Apple TV, it will receive the iPhone OS, just like the iPad. The $99 price tag will also make it much more compelling than before, and brings it right on par with the Roku Netflix box.

In addition, Apple is aiming for the device to be very small. It’s been described as “an iPhone without a screen”, and may feature only a power and video-out port. It will be based on the design of the next-generation iPhone, and will feature the A4 CPU and 16GB of storage.

That may not seem like a lot of space for a device dedicated to video, but it appears that Apple isn’t intending for users to save much content to the device. Instead, it will use a cloud-based method of streaming content like Netflix’s Watch Instantly, which will also be capable of pushing 1080p high-definition content instantly, like Microsoft’s Zune Store on the Xbox 360. For the few who feel the need to save content, the device will be able to use an Apple Time Capsule as a wireless external storage device. Since it’s running the iPhone OS, we can expect apps and the App Store eventually, but there’s no word on that yet.

It’s too soon for Apple to show off the device at the next World Wide Developers Conference in June, but its development is going strong. Given that both Google TV and Boxee’s set-top box will be available by this fall, we can expect that Apple is working hard to push out this next Apple TV by then as well.