The drumbeat of rumors swirling around whether or not Apple (News - Alert) will launch the fabled “iTV” – its own connected HDTV—has been renewed thanks to an off-the-cuff comment by CEO Tim Cook during the company’s Q1 earnings call. But the market would still be a challenging one for the company should it choose to go in that direction.

Cook started out by noting that Apple has sold two million units of its $99 palm-sized set-top box, up from 1.3 million in Q4. Cook seemed to indicate that the STB would not be the end of Apple’s efforts in the TV space, which Steve Jobs famously called “a hobby.”

"There's a lot we can do in this space," Cook said. "So we continue to pull the string to see where it leads us."

It’s worth noting that there is indeed plenty of room for Apple to grow in video: those two million units for the Apple STB are a fraction of the more than 69 million iPads and iPhones that the company sold in Q1 alone, and is really put into perspective when one considers that there are roughly 130 million households in the U.S.

That said, whether there’s demand for another high-end HDTV in the space remains to be seen. New research from Leichtman Research Group (LRG) found that penetration has reached a majority: 75 percent of households in the United States have at least one high-definition television (HDTV) set -- up from 23 percent five years ago. Over the past five years, 52 percent of U.S. households adopted HDTV.

"Over the past five years, HDTV has grown from one-quarter of all U.S. households to three-quarters of all households, and many more households now have multiple HDTV sets," said Bruce Leichtman, president and principal analyst for LRG. "Today, about 47 percent of all TV sets in U.S. households are HDTVs, compared to 11 percent just five years ago."

In addition, 51 percent of HDTV households have more than one HDTV, compared to 22 percent five years ago. Overall, about 38 percent of all U.S. households now have multiple HDTV sets -- up from about 26 percent of two years ago, and 5 percent all households five years ago.

That may not leave the kind of market share that Apple would need to capture in order for TV to be a profitable business. Just 14 percent of all U.S. households plan to purchase a new TV set in the next 12 months -- compared to 19 percent last year and 17 percent five years ago.

Even more telling, LRG found that the mean reported purchase price for a new HDTV was $680 -- about 30 percent less than five years ago. The TV set game is a high-volume, low-margin business, and that is not the kind of business that Apple has ever been in.

Any television that Apple would produce would be a higher-end connected model, with Apple’s standard sleek industrial design, seamless access to the iOS range of apps, Siri-like voice control and, presumably, plug-ins meant to of course encourage the use of other iOS devices. All of that would make a very pretty package, but also spells a higher price tag (News - Alert).

Also, Apple’s closed ecosystem is both its hallmark and its hook, but in the TV space could actually backfire with consumers absent significant content deals or interoperability with the rest of the TV universe—both things that just add to the expense.

In a connected TV market dominated by LG and Samsung (News - Alert), others, even established TV brands like Sony have been struggling as the Korean giants have been able to ramp up production and push down prices.

Apple has other options besides a full HDTV, argues Brightcover CEO Jeremy Allaire (News - Alert), who sees Apple having the potential to create a major disruption of the broadcast and gaming industries.

Allaire speculates in his blog that to do that, Apple must develop two new hardware pieces: a $149 set-top device to replace its existing $99 model, and a thin-panel “smart” monitor.

"The company ... needs to find new $30 billion+ per year businesses to keep up its pace of growth and value creation," Allaire wrote. "The key is to introduce a product franchise that defines the consumer experience, owns the extension of the app platform into the TV, and captures as many users as possible, as quickly as possible – while taking enormous share from an established, multi-hundred billion dollar per year industry."

The $149 companion device should connect to nearly any existing TV, without requiring customers to buy an expensive new monitor. "This is crucial for quickly establishing and maintaining platform dominance and even stand-alone could be a $5-10 billion opportunity," Allaire noted.

Then, the ultra-thin connected monitor should combine touchscreen capability with second-screen functionality to bring an overlay of apps to the existing television experience—a sort of overgrown iPad.

"These large-screen monitors will be a direct assault on the global TV monitor industry, a market worth hundreds of billions annually, albeit with slightly slower replacement cycles of four years versus two years for smartphones and tablets. This gives Apple that additional $30 billion+ revenue stream it needs," Allaire noted.

And finally, "crucially, the new Apple TV will extend nearly every existing iOS app into being a TV app that brings the power and richness of large display surfaces to consumer computing – a task that nearly every industry titan has attempted and failed," Allaire said. “The combination of touch and TV will ignite a new era in dual-screen software application design and development in which it will become hard to believe that Internet software was once based solely on PCs, phones and tablets."

Whether Apple is inclined to take Allaire’s advice remains to be seen, but the company has been steadily adding to its content proposition for the Apple TV $99 set-top box, which competes primarily with Roku and Boxee (News - Alert) in the STB over-the-top (OTT) game. It recently announced that HBO Go would be coming to the platform, which is the premium cable net’s TV Everywhere app for viewing every episode, documentary or original movie produced by the channel on demand, inside and outside of the home. It’s available to its existing subscribers at no charge.