Apple Engineers Reportedly Pessimistic About Apple's Living Room Hardware Strategy

There really isn't a benefit to apple tv over any competitors

Except quality.

Love my Apple TV’s. The built in internet connectivity on my LG tv is terrible, doesn’t get updates after a year or two, never works quite right, constantly is bugging me with unwanted pop ups, and likely tries to send data about everything I watch home (pi-hole FTW).

Apple has been trying to crack the living room since 2006.
They tried it with the iPod hi-fi, and that failed for being overpriced.
They tried it with the first generation Apple TV, and that failed for being extremely overpriced, and also just being basically a hard drive for your TV that you couldn’t stream with, while streaming was becoming the new big thing.
With the Apple TV second and third generation, they were moving in the right direction. It was $99 so it wasn’t that expensive, it’s supported streaming, and it was extremely easy to use. But again, Apple was stubborn and didn’t open it to third-party apps, so it didn’t support everything, and it didn’t start supporting everything until super late in the game.
By 2015 when Apple decided to finally add third-party app support, they also decided to jack up the Apple TV‘s price and ruin the remote, so that didn’t help.
And now they’re stuck in a situation where the cheapest Apple TV that was released almost 6 years ago is still being sold for $149 whereas you can get a Google Chromecast for as low as like 20 bucks.
Sure, the Apple TV has a nice user interface and it’s easy to use and I love my Apple TV, but that’s not enough reason for anyone else to buy one.
Now I completely disagree with Mark that the solution might be to just discontinued the Apple TV. Even if the Apple TV will never, ever dominate, I still think that there’s a small percentage of people who absolutely love their Apple TV, and I would hate to see Apple just completely leave them in the dark.
But I don’t think that the strategy of introducing an extremely expensive home theater set up with a video camera and a $350 speaker all built-in is going to help their situation. That thing is going to be like $500, and have tons of cool features that most people won’t be able to justify forking over the money for. FaceTiming on the TV sounds like a cool thing, until it’s not.
It would be cool every once in a while for holidays and such, but am I going to want to FaceTime on my TV every single day? No. Am I going to want to handover $500 to be able to FaceTime on my TV? Absolutely not.
They should be working on a way to get the current Apple TV down in price. There is absolutely no justification for being $179 other than the ease-of-use, and that’s not good enough.
The 2015 Apple TV needs to go away, and they need to find someway to drop the current Apple TV in price. Even $129 would be better than $179, but if they could get it down to that old $99 price point, and get a good marketing strategy behind it involving the HomePod mini, AirPlay and enough crossovers, I think that would help a lot

“Despite the obvious benefits of an Apple TV for users invested in Apple's ecosystem”

How about the more obvious absence of benefits?

1. Buy an iPhone taking 4K videos.
2. Buy a 2TB iCloud subscription to store and sync your videos.
3. Buy an Apple TV 4K.
4. Watch your videos in 720p on your 60” 4K screen.
5. ???
6. Wonder why this thing isn’t selling so well.

It is the same problem the HomePod has. A premium product in a commodity market. Everyone gets free or subsidized products from the competition.

I'm with the engineers.
Given what most of us all do with our boxes, the unit needs to be WAY less expensive.

An HDMI stick version with remote for $69/$79 would be about right (when accounting for some Apple tax)

Have a cheap stick + remote for those who mostly just "watch stuff" - and then have something more $199-$299 for gaming focused or interested users and include a remote and a controller.