<snip>
You're half right and half wrong, imo. The thing that made the ipod explode in the first place is that everyone already had big MP3 libraries that they had downloaded off of napster (remember, the itunes store didn't exist until a couple of years later after a couple of generations of iPods were already released and mega-successful). And they also had big CD libraries that iTunes allowed them to easily rip onto their ipods (which atv can't do due to legal issues).
The iPod was successful because it allowed all the halfway tech savvy people to take their existing CDs and their existing downloaded MP3 library with them in a small pocket friendly device that didn't cost a crazy amount of money and that was pretty easy to load and manage your music library through. The iPod didn't become a mega success because grandmas and grandpas were using it at first, that didn't come till many years later after the ipod was already a huge success. The non-tech savvy market success came as a direct consequence of the reasonably tech-savvy crowd making it a success in the first place. Grandma and grandpa were never gonna get an ipod until johnny kept telling them how great it was.
The atv is NOT following that same path to market success however. You're right, the reason why the ipod was a success is because of content, but not the kind that could be bought through the itunes store, it was because the ipod played the content that most early adopters already had tons of, mp3 and CD. If the ipod was designed so it could only play AAC, then it would've been a spectacular flop. Yet the atv doesn't play the vast majority of formats that most people already have (especially early adopters). The atv doesn't play dvds and it doesn't play avi. So if your video device doesn't play the formats that most people already have their existing videos saved as, then the device will never see anywhere near the success level of the ipod.