The item on the top of my list this year is the AppleTV, although I’m fairly sure that I’m in the minority. The AppleTV was the other big product that was launched this year by Apple, you may remember it from MacWorld, it was released the same time Steve Jobs decided to let everyone know that Apple was doing a little product called the iPhone.

I wanted the AppleTV from the first time I saw it last year, I love the idea of being able to watch all of the video podcasts I like in my living room without having to carry my iPod around and climb behind my TV to connect cables every time I want to watch something off of my iPod. The AppleTV is a beautifully simple device that does what it does well.

The AppleTV doesn’t seem to be doing so well and to be honest, I’m a little worried that it may be discontinued. I don’t think that the AppleTV should be discontinued, I think there are a lot of things that could be done to make it worth while to the consumer but the way it is now $299 is a little steep for a device that doesn’t really do a whole lot.

So will Apple discontinue the AppleTV? I don’t really know, I don’t expect them to do so. Apple has said in the past that they plan on adding functionality to the AppleTV but besides YouTube being added to the device they haven’t really done anything to it.

So the way I see it, Apple has three choices at this point with the AppleTV, they can either discontinue it all together, I’ve already said I don’t expect them to do that. They could also add more functionality to the device or they could scrap the current hardware and come out with a whole new AppleTV (in the process frustrating all of the early adopters who didn’t really get much out of the device).

The adding of more functionality seems likely but what exactly could they do to it? They could add other video streaming services just like they did with YouTube, a great choice would be Hulu but that is very unlikely. They could add movie rentals to iTunes or they could allow you to purchase TV shows and movies from the AppleTV similar to the way you can purchase music on the iPhone and iPod Touch.

We have seen signs of movie rentals in iTunes (here) and it seems logical to purchase TV shows and movies from the AppleTV similar to the on demand options most cable companies offer. Adding functionality through software updates seems like it is going to be the option they choose.

But on the other hand Apple needs something to show off this MacWorld and a new AppleTV could be a neat device for Steve Jobs to demo. Maybe they could add a DVD player to the device, lower the price, or add support for standard definition TVs (which in my opinion was a big mistake to begin with). I’m not sure if Apple would want to do this at MacWorld though because it may be that Apple would like to show off some of the early applications built for the iPhone with the SDK that will be debuting in February.

Apples future for the AppleTV is a little blurry but I’m sure they have already figured out what they are going to do with the product. Since I’m hoping to find one under my Christmas tree this year I hope they keep the current hardware and begin adding functionality but you can never be too sure, Apple has never been the most predictable company.