By Daniel Eran Dilger

Published: 04:50 PM EST (01:50 PM PST)

A new report says the next update to Apple TV will adopt the name iTV, while also dropping support for 1080p video output to standardize on 720p HDTV.

Continuing upon the Engadget rumor that the next generation Apple TV will move from a scaled down Mac running Front Row software to an iOS device that works like a screen-less iPod touch, the latest wrinkle says the new model will get its former "iTV" codename.

Apple's chief executive Steve Jobs originally introduced the device (a few months before it shipped) under the iTV name while noting that the company was still looking for a permanent name. Apple TV was subsequently released as Apple announced the iPhone in early 2007.

Kicking apps

Since then, Apple has built up the iTunes App Store for iPhone, iPod touch, and iPad devices but left Apple TV to sit in maintenance mode, collecting few features and never getting an official SDK of its own that would enable third parties to extend its features.

By converting Apple TV into an iOS device, the company could erect a third new wing of apps in iTunes. The popularity of iPad (which has collected a portfolio of over 20,000 apps in just a few months) suggests tremendous potential for a TV-oriented iOS product.

Apple's ability to rapidly muscle into the market for portable gaming could similarly be repeated by giving existing App Store developers the ability to quickly port and optimize many of their existing games to work on HDTV sets, providing a very cheap alternative to more serious console gaming devices.

If released alongside iPod touch 4 expected next month, Apple could decisively leverage the current excitement surrounding iPad to inhale lots of HDTV users during the holiday season at a time when the growth of the Microsoft Xbox 360, Sony PS3, and Nintendo Wii are all maturing.

Taking names

Apple has also grown adept at taking names that appeared to belong to other companies. In 2007, "iPhone" was cordless telephone product owned by Cisco. Apple has since absorbed the rights to iPad (claimed by other hardware makers) and iOS (Cisco's router operating system).

That makes it more likely that Apple has the interest and capacity to begin using iTV, despite its trademarked use by UK broadcasters (the Independent Television Authority, a competitor to the BBC).

No 1080p in iTunes

The shift toward a smaller, cheaper device that uses network streaming rather than Apple TV's hard drive for local storage also likely necessitates using the same video output of iPhone 4 and iPad, which is 1024x768 (or perhaps the very similar 720p HDTV resolution).

Apple sells HD content in iTunes as 720p. Higher resolution 1080p is an alternative HD standard, but video experts note that the difference in resolution is not visible to users at a normal TV viewing distance unless the screen is larger than 55 inches.

For Apple's mass market users, a cheaper device that streams easy to buy and view HDTV content makes far more sense than the current Apple TV, which requires syncing with a local iTunes system or downloadable storage for rentals.

Such a device would seem to necessitate HDMI output, rather than the VGA output currently offered by iPhone 4 and iPad, as few HDTV sets or video projectors still support VGA-style inputs.