Apple made a huge mistake when it decided not to take on Microsoft Xbox and Sony Playstation

The Apple TV is one of Apple's most perplexing products. Its design is lacking, its content is undistinguished, and much of its software, like the TV app or the iPhone remote, seems unfinished.

Bloomberg ace Mark Gurman wrote on Thursday about the current Apple TV's development process, and how the vision for the product has been scaled back over and over again. "I signed up for revolutionary. We got evolutionary," an Apple source told him.

But the most interesting detail to me was that Apple had considered bundling a game controller with its $160 TV computer, which would've allowed the company to chip away at the console gaming industry the same way the iPhone has chipped away at the handheld gaming market.

From Bloomberg:

"Early on, the Apple TV was going to replace the clunky set-top boxes from the cable companies and stream live television. It never happened. The team debated bundling a gaming controller with the current model to better compete with Microsoft Corp.'s Xbox and Sony Corp.'s PlayStation. That didn't happen either."

And:

"To a certain extent, the Apple TV is handcuffed by its parent's addiction to fat margins. Apple is constitutionally allergic to losing money on a product-even if it can make up the difference by selling content... Likewise, not bundling a gaming controller was partially a cost-driven decision."

When Apple launched the most recent version of the Apple TV, it added the ability to pair an Apple-approved Bluetooth controller with the streaming box. However, Apple does not make a Bluetooth game controller - people had to choose from licensed third-party options, which were priced around $60.

A few game developers took advantage of the new controller settings at first, but not many, especially because it would require extra work to support a controller with an uncertain install base. And the Apple TV remote does not provide the same experience as a dedicated game controller.

Apple is fond of the slogan: "The future of TV is apps."

But it turns out, in the present, that most of the best-selling and highest-grossing apps on Apple's app stores are games. According to App Annie, 75% of of apps revenue for iPhones and iPads were games in 2015.

As of January, only 10 of the top 30 grossing apps are non-gaming, and going back to the end of 2013, only two of these were even in the top 50, according to research from Macquarie's Ben Schachter.

So if Apple really wanted to have a healthy developer community around its TV operating system, it should have given games developers a reason to build games for it - like that game makers could count on Apple TV users having a traditional gaming input.

I previously asked someone with knowledge of Apple's strategy why Apple didn't emphasis the gaming abilities of the Apple TV, and they said that Apple didn't want to be compared to Xbox or Playstation, which are gaming focused.

But Apple could have "disrupted" the console industry the same way it took over the mobile gaming world - by offering a limited version for cheaper, building up a large number of developers, and eventually directly challenging the established market as technology gets better and faster.

'The assets that we have in this area are huge'

It all goes back to Apple "trying to change its story." In recent months, Apple leadership has pointed to its services revenue - mostly the cut it takes when someone buys an app from the App Store - as a way to offset lower margins and also as a second firehose of profit.

But as Gurman reports, Apple loves its fat margins. That's the way it's always made its money - selling premium hardware at a premium price.

But that strategy doesn't seem to be working for TV. The same content is generally available on Amazon and Roku, which are Apple TV's primary competitors, and which sell their devices for a much lower price.

Competition is hurting Apple TV - last quarter, its sales were down year-over-year, Apple's CFO admitted.

So Apple TV needs a way to differentiate itself, or at least justify its higher price. And if a "skinny bundle" or getting exclusive TV shows like "Planet of the Apps," is tough, maybe Apple needs to think of its TV computer in a different way.

Turning the Apple TV into a cheaper version of a game console with a bundled controller would have emphasized Apple's strengths - its hardware design and developer community - while only wiping out some margin that was not moving the needle for the $700 billion company anyway.

This is an opinion column. The thoughts expressed are those of the author.