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We often trade-off quality for convenience. Cassette tapes and CDs are inferior to vinyl, but are more convenient. MP3s and AACs sound worse, but offer even more convenience. Most of the online video content, be it Netflix, Hulu, or iTunes, is vastly inferior to a movie theater, but is so much more convenient. That said, the audio quality issue with Apple TV has no good explanation. It seems like it was just more convenient for Apple to take a one size fits all approach — use a 48kHz sampling rate for videos and music. Even music purchased from iTunes sounds fishy on an Apple TV.
I would still recommend purchasing an Apple TV, if you have a Mac and/or iOS device. It can do some amazing things. AirPlay mirroring on the iPad is a surprisingly great gaming experience. MetalStorm: Wingman, for example, has a split display where the iPad becomes a cockpit controller and the game play is on the HDTV. This sets Apple TV apart from competitors.
Now that Apple TV has Hulu Plus (in addition to Netflix and iTunes), it is much more competitive with Boxee and Roku. You can also stream movies to Apple TV (via AirPlay screen mirroring) with the Amazon app for iOS, but it offers poor quality and a poor user experience. In fact, if you own Apple products, buying an Apple TV seems like the most logical choice. There are other options. Since AirPlay is a de facto standard, companies like Pioneer, Marantz, and Yamaha feature built-in AirPlay support in select A/V receivers.
If you are a Windows user, Android user, or both, Apple TV is not the best way to go. Many Windows laptops can use WiDi for wireless display — you can even buy movies from iTunes and watch them on your HDTV. Products such as Roku and Boxee offer Netflix, Hulu, and much more at half the price, and had 1080p quality long before Apple TV. I almost have media envy over the non-Apple offerings. That said, Apple TV is all about the ecosystem. On its own, it is weak. Combined with your Apple products, it is essential. Unfortunately, Apple really screwed up the music experience with Apple TV. If you are an audiophile, look into other solutions, such as Amphony. There are also other manufacturers that make AirPlay compatible AV receivers, such as Pioneer, Yamaha, Marantz, etc. Make sure to do some research on the specs and read the reviews before buying.
I still use Apple TV for playing music occasionally. If I am going to listen to some music really quick, and don’t want to bother booting my Mac, it’s a good way to go. I also like the thousands of internet radio stations available on Apple TV. I always have a cache of music on my iPad to listen to, but when I really want to listen to music, I play it from my Mac to my stereo, via the Amphony transmitter.