Apple will replace its Apple TV hobby with a new member of the iOS family, Apple iTV, according to an Engadget report.

Apple iTV will be priced starting at $99 and will be similar in size and specs to the iPhone 4 (A4 CPU, 16GB of flash storage). It is expected to support a new iTunes streaming video service.

According to Engadget’s latest info, Apple iTV will be limited to 720p video.

This is the barest of rumors – but relaunching Apple TV as a member of the iOS family is a no-brainer.

Here’s why.

Five Reasons Apple iTV Will Be A Hit

Here are five reasons why an iOS-based Apple TV will be a hit:

• People love iOS – people love iOS on the iPhone, they love iOS on the iPod touch & they love iOS on the iPad – turning all these devices into mega-hits. They’ll love iOS on Apple iTV, too.
• Apple iTV will have more apps than any set-top device – iOS has proven to be incredibly popular with developers and there are hundreds of thousands of apps now available. This made the iPad immediately compelling, and it will make Apple iTV immediately compelling, too. There are already thousands of successful iOS developers, and their skills will transfer easily to developing for Apple iTV. The huge library of apps will also give Apple iTV a big advantage over competing platforms.
• It will run iTunes – Apple got things right with iTunes and has relentlessly leveraged the popularity of its media platform. Instead of forcing people to learn a new app, Apple iTV will run iTunes and be familiar to millions of people that have used iPods, iPhones or the iPad. Music, videos, TV shows, podcasts, streaming media will be there and will work the way you expect them to.
• Apple iTV will be a major player in gaming – the iPhone and iPod touch have rapidly become major gaming platforms. Apple iTV will play existing games and will become a target for developing new types of games. Developers will be able to create universal games that play on the iPhone, iPod touch, iPad and iTV. Better yet, you’ll be able to start a game at home and then take it with you on your iPhone.
• Apple iTV won’t be a hobby – for several years, Apple has dismissed the slow selling Apple TV as a “hobby”. With Google TV at hot on its heels, Apple is going to put serious effort into making Apple iTV into a serious platform. And, if Apple gets the iTV price right, there’s no reason why the company can’t extend iOS successfully onto a new platform.

At this point, of course, Apple iTV is just a rumor. But the iTV rumors sound like the device could be exactly what people have been wanting Apple to give them – an Apple TV that supports apps.

What do you think of the latest Apple iTV rumors?