The “one more thing” at Apple’s September 1 event was an updated Apple TV. Apple has certainly cranked up the ol’ shrink ray for a form factor that is 80 percent smaller than the previous generation. The rumored addition of apps didn’t eventuate nor did the rebranding to “iTV” but, as predicted, the update sees the device sporting an A4 chip and it will only be able to handle a maximum resolution of 720p. Because the new Apple TV does away with local storage altogether in favor of cloud-based storage and streaming of content, Apple says the choice of 720p was more a balance between quality and bandwidth than any rumored difficulties the A4 chip may have with Full HD content.

The device also gets a paint job and now comes in black. It has built-in HDMI, Wi-Fi, Ethernet and optical audio out and, while a lot of devices slim down thanks to an external power supply, the new Apple TV achieves its size reduction with its power supply crammed inside its miniaturized frame. Apple says it’s also extremely energy efficient and doesn’t require a fan to keep cool so is never noisy.

There’s also a Micro-USB port on the back, but don’t go thinking you’ll be able to plug in an external HDD to access content because it’s apparently only for service and support. In short, if you want to watch anything using the device you’ll need to stream it – be it TV shows and movies from the iTunes Store, content from Netflix, YouTube, Flickr and MobileMe, or media stored on your Mac or PC. In bad news for existing Apple TV owners, their devices won’t be getting an upgrade to the new cloud-based software.

The move away from local storage shouldn’t be a huge surprise. Apple has been pushing the cloud for some years now with its MobileMe service and a media streamer fits in nicely with that philosophy. Unfortunately for Apple, it isn’t the only company that sees media streamers as the future of home entertainment. Aside from facing stiff competition from dedicated streamers with more impressive specs, like the Roku XR and Pop Box, nowadays streaming capability is included in everything from gaming consoles to Blu-Ray players.

But Apple’s strength has always been the ease of use of its products and their integration with iTunes so maybe this latest update will be enough to attract consumers to a device that hasn’t been able to scale the heights of Apple’s other device in recent times. We’ll see.

Apple TV comes with the aluminum Apple Remote but can also be controlled with an iPhone, iPad or iPod Touch using the free Remote app.

The device measures 0.9 x 3.9 x 3.9 inches –H x W x D – (23 x 98 x 98mm) and weighs 0.6 lbs (272g). Apple TV’s dimensions aren’t the only thing to be hit by the shrink ray. The device is now priced at a much more reasonable US$99. It will ship in four weeks.