Q: Will Apple TV Take 2 work with Time Capsule? I’ve been looking but I can’t find a definitive answer one way or another. What I’d like is to use Time Capsule as a media storage backend for Apple TV? Will the new update make this possible?
A: Unfortunately, the short answer is no. Apple TV will not work directly with Time Capsule in the sense that you can stream or sync content from Time Capsule to your Apple TV without an intermediate iTunes library running on a Mac or PC somewhere.
Further, Time Capsule will not simply provide an extended storage repository for your Apple TV.
What you get on your Apple TV internal hard drive is basically all you get in terms of Apple TV local storage—40GB or 160GB, depending upon the model.
What you can do, however, is use the Time Capsule 500GB/1TB drive as a location for your iTunes library media content from your Mac or PC. This content still has to be managed and synced through iTunes itself, however, which means you’ll need a computer running iTunes somewhere in the house—just the data can be stored on the Time Capsule drive instead of a local hard drive in the computer.
The Apple TV would still communicate with iTunes on the computer itself, but the files for transfer or streaming would be read from the Time Capsule drive.
Keep in mind, however, that if both the computer or Apple TV are using a wireless connection this may affect performance compared to a locally connected hard drive, since you’re effectively using double the wireless bandwidth (one stream to pull the data from the Time Capsule drive into iTunes, and a second stream to send it to the Apple TV).
See our article, Managing your iTunes Library on an External Hard Drive for more information.