Apple TV 2 broken, asking me to connect to iTunes

Welcome to the Apple Community.

If your problem persists get yourself a micro USB cable (sold separately), you can restore your Apple TV from iTunes:

• Remove ALL cables from Apple TV. (if you don't you will not see Apple TV in the iTunes Source list)
• Connect the micro USB cable to the Apple TV and to your computer.
• Open iTunes.
• Select your Apple TV in the Source list, and then click Restore.

Yes it will restore it to factory settings then update it to the current software version.

I have the exact same issue with my apple tv2, but mine will not show up in my iTunes when I connect it to my computer. Is there any way for me to correct this?

1. Remove ALL cables from Apple TV. (if you don't you will not see Apple TV in the iTunes Source List
2. Connect the micro USB cable to the Apple TV and to your computer.
3. Reconnect the power cable (only for Apple TV 3)
4. Open iTunes.
5. Select your Apple TV in the Devices list, and then click Restore.

If your Apple TV fails to restore through iTunes……..

• Check that you have correctly followed the instructions for your model of Apple TV.
• If not already, try using a powered USB port.
• Repeat the process but this time try connecting the cable while iTunes is closed.
• Repeat the process with another cable.
• Try restoring the Apple TV on another computer in another location.