October 12, 2005 5:35 PM PDT

Apple cuts the TV out of TV programming

Leave it to Steve Jobs to elevate "Desperate Housewives" from a pandering prime-time soap opera hit to harbinger of digital media's future.

The release of Apple Computer's new iTunes store for videos Wednesday has provided a first mainstream look at a business model likely to unsettle the movie, television, advertising and retail markets for years to come.

It's not much for now--episodes of five popular television shows from ABC and Disney's cable network, a handful of animated short films and music videos, all for sale at $1.99 apiece. But the prospect of expanding the success of the iTunes music store into video has possibilities that are already resonating through the media business.

Apple products "This is a first giant step," said Disney Chief Executive Officer Robert Iger, who appeared on stage with Jobs to tout the new offering. "It is the future, as far as we are concerned."

With this first step into the video sales market, Apple is taking a similar path to that followed by its initial iTunes music store. In the case of music, the company started with a relatively small amount of music, accessible only to the small number of Macintosh computer users, as a means of persuading a once-reluctant music industry to allow broader online distribution.

Wednesday's deal with Disney appears to be a similar foot-in-the-door strategy, with a small amount of content that points clearly to a future that will likely include vastly more material. It does go beyond anything else online, however, offering consumers the ability to download a purchased version of several shows the day after they air, along with back episodes.

Before launching the video store, Apple approached only Disney, said Eddy Cue, the company's vice president of iTunes. He declined to say whether Apple would subsequently be approaching other networks, cable TV producers or film studios but said iTunes would be expanding its catalog of video over time.

The immediate question is how other media companies will view Apple's offer.

Other network television companies are a natural first step. TV programmers have watched nervously as digital recorders such as TiVo have allowed viewers to skip past advertising, and a new model in which consumers pay per show for formerly free content is likely to be welcomed by the networks.

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Film studios may be a harder sell, however. Hollywood executives have privately expressed deep reservations about the security of Apple's proprietary digital rights management protections, called FairPlay. They have largely refused to allow any permanent downloads of movies to be sold over the Net until the introduction of a new generation of DVD copy protection, expected to be ready by the end of the year.

However, analysts said the move accelerates the divorce between specific kinds of content and their delivery mechanisms. Just as many people are already watching movies primarily at home, on DVD, consumers may stop thinking of television as the primary way to access TV content.

"A lot of people who want this kind of content may not even bother with a TV anymore," said GartnerG2 analyst Mike McGuire.

However, Apple faces a very different competitive landscape in the video business than it did in music.

Many of the most avid, tech-savvy television consumers--a natural core market for downloadable TV shows--already use some kind of digital video recorder such as TiVo, or those offered by cable companies, which allows them to record high-quality versions of all television shows.

Increasingly, those products allow consumers to transfer the recordings to a portable device or laptop computer, such as with the TiVo To Go program, or Tuesday's debut of the PocketDish device by EchoStar's Dish Network.

Cable companies such as Comcast are also increasingly making copies of shows available for free, on-demand viewing. Though network broadcast companies have been loathe to put their shows into this pool, fearing the ultimate loss of advertising revenues, the move toward on-demand content has helped accustom viewers to free shows, rather than paying individually.

However, many consumers continue to buy DVDs of full seasons of TV shows, and the iTunes per-episode model could allow viewers to be more selective about their purchases.

Whatever the drawbacks today, it's clear that Apple has set its sights on becoming a major player in the home video business, just as it has become one in the digital music sector. Analysts speculate that a next generation of products could let video be played on the television itself, through a wireless connection of some kind, much as the company's AirPort Express allows music from a computer to be played on a stereo today.

More is certainly on the way.

"I think this is the start of something really big," Jobs said at Wednesday's unveiling. "Sometimes that first step is the hardest one, and we've just taken it."


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Sounds good, but ...
the initial content offering is limited. I hope that this is the start of a great new distribution channel for TV content; I would gladly pay $2 per episode of several TV shows that I can't catch. Let's just hope that the studios aren't too shortsighted to cash in.
Posted by ablocker (6 comments )
Reply Link Flag
How many would pay $1.99 for a tv episode?
It appears that price is not incompatible with some of the season dvd releases - for instance, 25 episodes at $1.99 runs about $50 . However, remember that at this price, no extras are included; no commentaries, etc. Also, I'm guessing many people don't pay the list price for the dvds; for instance, I see that Amazon takes about 15-20% off those prices. So many people are really paying about $1.49 or less per episode.
For instance, on Amazon (and I'd guess there are other places offering things at even cheaper prices), you can get the 23 episode first season of Desperate Housewives for $38.99 - with commentary and extra scenes, etc. That's $1.69 an episode. A similar situation exists for Lost - 24 episodes, lots of extras, $38.99 ... that's $1.62 an episode.

So, are you willing to pay 37 cents more an episode for less info?
Posted by lwvirden (83 comments )
Link Flag
Cool Factor v. Convenience
Initially, the 'cool factor' will be the main reason to pay for tv content on your ipod. But convenience will play a factor. For instance, Battlestar Galactica is the top of my Tivo season pass manager. Most of the time I simply watch it on my TV. However, there have been a couple of times where I have wanted to take an episode mobile. Here is what I have to do:

Transfer the program to my laptop using TivoToGo: 1 hour.
'Unwrap' the .tivo file format using Direct Show Dump Utility: 20 minutes.
Encode for my PSP using PSP Video 9: 30 minutes.

So now there are two hours devoted to watching a one hour show on my PSP. I would rather pay $2 for the convenience of directly downloading the episode right to an Ipod.
Posted by olsenmichael (1 comment )
Reply Link Flag
Convenience & Comfort will win out!
There are other companies out there who are marketing "super-tivo"-like devices which permit people to watch downloaded content in a comfortable convenient way. Brightbox for one. For details, check out the Brightbox video blog:
<a class="jive-link-external" href="http://brightboxblog.com/ppdeagle" target="_newWindow">http://brightboxblog.com/ppdeagle</a>

(You'll find lots of information on how "convergence" is shaking up the TV/Internet/Phone industries).

The race won't be over for about 5 years; the big boys (Microsoft, Apple, etc) are struggling to keep up with the change...
Posted by ppdeagle (12 comments )
Link Flag
Laptop download
Actually, you can download the TV shows directly to your laptop, then to your video iPod!
Posted by CHESARASARA (6 comments )
Link Flag
they said free??
The article claims cable customers are accustomed to 'free' content with on demand shows. I don't consider $90+/mo. I pay for my cable service free by any standard!

Anyway, we use the DVR cable box from TW and it fills what I consider to be the needs of average network tv consumers. Yeah people on the go may enjoy the ability to watch a show on a mobile device, but if the media companies think someone like me (again, considering myself an average network/cable tv consumer who doesn't travel or commute 2hours one way to work) is going to pay to view something on a 2.5 inch screen, they have lost their minds!
Posted by Brandon King (1 comment )
Reply Link Flag
The Future
Imagine a future where you can just buy TV shows a la carte
rather than pay that $90 subscription fee. That's what is cool
about this new distribution model. Right now, Apple selling
low-res content geared for iPods. They know that only a small
part of the marketplace really wants video on the go. Jobs has
said so himself. The iPod is still a music player first and

But, as broadband speeds increase, the ability to buy full
resolution shows could be a very attractive alternative to cable
subscriptions. Apple clearly is positioning itself to be a seller of
that kind of content and I expect that they have a home
entertainment device in the works to serve as the interface/
storage/playback for this kind of service.
Posted by Thrudheim (306 comments )
Link Flag
itunes6 to laptop
Again, I believe you can download the TV shows form iTunes6 directly to your laptop, then to youe Video iPod if you wish. My laptop's screen is 17" wide!!
Posted by CHESARASARA (6 comments )
Link Flag
Video on the hard drive???
This recent announcement/intro by Apple has me sitting up straight!

I am sort of a 'leap-frog' adoptor; meaning I stretch my purchases usefullness for as loooooong as possible. (Note: I'm still using my PB G3/lombard and OS 9.2.2). And we are still using 'rabbit ears' for TV reception!!! (Due to cost).

I've recently been shopping for an external hard drive for additional backup and I've been thinking now: can I soon get movies on a download and just store them on the HD?

As for movies to go. I thought it was pretty silly to have video screens in the back of headrests in cars, yet they seen to keep on with it. I imagine that the folks who buy for that reason are Apples target market, with the video iPod. It might work; kids have their own iPods/movies--less fighting, more isolation, less communication, socially disfunctional down the road!!! Bring on the therapists...

But really...the iMac as a hub in the living room has me thinking of leapfrogging again!
Posted by (3 comments )
Link Flag
You don't have to watch it on iPod
You don't have to have a new iPod video to download and watch the show. Actually you don't need an iPod at all, you can just download the TV shows through iTunes and watch it on your computer. They are H.264 encoded, which delivers pretty impressive quality even on a large display or TV.

If you are lucky to have one of the new iPod video, not only you can watch it on the iPod's 2.5 inch screen, you can alaso connect your iPod to a TV to play back the TV show on TV by purchasing an optional AV cable from Apple for 20 dollars.

And another note, yes, you can transfer your own video to the new iPod video.

The new iPod can playback following video formats:
H.264 video: up to 768 Kbps, 320 x 240, 30 frames per sec.
MPEG-4 video: up to 2.5 mbps, 480 x 480, 30 frames per sec.

iTunes will sync these clips to your new iPod video.
Posted by papersushi (3 comments )
Reply Link Flag
Wow, somebody finally realizes this. Thank you!
Posted by CHESARASARA (6 comments )
Link Flag
Subscriptions and free TV content
Subscriptions can't be far off. We're talking about Disney, so I imagine it won't be too long before you can subscribe to SportsCenter and have it download new episodes every day.

I also would like to see free content added, like Channel 101 and 102.

And videocasting. Let's get that up and running. (Power to the people!)
Posted by TV James (680 comments )
Reply Link Flag
Videocasting is already here
Check out sites like <a class="jive-link-external" href="http://www.vobbo.com/" target="_newWindow">http://www.vobbo.com/</a> that let you record your own video, live through the browser (and free, if you can do it fast enough). News cast? Talk show? Silly drunk pranks? It's just 2 clicks away.
Posted by random_foo (8 comments )
Link Flag
Wrong, wrong, wrong.
From the Article:
Just as many people are already watching movies primarily at home, on DVD, consumers may stop thinking of television as the primary way to access TV content.

"A lot of people who want this kind of content may not even bother with a TV anymore," said GartnerG2 analyst Mike McGuire.

People will always want to watch video (however it is accessed) using their Television. The other viewing methods (Internet, iTunes for Video, etc.) will be settle-for alternatives. Who really wants to view entertainment content on a 2" screen or on a computer -- it'll be watched on a big-screen or projection TV with full surround sound...
Posted by ppdeagle (12 comments )
Reply Link Flag
TV Sidekick
If you think people won't want to watch TV from a PC/Mac, you are right. BUT did you know that the new iMac also has "S-video and composite video output(2)"? You just hook up the iMac to your LCD or Plasma, using the S-video port and Voila, the videos are run on your main set. As a result, the new iMac with FrontRow will act as your TVs sidekick, sitting there on the side. You use the iMac to select the media and watch all your videos on the TV. I expect future versions of the iMac to come with DVI out, Component Video Out or maybe even HDMI. How do I know this? Users in Asia and Europe have been using a DIY version of this setup for months. (We have very little to watch over here) Hurray for Apple, but I also think the other winners will be High Def TVs, hard drive companies, &#38; broadband ISPs, whereas the losers will be TV Stations, Cable TV companies, DVD makers, Advertisers, Ad Agencies, Amazon-type companies, illegal download sites and eventually movie theaters. Lastly, I just found out that if you live outside the U.S., but own a US Credit Card, you can still download the TV shows via iTunes. Is that a big deal? YES, because (1) We don't have Tivo out here and (2) we now don't have to wait months after a show airs in the US to watch it locally. I've got my Apple religion back, all over again!
Posted by bertbuster (2 comments )
Reply Link Flag
Good one Robert
Great thoughts Robert! Thanks for the technical, it opens up many possiblities...

I'm paying attention!
Posted by (3 comments )
Link Flag
iTunes6 TV shows
Yes, the 5 shows currently available is a very short list. I will be using it, but hope iTunes expands to other network shows quickly!
Posted by CHESARASARA (6 comments )
Reply Link Flag
iTunes6 TV show downloads to LAPTOP, OR video iPod!!
Like Fish Sun has said, you can download directly to your laptop. No need for the new video iPod!
Posted by CHESARASARA (6 comments )
Reply Link Flag
Russ, Is That You?
WPI, class of 1979.
Posted by Jcabbott9 (1 comment )
Link Flag
Thanks Fish Sun
"You don't have to have a new iPod video to download and watch the show. Actually you don't need an iPod at all, you can just download the TV shows through iTunes and watch it on your computer. They are H.264 encoded, which delivers pretty impressive quality even on a large display or TV."
Thanks Fish Sun. I didn't know that. Being able to 'video' out to a larger device opens a whole world of possibilities!
Posted by (3 comments )
Reply Link Flag

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