Analysis of IT news

Wednesday, September 13, 2006

News Item: Apple poised to sell movies online

News item: Apple announced a host of new products geared towards the sale of movies online. A new version of iTunes where users can buy and download movies (let's call it iTunes Movies) as well as a new iPod better suited to watch those movies.

The analysis: the real news here is the upcoming iTV device more than anything else. Scheduled for early 2007, the iTV is a device that will allow to play movies downloaded from iTunes on a regular TV using Wi-Fi.

If it were not for iTV, this would be pretty much a non-event. Apple indeed doesn't have the mojo it enjoyed with iTunes Music.

The main reason is that if the iPod was the killer product that drove iTunes success, it isn't suited to support iTunes Movies effectively. I don't see consumers buying Pirates of the Caribbean to watch it on a screen a few inches wide.

As a result, Apple has several serious competitors. Some services such as MovieLink have been allowing legal movie download a long time before Apple. Even announced its own services days before Steve Job's company.

But what everybody but Steve Jobs missed is that the key factor that will really convince consumers to purchase movies online is convenience.

Sure, downloading a movie from the Web can be much more convenient than a drive to the local video store, especially if the online selection is large enough. But consumers do not want to watch a movie on their computers. They want to watch it on their own TVs. What's the point of purchasing a $3000 entertainment center if it's to watch movies on a 19" screen behind a desk?

And that's where the iTV comes in. A device that makes iTunes a uniquely complete solution. Considering Apple's track record, one can assume the iTV will be pretty easy to use. The question is: will anybody be able to copy it? Coming up with a competing device isn't the problem. The problem is coming up with a standard that everybody uses (albeit everybody but Apple).

Another uncertainty is the movie studio's attitude. Currently none of the online movie services have a great selection. In the case of iTunes, it features movies from Disney and its affiliates (Pixar, TouchStones pictures, Miramax) but that's it. Other movie studios won't want to cooperate with Apple because they have a feeling they can short-circuit the middle-man and have more control than the music majors have. But their attitude could hurt everybody, especially if studios are short sighted enough and refuse to hurt their DVD business. Put too many restrictions and/or too high prices, and people will keep downloading movies using BitTorrent.