Movie download services have been about to take off for nearly 20 years.

In the mid-1990s, Time Warner spent $10,000 a customer in Florida to show downloading movies over cable lines was technologically feasible. In 2008, movie downloads are still mired in the "proof-of-concept" stage.

Apple’s announced plans today for an online movie rental service could be the spark that sets movie downloads alight in consumers’ minds.

Not because Apple is offering a fundamentally new twist on VOD. But because it’s Apple.

The movie download market today is remarkably similar to where online music was before Apple launched its first iPod. Back then, MP3 players were already on the market. But they were largely niche products and most music that played on them was pirated. Apple created the first cool digital music player.

Steve Jobs was also the first technology executive with the heft in Hollywood to actually cut deals with studio executives to allow enough legal content online to create a marketplace — and demonstrate that making money from digital music was at least possible.

In 2008, most consumers still aren’t all that interested in cable companies’ movie download offerings — largely because the studios are so worried about piracy and cannibalizing their existing TV syndication and DVD businesses that they haven’t supplied enough product to interest subscribers.

Movie downloads from services like Netflix and CinemaNow are still largely a curiosity for hobbyists and people who don’t know how to download the pirated stuff. 

Until now, Apple hasn’t fared  that much better. It’s sold only about seven million movies, compared to about four billion songs and 125 million TV shows.

Once again, Jobs has persuaded the studios to make vastly greater stores of content available to consumers in exchange for the tacit promise that he can create enough of a market to offset the inevitable increase in piracy that will occur when millions of new consumers realize how easy it is to download and share movies on their computers, iPods and TV sets. (Just look at the movie piracy rate in Korea, which has the world’s most ubiquitous broadband).

Apple’s movie rental service could be exactly the spark Hollywood needs to jumpstart its online cinema business. Or the spark could become a conflagration that devours industry profits. Or it could flop once again, just as so many for-profit video-on-demand ventures have since Time Warner first dipped its toes in Orlando.

The only certainty is the movie downloads — legal or not — are here to stay.

See Also

• Apple Unveils Online Movie Rentals, Ultra-Thin Laptop Computer
• Time Warner’s ‘Time Machine’ for Future Video

Posted under Uncategorized

Jobs announces a third party SDK for the world’s most closed phone

I always thought that Apple got a pass from dazzled media over the closed nature of the iPhone. For all of Apple’s talk of being consumer-centric and user-friendly, the basic design of the iPhone made it by far the most closed mobile environment of all. You couldn’t even get a ringtone download until last month, and the selection of those tones on iTunes is truly pathetic. Steve Jobs trotted out a laundry list of excuses for the lack of third-party inclusion (viruses, bringing down the AT&T network, etc.) but none of it really explained why I could’t download a decent game or ringtone.

Apple apparently is moving toward a greater spirit of inclusion and true user-friendliness today. Not only did the company announce that it was lowering the price of its DRM-free iTunes Plus tracks, but it also said that an SDK would be available to third party developers for both the iPhone and the iPod Touch.

According to Jobs, the kit will be available in February because Apple is trying to ensure two things at once. First, it wants a development kit that gives third parties a good experience and access to as much of the multi-touch interface as possible. Second, they are working to ensure that these third-party apps do not comprimise the security of the phone. Jobs seems a little touchy on this matter, as he goes out of his way to rationalize his rationalizations for keeping such a tight leash on his coveted new tech hit.

Sayeth the great and powerful Jobs: "Some claim that viruses and malware are not a problem on mobile phones—this is simply not true. There have been serious viruses on other mobile phones already, including some that silently spread from phone to phone over the cell network. As our phones become more powerful, these malicious programs will become more dangerous. And since the iPhone is the most advanced phone ever, it will be a highly visible target."

What does this mean for develoeprs and the mobile eco-system? Well, it is very good news for the two million or so of us who do own the phone, but I am not sure it has that big an immediate impact on the rest of the mobile world. As has often been the case with the iPhone, its infleunce seems indirect. By giving users and developers a lush and flexible interface and palette, the iPhone obliquely pressures the rest of the mobile community to follow suit.

Posted under Michael's Blog

The long-awaited Wi-Fi iTunes Store opens for business

Apple takes aim at yet another longstanding bug in the mobile content eco-system with the release Friday of its Wi-Fi iTunes Store. Owners of the iPhone and new touch iPod were treated to a firmware upgrade that adds an icon to the interface for iTunes. When within Wi-Fi range, you can access the iTunes catalog and buy and download a tune directly to the devices.

Posted under Michael's Blog

Ringtones Have a Mixed Week

Industry analysts have predicted for years that the mobile ringotne fad had to ebb sometime. While there have been signs that European taste for tones has come to a bit of a plateau, the latest M:Metric figues suggest that the U.S. still has a hearty taste for the custom ring-a-dings. About 9.4% of U.S. mobile subscribers, more than 20%, still download a ringtone in a given month, while about half as many do so throughout Europe.

For reasons that are not entirely clear to me, the mobile press has made a very big deal over Verizon pulling then restoring the Bob Marley ringtone catalog to its phones this week. Sure this involved a rights issue with the Marley family, but was it really worth all the ink I have seen?

Similarly the silly "ringles" story  seems even more emtpy than the Marley saga. That music publishers want to add a ringtone to CD singles as a way to revive that market just seems like a desperate attempt at packaging novelty.

Lost in the shuffle of less important stories is the actual launch of Apple iTunes ringtones. You can right click on a song you have purchased and make a ringtone within iTunes that will pass on to your iPhone. The tool is very clever and easy to use. You get up to a 30-second clip, and you can drag the ringer window across the length of the audio timeline interface to make a ringtone of any piece of the song you want. This move toward true customization of ringtones in such an easy interface should be bigger news. Alas, Apple does not seem to have secured many labels in this deal, and the iTunes store makes it very difficult to find songs that are enabled for ringtones. This is one of Apple’s few missteps recently, but it certainly suggests the kind of tension that exists between the media industries and Apple’s iTunes model.

See Also

• Apple

Posted under Michael's Blog

The Apple iPhone rebate keeps the pressure on the wireless industry

Why did Steve Jobs really reduce the iPhone price a whopping $200 only 90 days after its release? Business 2.0’s blog reels off ten possible reasons. Did Apple just pass along reduced costs? Were they detecting slowing sales they needed to tweak. Or was it just simple price gouging of early adopters like me?

But when Steve Jobs responded to iPhoner complaints about having paid $499 and $599 in the past month and a half, the Web exploded in feint praise. Jobs will be giving me, an early buyer, $100 in credit to buy more from him. I am good with that. I had my eye on the iTouch anyway. Om Malik argues that the rebate move demonstrated the power of social networking online and the people’s new ability to wage a class action protest in a number of hours.

Well, yes. But the real message behind Apple’s move is that customer service is worth more to this brand than a $100 or so in lost revenue. When was the last time a major cell phone OEM or a carrier made a similar gesture? From day one, the unheralded lesson of the iPhone was the power of positive conumer experience. I personally went to both AT&T and an Apple store in search of my iPhone, and the difference between the two experiences made me feel embarrassed of the traditional wireless industry. Apple knew how to sell these things, explain these things, and service anyone walking through that door. It is not suprising to me that Piper Jaffray analysts showed how Apple stores were outselling AT&T outlets by 7-to-1.

It is wrong to believe that Apple gains user loyalty from sexy gadgetry alone. The real impact of the iPhone is how frowsy it makes other wireless technology look in its design and its relationship to consumers.

Posted under Michael's Blog

There is more to the Apple/NBC dispute than pricing

After NBC announced last week it would not be renewing its contract with Apple to distribute its premium content on iTunes, most industry insiders understood this to be a pretty big bite out of Apple’s online store. After all, various sources peg NBC being responsible for up to 30% of video sales on the service, with shows like "The Office" and "Heroes" among the top sellers. But on Friday, Apple bit back announcing that it would not carry this season’s new shows from NBC because it didn’t want to end their runs abruptly when the contract ran out later in the year. 

While Apple claims in its provocative press release that NBC wanted to double the wholesale price of its episodes, Mediapost reports that the negotiations were more complex than that. NBC was looking to tweak disappoiting revenues from the iTunes partnership by bundling episodes with NBC Universal film offerings as well. Apple felt this would "confuse" the market. NBC came back with its own release arguing that Apple’s business model for iTunes is really about selling hardware, not media.

This is an argument that has been a long time coming. This situation very much resembles early TV and radio, when the hardware makers considered on-air programming simply the sweetener that sold the TV and radio sets. While it is true, Apple is a hardware company, it is also now a media company and it needs to better understand the eco-system that supports ambitious programming.

On the other hand, NBC’s pressure on iTunes may have something to do with its own disappointing up fronts and a weaker-than-expected reception by media buyers for digital. This was one that everyone should have seen coming too. The major media companies were coming to the upfront table with all of these prime time shows running online, as if they were supposed to sell themselves. But the industry is still trying to sort out what kind of ad formats work on digital video, how much people really want their prime time on desktops, and what reasonable pricing should be.

This war is only beginning as distributors and content providers both struggle towards workable business models for digital video. The fact of the matter is that no matter how many eyeballs veer online, the digital ad market still only produces a fraction of the revenues that TV can. How digital distribution supports a robust eco-system of prime time prodcution remains an open question that neither Apple or NBC can answer.     

Posted under Michael's Blog

Some developers are up to the iPhone challenge but others? Not so much

There is a tendency for the Apple-istas to praise any new application made expressly for the iPhone. There is the excellent Plusmo widget portal, the very usable Digg for iPhone, and the truly exceptional new Facebook for iPhone. The iPhone and gadget blogosphere are deservedly abuzz over this one. Mashable called it "stunning," while TechCrunch called it the best iPhone app ever. I think the Facebook app is wonderful, but it does lack the ability to upload new material easily.

Meanwhile there really are some mediocre attempts at riding the iPhone wave. Texterity, the digital magazine supplier has an interesting demo that puts full versions of magazines onto the iPhone screen, although I am still wondering why. I think the technology is impressive. I imagine there might be some use for it in digital cataloging, but it still looks like something that was done for the sake of doing it. Speaking of which, there is the Harper Collins and their preview site for new books. The iPhone version does so little to format the pages properly for the phone, one wonders why they bothered except to appear cutting edge.

One of the great things about the iPhone is low barrier to entry for deveopment. One of the bad things about the iPhone may also be this low barrier to entry. The best apps are following Apple’s lead in identifying the things that people most want to do while mobile and focusing solely on those elements. The less impressive ones leave you wondering "what for?"

Posted under Michael's Blog

by Shelly Palmer

Posted under Michael's Blog

So Steve Jobs gets his way and http://www.emi.com becomes the first major label to ditch copy-protection software. Other record labels are expected follow suit. Music fans will get to burn as many tracks as they want and get the added bonus of near-CD quality sound files. Paid music downloads soar. And everyone wins.

Well, yes. Except for the "everyone wins" part.

Apple certainly wins. It sells a lot more iPods. Fans win. But music labels only lose less.

If you’re an amoral fan who has a choice between paying for a pristine, 256kps, copy-protection-free file from iTunes or downloading it for free from your favorite pirate site or friend’s computer, what are you going to do?

You’ll do what 1 billion illegal song downloads a month say you’re going to do. You’re not going to pay.

Sure, some people will pay. I will. Maybe you will, too. Probably more people in the world will pay.  But most people won’t.

Which means that the "sea change" in music buying habits that some media outlets are already predicting isn’t going to happen. Or at least, not enough to stem the steady erosion in the music industry’s business.

The sea change has already occurred. Fans realize they don’t need to pay for albums.  There’s no going back.

The real sea change will occur when record labels — not Apple — come up with a fundamentally new paradigm for monetizing music. I detailed a few pet ideas in last week’s column, "When Will They Ever Learn?"  I may be wrong about my ideas. But I’ll bet you it’s not going to be "pay per download" that rescues the record industry, either.

See Also

• EMI, Apple strike deal to sell songs online free from copying restrictions

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