Apple video move divides industry

By Mark Ward
Technology Correspondent, BBC News website

The iTV device will be available in 2007

The technology world has been set chattering by the series of announcements Apple made on 12 September.

Currently generating most heat on blogs and discussion boards is the slim video streaming gadget code-named iTV. The final version, due 2007, will have a different name.

Apple hopes people will buy the gadget to get the movies and other media they buy from the iTunes store via their PC on to other devices around the home - especially the TV.

A lot of the discussion mentions that Apple pre-announced the iTV gadget - something it typically never does. This break with tradition underscores how serious a step Apple is taking with the device and the scale of the competition it is taking on.

Apple boss Steve Jobs acknowledged this when, during the iTV presentation, he said: "Everyone who's tried this before has failed."

History lesson

Analysts, Apple advocates and industry watchers are divided on whether Apple can buck this long-standing trend.

Apple targets TV and film

By launching a movie-download service and accompanying hardware it is taking on many more competitors than it did with iTunes and the iPod.

It made a success of those despite being late to launch an online music store and portable music player, said Ian Fogg, senior analyst at Jupiter Research.

"It has done very well as a swift follower," said Mr Fogg.

Analyst Aleksandra Bosnjak from research firm Ovum said Apple's competition included the movie studios themselves plus many other ambitious firms such as Amazon which recently unveiled its Unbox download service.

TV shows are also starting to turn up on the online service for Microsoft's XBox that lets owners of the console download them for watching later.

Later this year Microsoft is also set to launch its Zune player and download service that will undoubtedly offer music, movies and TV shows.

Ms Bosnjak said the movie download market was getting so crowded that there were bound to be casualties.

Amazon's Unbox service also offers movie and TV downloads

"There are too many players and too many contractual co-dependencies for all to survive," she said.

Mr Fogg said Apple pre-announced its iTV box in a bid to convince potential partners that its ambitions are serious. He said it hoped to build "momentum" and get movie makers and broadcasters talking about putting content on the Apple service.

For example, he said, Amazon's Unbox offers movie downloads from 20th Century Fox, Paramount, Sony, Universal and Warner Bros. So far, only Disney movies are available from Apple.

Also, in the UK it faces significant problems extending the download service because of the equal ambitions of big net and TV firms.

Most of the customers of Britain's biggest net service firm, NTL, already pay for the TV shows they watch and many pay more to watch movies on demand. Few may be tempted to splash out on a gadget and a service that offers them less than they already get.

Similarly Sky has more than eight million pay-TV customers that the broadcaster is trying to get signed up to a free broadband service.

Hard sell

Mr Fogg also pointed out that despite the success of iTunes most music is still bought on CD. A report from market research firm Screen Digest suggests that, for a long time to come DVDs were likely to be more popular than downloads.

By 2010, said the Screen Digest report movie downloads in Europe will grow to 690m euros (£466m). By contrast the European DVD market will be worth 5.7bn euros (£3.86bn).

For Apple, making a success of selling the iTV box is critical to its future prosperity.

This is because Apple needs people to enjoy their digital media - be it images, music or movies - on the company's hardware. Apple makes little money on the sales of songs via iTunes. It makes far more from iPod sales.

So far only Disney movies are available via the iTunes store

The iPod has been almost single-handedly responsible for the huge improvement in Apple's revenues and profits.

On his blog industry commentator Om Malik said Steve Jobs could now be regarded as "Bill Gates 2.0" because of his dedication to putting Apple hardware at the heart of what people do with their digital media.

On the PC, he said, the money was in applications such as spreadsheets and word processing and Bill Gates pushed this point whenever he could.

"In the post-PC, device world, content is what sells the hardware, at least for hardware," he wrote.