Tag Archives: Itunes

Apple TV’s next moves?

Before the Christmas holiday, rumors of Apple’s overtures to the networks abounded like so many visions of sugar plums. Journalists and bloggers posited about the effect of Apple’s entrance into the subscription television market. Most of the analysis was solid. The Seeking Alpha blog featured this succinct write up. Most expect a successful Apple offering would threaten cable and satellite subscription models. Others note that an invigorated Apple TV could put the pinch on the Netflix Roku service. Light Reading’s Cable Digital News noted the following.

While cable operators likely won’t face an immediate threat from the subscription service Apple Inc. (Nasdaq: AAPL) is purportedly pitching to major content suppliers, the offering may instead put the hurt on over-the-top video service providers like Boxee and Roku Inc.

It should be noted that Apple TV employs a hard disk. Content is downloaded before it’s played. Roku receives streams, so it’s a lower cost, lower footprint device. Most importantly streaming allows more delivery flexibility. Netflix doesn’t care whether I watch my content on a PC or a TV. Apple TV is anchored to a television. While an iTunes account can be managed from multiple devices, content needs to be downloaded to each to play it. Even with improved progressive download performance, this model has its limitations. One blog noted that a full season of an HD network television series can take up to 50 GB of hard disk space. So there’s a limit to how much content can be delivered to an Apple TV.

For Apple to leverage the strong iTunes brand it has to unhitch content from the device – a fundamental change in business model for a device manufacturer. But if any company has shown the ability to adapt to the digital media marketplace of the early 21st century, it’s Apple. If Apple succeeds at getting content deals in place, I expect a next-generation Apple TV to emerge shortly thereafter.

Apple, iTunes, and the cloud

A small, but interesting tidbit. Word has leaked that Apple has agreed to acquire the hybrid streaming-download music service Lala. Unlike other streaming services, Lala is not subscription-based so it fits nicely into Steve Job’s view of the online music world. Lala is more of a cloud-based iTunes. If you keep your music on the cloud and stream it, you pay 10 cents to add it to your collection. Downloading a song costs 89 cents. Lala also has a nifty technology that allows the user to upload his MP3 library to Lala. Any song in Lala’s catalog is linked to the Lala version, others the user can upload for free.

Assuming a proliferation of music playing devices with inexpensive Internet connectivity, the deal’s a no-brainer. It accelerates iTunes’ much needed migration to the cloud. You gotta love this business model from the consumer’s point of view. “Let me get this straight, you’ll store, backup, and manage my music collection on your storage with your infrastructure for 10 cents per song, or I can take on the hassle for 89 cents per song.” Apparently the model works according to a Wired article.

This Lala acquisition could also help iTunes increase its revenue-per-user. Steve Jobs admitted  in 2007 that the average iTunes user had only bought an average of 22 songs. By contrast, Lala CEO Bill Nguyen told us in October that its paying customers spend an average of $67 on Lala music…

And don’t forget all of those wi-fi capable iPods to be sold.

Debunking the Long Tail?

Repeat a theory often enough and it is treated as fact. The Long Tail may have attained such status. Because it is the basis of so many Web 2.0 initiatives, and it’s both elegant and charming, many content producers no longer question it. Last week an article in The Register cited the work of economists Will Page and Gary Eggleton with Mblox founder Andrew Bud in putting the Long Tail to the test. It doesn’t fare well.

This really isn’t the upbeat fairy tale message Anderson has spent four years selling on the conference circuit. However, as he took his “message” to Davos and beyond, the Long Tail has gradually developed into a ‘Policy Based Evidence Making’. Having convinced himself of the truth of his hypothesis by looking at one US music service, Anderson widened his search for facts that might fit his theory. But he didn’t examine the numbers closely or critically enough, say the economists.

At some point the Long Tail has to prove itself in real-world business applications. Storefronts (real and virtual) and mass marketing are going to be with us for a long time, so a pure application of the Long Tail may be years away. Until it’s catalogued and easily discoverable, it’s unsellable. The iTunes Genius sidebar might be the Long Tail’s first true enabler… someday, but it’s a ways off. If an application can’t recommend something to go with a Beatles tune, how useful is it?

I’ve always appreciated the elegance of the Long Tail theory, and have been surprised that it failed to produce superior profits in the media and entertainment sector. The article goes a way towards explaining why it is failing in the market place.

Others have appreciated it for the Utopian vision the Long Tail provided of being able to make marginally marketable media, but still turning a profit on it. Who wouldn’t rather make an art film over an infomercial? Like Santa Claus, people believe in the Long Tail because it makes them feel good to believe.

At the end of the day it proves an old algebra teacher quite prescient – “Question anything that doesn’t resolve to a normal curve.” An exaggeration to be sure, but something to keep in mind.

To this I add the Capria corollary – If the guy sounds like he’s selling snake oil, he is. Chris Anderson and his theory have long been more hype than substance. He’s parlayed a single theory posited in a magazine article into a career.

Apple TV, Open Television Network, and the independent

As a consumer device, Apple TV is a typical first generation technology endeavor. Basically Apple took the iPod formula and applied it to IPTV — create a basic, no frills piece of hardware in an elegant wrapper, but give it a best in class UI.

This approach worked for the iPod because an easy to use MP3 player had an easily understandable value proposition to consumers. People wanted these devices, but the market was doing a terrible job meeting those needs. The iPod swooped in and took control of the market.

There’s not a lot of pent up demand for an IPTV device because

  1. No one knows what IPTV is.
  2. Very few people want another set top box (STB) clutter their living rooms.
  3. Video on demand (VOD) and pay per view (PPV) are doing a solid job of filling Apple TV’s niche.
  4. There’s always NetFlix.

Mike Curtis over at ProVideoCoalition.com did a nice review on the latest Apple TV update, and linked to some interesting information on Apple TV as a consumer device. No need to recap that. Instead, let’s look at what Apple TV’s success or failure means to independent content creators.

IPTV can be the great equalizer for independents. It has the potential to distribution affordable for even the smallest players. Unfortunately the iTunes store is not independent-friendly. Apple’s been unwilling to adopt the Amazon and Yahoo! models of renting space to retailers. If you’re not big media, you’re not welcome in iTunes — unless you’re willing to give your content away. That means adopting an ad-based model, and that means more work for the independent producer.

Enter the Open Television Network

OTN logo The recently launched Open Television Network takes care of all the e-commerce infrastructure, so independents can sell content for download. Once an Open Television account has been created, to the user, it’s just like buying through iTunes. Very elegant.

The content owner supplies his or her own storage, gets a listing in the Open Television index, and is free to market independently. To date it’s the most open, elegant, and affordable means of delivering IPTV content available to content owners. Open Television takes a very reasonable 15% cut of sales. Try getting a deal like that with a traditional distributor.

Whether Open Television becomes the dominant platform or not, it has opened up IPTV to the independent.

What’s next for Apple TV?

Rumors abound regarding the future of Apple TV — Apple’s tepid foray into the set top box market. The big issue users face with Apple TV is that it’s either expensive or cumbersome to get content into the thing. Beyond movie trailers, YouTube, and podcasts available via iTunes, it’s either pay per download or rip your own from DVD.

Compare Apple TV’s value proposition to something like Slingbox’s. While the Slingbox allows the user to leverage and repurpose content he or she has already paid for, Apple TV doesn’t. (Coming soon, Slingbox Mobile for your Blackberry.) Someone already paying a $100+ for cable and $17 for Netflix won’t be compelled to drop $300 for a box that will run up the media bill further.

Apple needs to enable customers to get content into Apple TVs easily and inexpensively. Some options include:

  • Adding a Blu-ray player. Saul Hansell predicted this in the NY Times Bits blog. It’s not likely. The box is already expensive enough, and Apple doesn’t stand to make money off of increased Blu-ray penetration.
  • Adding rental options. Going toe to toe with Netflix is an option, but what about teaming up with Netflix? Netflix just announced an agreement with LG to allow direct-to-TV downloads from Netflix to specially equipped LG TVs. A deal with Apple would pack more punch.
  • Adding DVR capabilities. I understand why Apple won’t do this. As TiVo has learned, DVRs are the domain of the cable and satellite companies. DVR software for the Mac is already available with EyeTV.
  • Allowing independent producers to sell videos on iTunes. Currently everything I can get for my Apple TV on iTunes I can get cheaper elsewhere. If Apple allowed independents access to its store, content not available anywhere else would appear overnight on iTunes — you know, that long tail thing.

Obviously I like the last option. Apple’s following has grown as it’s empowered people to communicate in new ways — twenty years ago it was desktop publishing, more recently it’s been video editing. Now it has the opportunity to empower us to be distributors. If Apple TV and iTunes remain nothing more than outlets for the studios and Google, they will continue to be niche products in the IPTV market.

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