What the Apple-Fox iTunes deal means
There are few things Steve Jobs loves more than a dramatic Macworld surprise announcement, but three weeks before his annual keynote speech, someone – my guess would be Rupert Murdoch – just stole his thunder.
Several sources this morning – including the Financial Times and the Wall Street Journal – are reporting that Apple (AAPL) and News Corp. (NWS) have struck a deal for a new video-on-demand service that could change the way digital movies are distributed, viewed and paid for.
Citing an unnamed "person familiar with the situation," the FT reports that the two companies signed an agreement that would allow customers to download the latest 20th Century Fox movies through the iTunes store and watch them for a limited time. No pricing details were available, but earlier reports suggested that Fox and Apple were talking about charging $2.99 for 30 days viewing. That's considerably cheaper than competing services from BlockBuster and NetFlix, neither of which work with iTunes, Macs or iPods.
In addition, Apple is reportedly extending its FairPlay digital rights management system for the first time to another company's product. As part of the same deal, Fox will sell its new releases on FairPlay DVDs that permit customers to transfer, or "rip" the content to a computer or video iPod. As the FT points out, there is software available to rip movies today, but using it is considered piracy and can land you in jail.
Disney is the only other studio that makes new releases available on iTunes, but only to buy, not to rent. Paramount, Metro-Goldwyn-Mayer and Lionsgate sell older library titles. But the tide may be turning, and Apple is reported to be in talks with Sony, Paramount and Warner Brothers.
"Fox and potentially other studios are coming around to the idea that there is nobody out there to challenge iTunes," Jonathan Weitz, a principal with IBB Consulting, told the FT. "This deal is a sign that media mobility is coming to the mainstream."
The best instant analysis of the deal this morning is on Silicon Alley Insider, where Dan Frommer seems to have stayed up all night trying to work the angles. See his winners and losers column here and his six questions here. Among the latter, our favorite is No. 6:
How will Blockbuster, Amazon, Netflix, Microsoft, Sony, cable, telco, and cellphone companies, and other rivals respond? Apple's iPod line dominates the portable media player market, and the iPhone is taking a big chunk of the smartphone market. And now, it appears, there will finally be digital rentals compatible with Apple's gadgets. Surely Jobs' rivals haven't been sitting around doing nothing. How will they fight back? Lower rental prices? More portability/less DRM? This should be a fun one!
Could this mean the AppleTV is no longer a "hobby" for Steve Jobs, and could become more of a player (no pun intended)?
Competition is a desirable occurrence. We, the consumers, are the most benefited from any deal like this. takeoffzone
The Zune is like the iPod in the sense a motor scooter is like a car …
Here are some of the iPod features that the Zune lacks: Games, alarm clock, stopwatch, world clock, password-protected volume limiter, graphic equalizer, notepad, auto-synched copy of your computer’s calendar and address book, and Disk Mode, which lets an iPod serve as an external drive for carrying around computer files.
If you use the Zune’s wireless features, you’ll also get much worse battery life: 19 hours of music playback on the 80-gig Zune versus 30 on the equivalent iPod. The 80-gig Zune is still thicker and chunkier than its iPod rival, too.
Here are some of the iTunes software features missing in the Zune’s software: Smart Playlists, which assemble groups of songs based on criteria that you specify (“80’s up-tempo songs I haven’t heard in three months”), choice of visualizers (screen-saver effects that dance to the music), closed captioning for videos and TV, Cover Flow view, and a graphic equalizer.
The Zune store is missing a lot of iPod features, too: TV shows, movies, audio books, monthly allowances and comprehensible pricing.
At the iTunes store, you pay $1 a song. But on the Zune store, you pay using Microsoft Points, which are sold in blocks of 400 ($5). Songs cost 79 to 129 points, which means 99 cents to $1.61. Suddenly, you’re a currency trader.
This absurd system serves nobody except Microsoft. First, it’s a ham-handed effort to make you lose track of how many dollars you’re actually spending. Second, you can’t just buy one song; the least you can spend is $5. And finally, you’ll inevitably waste money, since it’s unlikely that Microsoft’s various song prices will divide evenly into 400.
@swede in chicago
Interestingly enough, iTunes does have HD content in the Podcast area. I have some great free HD podcasts (720p) from both DiveFilm and NASA that look great on my HDTV that's wired to my AppleTV. So I can say that the infrastructure is already there – paid content in HD is all that's missing… (MacWorld in Jan?)
Can do with Microsoft's Fragmented Stuff vs. How easy it is with Apple Unified User Interface Stuff!
scanned the FT story and this one + comments but have not seen resolution addressed — this is a non-issue for me unless it delivers HD. As far as I know, iTunes does not deliver in HD? Anyone? TIA.
I love Netflix, but I can't WAIT to DROP IT FOR THIS!!!
They so STUPIDLY only support WIndows. When are firms going to realize that if they go with MSFT they are walling themselves in?
Finally people will stop producing so many plastic disks and shipping them around the world everyday when we can use the net for all of it.
I would not use a Zune or a MediaCenter if you PAID me.
"Stole" Steve Jobs' thunder?
I think in this particular instance, this announcement is a good thing for Apple- it gives the other studios half a month to come to their senses and get on board. The more content Steve can announce on Jan.15th, the better for everyone. Presumably, the dam is about to breach.
Apple is best positioned to provide the studios with a constant revenue stream, and they all know it. He could afford to sit back and wait while they all floundered around for a year or two 'til they figured that out.
HOO-RAY. This is a great step forward and makes total sense. If there are other smart studios with this kind of vision to partner with Apple, I hope they step up.
My iTunes bill is about to become bigger. But I'm going to be happier.
"I have friends with the console and none of them use it. It is a horrible experience. What Apple will do is bring it to the masses with a style that only Apple seems to be able to muster right now."
Umm its a pretty simple experience and easy/cheap way to rent HD source videos. The currency system may be a little wacky but the overall user experience MS offers (xbox live/Zune) is by far the most complete pay per media platform i have used (movies, games, music and podcasts)
And to those who don't want to use the zunes, i suggest they try out the new generation. same prices as equivalent apple products, more features.
Matt,
Are you serious??? That's the best play on this announcement you can come up with?! Microsoft has already got this? For the millions of iPod owners everywhere this is semi-big news as they can now view rentals on their iPods with the click of a mouse… The bigger implication here is what this does for the industry in general: From the current way we view distibuted movie titles (dvd, hd, etc…), to how and what we consume in larger part on the new iPhone platform… Tied very nicely together between the existing iTunes ecosystem, and an underdog thought to have been another "apple lemon" – the iTV… In very short order, you'll be able to donwload movies at home (via your mac or pc with itunes), or on the go (iPhone platform)… Try doing that with your Zune or Xbox… Additionally, this will have a major effect on current distribution deals with Netflix, Blockbuster and the like…
Simply put (Matt), PayPerView, and the current movie distribution deals in place don't stand a chance, and frankly, I doubt will be able to maneuver quick enough to turn the tide in their favor… It will be a totally Apple dominated market – at least for the next couple of years! At that point, Apple will at least have helped establish the next Generation of Video and Audio codecs that will run movie distro version 2.0 in the not too distant future… It's never been about control, it's been about giving people simple solutions that work! Long live Apple!
I don't know the details about it but it sounds like the pay-per-view deal is separate from the DVD/FairPlay deal. There is an implication that it is competing with Blockbuster and Netflix but it doesn't mention how long after these films are released in the theaters they will be available on the new service.
The thing I have never liked about XBox live is that you have to pay extra just to get to it. I'm surprised Sony is in talks with Apple since I would think they would be trying to do a similar thing with the PS3. It would be a natural extension of the console since the hard drive is built in. The next thing would be to replace the Blu-Ray player with a burner and you eliminate the need for Blockbuster and Netflix
Sure you have been able to do this for a while, but the confusion among techies between technical capability and wide spread consumer acceptance is where Apple out does MS and the rest.
I am an Apple fan boy, owned the stock for the last few years and it has paid for my gifts many times over….
It's a big deal because of the Apple experience. Drop dead simple. I'm sure this is just one of many announcements Steve Jobs will be making at MacWorld. Should be a good year ahead for AAPL.
My Friend Shurg,
This is a big deal because nobody… really wants a Zune. As far as xbox live… I have friends with the console and none of them use it. It is a horrible experience. What Apple will do is bring it to the masses with a style that only Apple seems to be able to muster right now. This will be very cool and then combined with a new device at Macworld will be another game changer.
*shurg*
Not trying to be a MS Fan boy or anything… however… You can already do this with network tv / payper view over a Media center and the Zune, and have been able to do it for while, and you are going to get them faster /cheaper because they are released to Payper view before they are out on DVD most of the time.
You can also rent movies on XBox Live from most major studios if you want HD / DVD quality. Also XBox and Zune share the same account system so “points” are usable on either platform, You can use them for Music, Games, or Movies, or other stuff.
Not sure why this is such a big deal. Apple’s just trying to catch up iTunes platform features with their competition. They have spent a good deal of time on the iTunes look and feel and it is just easy to use, They really have not spent a lot of time on platform features though, choosing to focus purely on the music business.
I think Apple’s probably got something bigger / cooler coming for macworld
Movie downloads won’t move the needle on Apple’s stock. TV and movie downloads are over-hyped and won’t deliver to the bottom line. People will end up preferring advertising-supported small-screen content and disc-based delivery for their TV's. This preference will not go away as we transition to a BluRay or HD world.
Read more at:
http://www.business-strategy-innovation.com/2007/12/followup-future-of-broadcast-television.html
and
http://www.business-strategy-innovation.com/2007/11/future-of-broadcast-television.html