Analysts, Retailers Laud Apples Video Play

Despite Wall Street's sell-off of Apple stock, analysts and retailers are bullish on Apple's video-centric iMac and iPod.

Analysts and retailers expressed more optimism over Apple Computer Inc.s announcement this week of new, media-centric iMac models and a new, video-capable iPod.

This was in contrast to Wall Streets sell-off of Apple stock in a week where the company reported record profits.

On Wednesday, Apple CEO Steve Jobs presented new iMac models that featured Front Row, a media-center-like digital media presentation solution, and new iPods that could play color video content.

In addition, Jobs announced a deal with ABC and its parent company Disney, in which video content from those two companies would be available for legal purchase on Apples iTMS (iTunes Music Store).

The iTMS also offers for sale music videos, video podcasts and shorts by Pixar (which is also helmed by Jobs).

"This is a big, big deal," said Michael Gartenberg, a vice president and research director at JupiterResearch.

/zimages/1/28571.gifVideo iPod will capitalize on TV video sales. Click here to read more.

Apples announcements "validated two concepts: the media-centric personal computer and mobile video," he said.

Gartenberg noted that other manufacturers, such as Archos and Creative Technology Ltd., have brought portable video media players to the market, but Apple "overcame their limitations."

Specifically, he noted that these players lacked a reliable source of legal content, and that it was difficult to load video onto the players.

Though currently the iTMS sells only five broadcast TV shows from one provider, Gartenberg said he was sure this list would expand.

He noted that when the iTMS launched, it featured only 200,000 songs; today the count is up to two million.

Gartenberg noted that according to JupiterResearchs data, fewer than 4 percent of online households own a DVR (digital video recorder), and that most people who own a VCR dont use it to record off the air.

The video offerings, he said, are similar to how the iTMS "offered the first legal alternative to Napster."

He noted that there were dozens, if not hundreds, of media companies with back catalogs and other content that is not currently distributed, but could be through the iTMS.

Van Baker, a vice president of research for Gartner Inc., based in San Jose, Calif., also voiced optimism for downloadable digital content.

He said that "the most impressive thing that Apple announced today was the fact that they had secured an agreement with Disney for the top two television shows on the air today with the current season episodes available the day after they air."

"This is a coup for Apple," he said, "and we expect that the other networks will be talking to Apple soon."

Baker added that direct comparisons between Apples Front Row media presentation solution and Microsofts Windows MCE (Media Center Edition) were premature.

"[Front Row] does not have all the functionality that you see in MCE, but Front Row is much more elegant and offers much of the same capabilities," he said.

"Assuming that Apple can secure more video content for its library, there are many new products that could be positioned in direct competition with Windows MCE PCs."

Ben Bajarin, an analyst with the Campbell, Calif.-based Creative Strategies Inc., said that Apple has made "a step in the media center direction."

"Apple is saying, Our Macs are the center of a digital media lifestyle," he said. "The next step is clearly, how do you get this digital media to a TV?" he added.

Bajarin speculated that Apple could work with a partner for new hardware or design their own.

Bajarin said that he saw Front Row as a compelling selling point for the new iMacs. When asked why people who currently own DVRs or VCRs pay to download previously aired TV shows, he responded "because they can."

He pointed to the example of cell phones and media content. Recently, he said, there was a spin-off of the Fox TV show "24" produced in short episodes people could pay $3 to view on their cell phones.

Similarly, he said, content producers could sell extras such as outtakes, extended reels and commentaries over iTunes.

As for the video-capable iPod, Bajarin said "the video iPod will be a hot seller," but not primarily because of the video feature.

"The iPod is still on everybodys holiday gift list, and this model has a very aggressive price point," he said.

"The biggest news isnt that people are going to be watching a lot of video on their iPods," said Sam Bhavnani, an analyst for the San Diego, Calif.-based group Current Analysis. "After all," he said, "you cant watch while jogging or going to the gym."

"What this is, is a baby step to movie downloads through iTunes," he said.

"Apple is making inroads—the key is relationships with the people who can provide compelling content," he said.

Bhavnani said that though it might take more than 45 minutes to download a movie at the same 320 by 240 resolution the current TV episode are offered in, such a download would be legal, compared to using a P2P service such as BitTorrent. "And those take forever," he added.

"This is the first step to a digital home," Bhavnani said, "and well see more to come." He said that he expects to see another big announcement in this area around February of next year.

Next Page: Retailers react to Apple video updates.