Apple Premieres Movie-Music Double Feature

News Analysis: Apple remains fixated on entertainment and digital media as keys to its growth with the introduction of its new movie download service and a sneak peek at its future Mac-TV wireless link.

Apple Computer demonstrated on Sept. 12 that it intends to become as big a retailing powerhouse in movie downloads as it has already become in the market for music distribution.

Everything company CEO Steve Jobs revealed Sept. 12 at San Franciscos Yerba Buena Center for the Arts Theater fit into a coherent strategy for strengthening Apples position (and revenue flow) as a digital media marketer and distributor.

From its strategy for selling movie downloads, to new iPod features, to an unprecedented "sneak peek" at iTV, a product to be announced in early 2007, everything Apple showed all share the primary purpose of expanding the companys ability to sell not hardware, but bits and bytes of entertainment. Though, of course, Apple will sell you the hardware, too.

The only thing conspicuously absent from the announcements was a full-screen video iPod, which some market analysts expected to debut.

Apple is already a digital retailing juggernaut in the music world. Jobs noted that iTMS (iTunes Music Store) had an 88 percent market share of online music retailers, with over 1.5 billion songs sold to Mac and PC users.

By the second quarter of 2006, he added, Apple was the fifth biggest seller of music that he stressed was legally obtained, behind Wal-Mart, Best Buy, Target and Amazon.

Unlike Apple, all these retailers sell physical CDs. And Apple, he noted, was poised to surpass Amazon in 2007.

As expected the Sept. 12 announcements were led by Apples movie download service.

Jobs drew parallels between todays movie offerings, which are limited to titles from Disney and three studios owned by Disney, and the first days of selling TV shows on iTMS, with only five shows from one network.

Jobs said that today iTMS sells over 220 shows from 40 networks. Expect a similar expansion of offerings in the movie category, he added.

These movies will be sold at "near-DVD" resolution of 640 by 480, rather than at the previous resolution of 320 by 240. Using the H.264 codec, Jobs said, this would provide excellent picture quality for viewing on computer—and larger screens.

This feature ties into the "sneak peek" device, currently code-named iTV. Although the final name will likely be different, Jobs said. Such a device has been long anticipated by analysts and Mac watchers.

The iTV, which looks like a flatter Mac mini, serves as a wireless way to connect your Mac to any TV via HDMI or component video, and analog or digital audio.

/zimages/1/28571.gifClick here to read the details about Apples introduction of a movie download service.

The iTV connects to a Mac via 802.11 wireless, allowing users to browse content with Apples remote (which comes with most currently available Macs) through Mac OS Xs Front Row interface.

This offers a simple, large-text menu system for selecting movies, music, photo slideshows or movie trailers streamed from Apples Web site. With the iTV, any Mac will become a challenger for a dedicated Windows Media Center PC.

Jobs said the iTV will work with any computer outfitted with iTunes, though he did not say if PCs will also get the Front Row interface experience.

This is an instant value-add move for Apple: People who already have invested in digital media through Apple will have, after paying $299 for the iTV, a new venue for their media. Movies wont have to be watched at a desk, or computers wont have to be dragged out to the living room.

Next Page: Starting a new revenue stream.