Apple Goes Rental

New Box Offers 99-Cent Shows From Disney/ABC, Fox

By Todd Spangler -- Multichannel News, 9/6/2010 12:01:00 AM

After three and a half years on the market, Apple’s initial iTunes Store-connected settop box failed to hit the jackpot. The company also was unsuccessful in trying to pull together a monthly subscription-TV service with programmers.

But CEO Steve Jobs and company haven’t given up on the boob tube yet.

Last week, Apple unveiled a slimmed-down version of its set-top, priced at $99, that will instead push 99-cent streaming rentals of shows from News Corp.’s Fox, The Walt Disney Co.’s ABC, ABC Family and Disney Channel, and BBC America.

The new Apple TV, set to ship before the end of September, also will provide rentals of some 7,000 movies for between 99 cents and $4.99, as well as access to Netflix’s streaming-video service.

Analysts criticized the weak content lineup, as well as the Apple TV device’s inability to run apps. Some had expected a more aggressive strategy, along the lines of Google TV, to put Apple front and center in the home entertainment center (see cover story).

“We believe the new product is positioned to sell better than its predecessor helped by a lower $99 price point but is likely remain a ‘hobby’ where volumes will likely be modest,” Kaufman Bros. senior analyst Shaw Wu wrote in a note last week.

Shows for rent, available for 48 hours, are those for which the media companies have the video-on-demand distribution rights. These include Fox’s Glee, Family Guy, Bones and American Dad; ABC’s Lost and Desperate Housewives; Disney Channel’s Hannah Montana; and BBC America’s Top Gear.

“When we put our shows on iTunes five years ago, it was revolutionary,” Disney/ABC Television Group president Anne Sweeney said in a statement. “Since then, we’ve continued to provide viewers with innovative new ways to access our programming, and today we’re proud to team with Apple on a rental option for fans of our shows.”

Clearly, however, most TV programmers aren’t sold on Apple’s latest idea for wringing digital pennies out of their content. Even Disney/ABC and Fox reportedly committed only to a six-month trial on the 99-cent show rentals.

“We think the rest of the studios will see the light and get on board with us,” Jobs said at the company’s event in San Francisco.

One big concern of media companies is that the 99-cent rental would undercut more profitable electronic sell-through channels. Currently, Apple’s iTunes Store offers many episodes of TV shows for purchase, typically priced at $1.99 each.

The new Apple TV, roughly four inches square, is about one-fourth the size of the previous generation of Apple TVs, which carried a list price most recently of $229. Originally the Apple TV was priced at $299.

The device — which, unlike its predecessor, does not have a hard drive — will stream iTunes music and videos, YouTube videos, Flickr photos and podcasts from a computer. Soon, according to Apple, customers will be able to stream video from iPhones and iPads, via the company’s AirPlay feature.