Internet Video

Apple Goes Rental

9/07/2010 3:46 AM Eastern

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.

March