Apple’s Coming Video Revolution

I started this as a response to Geoff’s comment from my previous post, but it ballooned into a post unto itself.

Geoff Wrote: - “Good points, all of them. However, even Job’s himself stated this isn’t meant to take over as a single source of acquisition/consumption. I know I’ll still use my dvd player, satellite, YouTube and Torrents as video sources. But there are times when I want to watch something that simply isn’t available through those means. It’s at that moment when I’ll turn to the itunes store. I’m sure that I’ll enjoy the experience and be okay with the cost. I also expect that the experience will be so pleasant that I’ll occasionally turn to it even when other means are available - likely because it will be easier. I’m currently consuming about 90% of my media through non-traditional means. To me, all I want is a REALLY basic cable package, one that doesn’t cost $40/month. I’d love to be able to buy per channel. I still have a need to consume live news/events, but that’s about it.”

True. But Jobs also stated that Apple had no interest in making a flash-based mp3 player, or an iPod that plays video… Hell, he even said I don’t think the convergence of television and computer is going to happen.

For Apple to succeed, they need to play nice with the existing players, all while slowly disrupting the market until it’s too late for the competition to react. Similarly, I don’t think they want to reveal all their cards yet, for fear of other competitors (read: Microsoft) getting involved to soon. They caught everyone off-guard with the iPod + iTunes Store, and I think they’re doing it again with the iTV + iTunes store. And the irony is that they’ve used the iPod as the decoy.

Take a step back, and look how long TV shows have been available on the iTunes store. If I’m not mistaken, it’s been about a year now. While everyone took notice of it, no one saw it as a treat as the only suitable place to consume this video was on an iPod. Take a look now - Apple’s got thousands of new AND old television content, and it’s being updated quite frequently. When the pieces finally come together, I think it’ll be too late for the competition (be it the traditional cable companies, or Microsoft) to react.

For video, the critical missing piece is iTV, because at the moment, there’s no easy way to consume video from your television. Sure, you can string together a Mac Mini, or any number of existing technologies… but the experience is still flawed. For starters, the solution isn’t even remotely elegant, and secondly you cannot immediately acquire content, unless you go to your computer and queue it up for download. With iTV, I believe Apple will seamlessly tie the iTunes store with your television, and you’ll be able to download and purchase new content without leaving your couch.

If you look within Front Row, you can clearly see the signs of this… Movie Trailers is the clearest example - it seamlessly connects with Apple, serves up the movie posters and streams in the video. Add the ability to purchase that video with a single click, and you’re good to go.

Similarly, the iTV is without any sort of DVR functionality. If Apple was planning to have their wireless box cohabitate with traditional sources, I would assume they’d want to integrate everything together for a truly integrated experience.

But I don’t believe that’s the plan. It’s not “Apple” enough… it’s too clunky and complicated. And there are other players in that market, and none of them have been even remotely successful. No, Apple’s plan is to build another fully-integrated vertical, where it can control the experience from top to bottom. Purchase your content directly from Apple, with it stored in one central location, accessible from many devices… be it your iMac, Mac Book, stereo, TV and of course, your iPod.

Regardless of what Jobs has stated, I think Apple’s video strategy will be strikingly similar to their music strategy; Offer as much content as possible (the “long tail” if you wish…), available for immediate download at a reasonable price. The overall quality will be sacrificed for convenience (no HDTV, at least for the time being), but it’ll be good enough for Joe Average.

However, there are still some challenges ahead.

1. Bandwidth will play a major role in this strategy. I’m not sure if anyone’s noticed, but Apple recently purchased a massive data centre… one has to wonder what that was for.
2. Similarly, broadband will be critical, and one has to hope that ISPs don’t retaliate against the “mass downloading” by imposing strict download caps, or crippling the technology as they have with Bit Torrent.
3. Live TV will be a huge challenge, and one has to stop and wonder how they’ll deal with it. Because people won’t stand for watching a delayed feed of the Super Bowl.
4. Pricing is still an issue, and will have to come down for mass-adoption of this platform.
5. Storage capacity will be another issue for the general public. For instance, season 1 of Prison Break weighs in at 10GB. At that rate, people will be running out of space fast and furious. Luckily external drives are relatively cheap (and if Apple is smart, they’ll be releasing some sort of “lite” version of their XServe Raid system.)