SEPTEMBER is the time of year when Steve Jobs, Apple Computer’s Mr Incredible, tells the world what electronic toys we are going to want in our Christmas stockings.
Thanks to the runaway success of the iPod music player, which has racked up 60m sales, Jobs’s autumn unveiling of Apple’s latest products has become hugely important for retailers and consumers alike.
Apple’s inspirational founder and chief executive rarely disappoints. Two years ago, there was the iPod mini and the iMac, which “hid” the computer behind its screen. Last year there was the first video iPod and the stunning iPod nano, thinner than a pencil and the fastest-selling model to date. In different ways, each of these products redefined consumers’ expectations of what was possible.
This year, Apple was expected to build on its commanding position in digital music by adding movies to the iTunes online store — allowing people to download full-length films, then transfer them from their computer to their iPod.
The huge popularity of the YouTube website has already demonstrated the appetite for even amateurish video. With more people switching to fast broadband internet connections, much of the entertainment industry is preparing to embrace the digital revolution.
In San Francisco last week, Jobs confirmed plans to sell movies from iTunes. However, Apple’s initial movie offering was the bare minimum that industry rivals had expected. iTunes will at first sell only 75 films, all from studios owned by Walt Disney, including Pixar, Miramax and Touchstone. For the moment, the service is restricted to America.
Compare that with Amazon, the online books and DVD retailer, which 10 days ago launched its own movie-downloading service. Amazon Unbox is offering “thousands” of films and television shows, having reached agreements with many top studios.
Amazon said its studio partners were responsible for two-thirds of all movie releases. In fact, the only major omission is Walt Disney Pictures and its sister studios.
One might imagine that this line-up — Disney with Apple, the rest with Amazon — has something to do with the fact that Jobs is a director of Walt Disney and also the company’s biggest shareholder, having sold his Pixar animated films business to the group last year for $7.4 billion (£3.9 billion).
Not so, according to Jobs. “It’s really nothing to do with me being on the board,” he told The Wall Street Journal.
Apple will still be selling many popular films, including Pirates of the Caribbean and Pixar hits such as Cars, Toy Story and The Incredibles. But the pricing on iTunes does not look particularly compelling — $14.99 for new releases and $9.99 for older films. Critics said this was not significantly cheaper than buying a film on DVD. Moreover, DVDs are often sold with additional interview and other material, and can easily be lent to a friend.
In contrast, Apple’s copyright restrictions will prevent users “burning” their movie purchases to a disk. And, at least for another few months, iTunes customers will not be able to watch their films on proper televisions — they will have to make do with seeing them on their computers or, worse, on the tiny screen of their iPods.
So, Apple’s much-heralded attempt to take digital media to Hollywood amounts to this: a limited choice of films, sold in a less convenient and more restrictive format, at a price that is not markedly better than the existing alternative.
To many, this seems a very long way from the breakthrough that iTunes represented when the online store was launched three years ago.
“It was interesting to see how many more studios Amazon had signed up than Apple,” said an industry rival. “Apple really only got Disney. I thought that was very strange. I also was unimpressed they announced it with only 75 films.”
The movie store’s humble beginning may explain why the presentation that Jobs gave last week failed to live up to his deserved reputation as a brilliant evangelist for his company’s products.
Speaking more quickly than usual, Jobs ran through a long list of mostly modest enhancements to the iPod range and to the iTunes software. The iPod has been given a brighter screen, longer battery life, better headphones and new scrolling software. The nano has been redesigned to make it even slimmer, and is now available in a range of five colours, including an 8Gb black version capable of holding 2,000 songs. iTunes has also been refreshed to improve the organisation of music and other libraries (for movies, podcasts, etc), and to enable users to choose songs by album cover.
With the possible exception of the new iPod Shuffle — the world’s smallest digital music player, designed to be clipped to clothing rather than carried — few of these innovations merited the familiar superlatives that Jobs heaped upon them. From the sound of his low-key performance, he didn’t entirely believe it himself.
The lack of “beef” in many of last week’s announcements may also help to explain why Jobs chose to break one of his golden rules: never to talk about future products.
Ordinarily, Apple adheres to this policy with a rigour that is virtually unmatched, certainly within the technology industry. In the past, this has enabled the company to retain the element of surprise that has served it so well in its marketing.
Yet Jobs decided to give a “sneak peak” of a product that will not be available for perhaps another six months. This was a box with the codename of iTV, a wireless networking device that will allow consumers to use their digital televisions to watch the movies they have downloaded to their computers from iTunes.
This is the missing piece of the digital media jigsaw. The ability to download favourite films and television programmes to a computer is, for many, an attractive option — as is the possibility of transferring them to an iPod, or similar device, to carry them around.
However, few people would choose to watch films on the computer in their study or bedroom — or on a small laptop or iPod screen. What is needed is a way of getting the content out of the computer so that it can be displayed properly on a large television screen. This is the problem that iTV appears to have solved.
Jobs gave a short demonstration last Tuesday of how iTV should work. Many analysts appear comfortable that Apple can solve the complex configuration problems that have confounded other companies. iTV also addresses one of the many criticisms that have been made about Amazon Unbox. Some Apple watchers believe this is the main reason Jobs was prepared to waive his golden rule about future products.
John Gruber, who writes the Daring Fireball web log on “Mac nerdery, etc”, commented: “I don’t think that Apple really wanted to show (iTV) now.
“Vapourware pre-announcements (such as iTV) distract customers from currently available products, but in this particular case I think Apple felt they had to reveal this now.
“If they hadn’t, the lack of an answer to the ‘but how do I play these videos on my TV?’ question would have been more of a distraction from the iPod and iTunes announcements than the iTV announcement was.”
Apple is confident that the limited range of movies at present available on iTunes will expand rapidly. Jobs drew a parallel with the growth in the variety of television shows available for download.
When iTunes first began offering television downloads in America last October, it had only five shows, including Desperate Housewives and Lost. It now has more than 220 shows from 40 networks, and its customers have bought more than 45m episodes.
However, it is Apple’s enormous success in music that gives the movie studios, and others, pause for thought.
The overwhelming dominance of the iPod, particularly in America, has turned iTunes into an increasingly important music retailer. Jobs said last week that iTunes has now sold 1.5 billion songs, and has 88% of the US market in music downloads. “iTunes is now the fifth- largest retailer of legal music in the US,” he said. “We are on a trajectory to pass Amazon in the first half of next year.”
This success has given Apple, never short of self-confidence, enormous power with the music companies. A year ago, Universal Music, EMI, Sony BMG and Warner Music were anxious to persuade Apple to introduce greater pricing flexibility, instead of sticking rigidly to 79p or 99 cents a track.
Jobs refused, and accused the record companies of being greedy. Even though Apple’s music licences were up for renewal, Jobs won the argument. Apple renewed its contracts; it still charges 79p a song in Britain, and 99 cents in America.
Any producer would be wary of a retailer that held an 88% share over the fastest-growing part of their market. The Hollywood movie studios have no desire to yield as much influence to Apple as the music companies have.
The movie studios are also seemingly less in need of Apple’s help. Although DVD piracy is a problem, the sheer length of movies makes it more cumbersome for them to be stolen over the internet. And the film industry has also tried to learn from the mistakes made by the music business.
The past 30 years have shown that it is never wise to bet against Steve Jobs. But at the moment it looks as though cracking Hollywood will be considerably harder than Apple’s takeover of the digital music business.
