Art Of Geek

The Register’s Achilles Heel: Andrew Orlowski?

Last Friday, The Register, one of my regular reads posted an article by frequent contributor Andrew Orlowski titled The iPod’s Achilles Heel? It’s er… Reader’s Digest. I took objection to so many of the points Mr. Orlowski made, that I set out to write a rebuttal here on Art Of Geek.

The article in question brings up quite a few points, most of which are wrong, misleading or inaccurate. It attempts to identify the one major weakness the iPod has (it’s Achilles heel, to use a mythological metaphor), and make a point about how the Microsoft Zune or eMusic (or maybe both) have a chance to gain traction in the market by taking advantage of this weakness. Orlowski sums this weakness up at the beginning of the article as such:

”But someone at Microsoft thinks they’ve found what may be the Achilles heel of Apple’s end-to-end music delivery system, of which the iPod is simply the best known part.

And it’s all about how you acquire music.”

Sounds good so far. I read on expecting to find some yet undiscovered digital music strategy, or maybe an in-depth explanation of how the Zune’s Wi-Fi music sharing feature would be more than a gimmick and help Microsoft take some major market share back from Apple. Instead, what Mr. Orlowski presents is old news regurgitated in a not so new way. I got the impression of Mr. Orlowski as someone who has joined the party extremely late and proceeded to tell stories or jokes that everyone has already heard. Unfortunately for him, he gets the stories wrong, and ruins the punch-lines of the jokes.

The inaccuracies start right from the beginning, where he is wrong on two points:

“The iTunes store has been vital to the iPod’s success, which in turn has been the engine behind Apple’s recent growth. iTunes dominates the legal download market in the same way the iPod dominates the MP3 player business. It’s hard to remember now that for the first year of its life the iPod was a flop. But once Apple introduced iTunes for Windows, the mass market perception of the device changed from one of expensive luxury to convenience item.”

First off, the iTunes Store has NOT been vital to the iPod’s success, it’s the other way around, the iPod has been vital to the iTunes Store’s success. The vast majority of people do not buy an iPod so they can use the iTunes store. They buy one to listen to their own existing library of music, either ripped from CDs or acquired through file-sharing services. It’s only after one installs iTunes that they will begin to discover the iTunes store. It’s iTunes, the software, which has been vital to the iPod’s success, ensuring a streamlined consumer-friendly interface and simple, reliable syncing with the iPod. Orlowski even debunks this inaccuracy later in the same article with this statement:

“The average iPod owner has done little more than dabble with Apple’s store, figures show, carrying an average of 21 iTunes-purchased songs. Extrapolate those numbers to the wider market and you’d have figures suggesting the public has suddenly stopped acquiring music. That clearly isn’t true - they’re simply getting it from other channels: physical and illegal-digital.”

So which is it Andrew? Is the iTunes Store vital to the iPod’s success or is it just something that the average iPod owner simply dabbles with? It clearly can’t be both.

Furthermore, describing the iPod as a flop in it’s first year is complete hogwash. Compared to where it is now, it might be construed as such, but considering the iPod was first launched as a Macintosh only device, it was a roaring success, which explains why Apple even considered releasing a version for Windows. In fact, Apple sold over 1 million iPods before releasing the Windows version in October, 2003, and nearly three-quarter million in it’s first year. Only in Orlowski’s world can selling that many of something to a market that was only around 2% of the whole be considered a flop.

The article continues with a description of what the author believes the key factor in the iPod’s success was: the convenience factor of not having to burn CDs. Describing Apple’s original Rip, Mix and Burn campaign and how with the iPod it became simply Rip and Mix. An accurate account in my opinion, but he fumbles badly with this lie:

“Of course the cost of this convenience is pretty high - and is still born by the punter eventually - but the consumer perception of ease and convenience had to be there for the iPod to be a success.”

Of course the author is referring to the price of the iPod in his reference to the cost being pretty high. Andrew Orlowski either doesn’t get paid very well by The Register for his articles, or he’s been hiding under a rock for the last few years of the iPod’s success. The iPod shuffle launched in January 2005 for as little at $99 US, and the entry price dropped to $69 US in February 2006. The 2nd generation iPod shuffle, which ships next month costs just $79 US.

The dementia and misinformation continues:

“Today, if you can get music industry types to agree on anything - and don’t forget the jostling between indies and majors, between publishers and recording rights holders puts any flame war in the shade - it’s that the iTunes Store isn’t the future of music. And after more than three years, this is a consensus that’s based not on wishful thinking, but empirical evidence.

Principally this is because iTunes doesn’t make money for anyone except Apple. In itself, the iTunes Store barely breaks even - but it fuels the much more lucrative downstream bit of the delivery system. iTunes sales remain vanishingly small as a proportion of the music business, but most importantly of all, iTunes doesn’t generate money for anyone except Apple. Broadband providers, PC manufacturers, insurance companies, and the battery-replacement services have all profited in some way from the iPod’s success - but no one in the music value chain. Steve Jobs doesn’t even leave crumbs on the table.”

Interesting. Orlowski is obviously ignoring the fact that Apple’s iTunes Store sells 88% of all legal online music and that it is the number 5 retailer of ALL music (including physical media sales) in the US, up from number 10 just 10 short months ago. Apple said they are on track to unseat the #4 position holder, Amazon.com, in 1H2007. Back when they were only the number ten reseller, they were expected to account for 3.5% of all music sales in the US. Now that they are the number 5 reseller, where does that put them?

But the big lie from that last quote is his assertion that iTunes doesn’t generate money for anyone except Apple. A statement that seems perplexing given that in the very same paragraph, Orlowski states that the iTunes Store barely breaks even. It’s already been public knowledge for a long time that of the 99¢ Apple charges for an individual track on the iTunes store, 65¢ goes to the music label, 25¢ is distribution costs, leaving 10¢ for Apple, which gets eaten up by credit card fees and their own R&D and infrastructure costs. Of the 65¢ the record label gets, the artist apparently gets 10¢, which leaves the label with 55¢. So it seams that contrary to the BS that Orlowski would have his readers believe, the artists make as much as Apple does, and the labels make about 5 times as much, while assuming none of the financial risks of the sales model, or any of the distribution costs.

Orlowski goes on to try to minimize the impact that the iTunes store has had by using misleading statistics, and throws in another lie to boot:

“The average iPod owner has done little more than dabble with Apple’s store, figures show, carrying an average of 21 iTunes-purchased songs. Extrapolate those numbers to the wider market and you’d have figures suggesting the public has suddenly stopped acquiring music. That clearly isn’t true - they’re simply getting it from other channels: physical and illegal-digital.

So in business terms, the iTunes Store is a deceptive chimera. Pakman has a joke he likes to illustrate it.
“The iTunes Music Store [ITMS] buyer buys 25 songs in the first year, 15 in the second year, and in the third year, the battery has died, so you have to go out and buy a new iPod,” he says.”

In journalistic terms, Orlowski’s article is the deceptive chimera. Dividing the number of iTunes Store songs by the total number of iPods holds no value whatsoever. First off, what percentage of iPods ever sold are no longer in use? Second, what percentage of iPod users actually buy music from iTunes? The more accurate calculation would be to divide the number of iTunes Store sales with the number of customers who have actually purchased music from the service. That would provide a more accurate benchmark and indicator of how the average iTunes customer uses the service. As for the “joke” regarding having to replace the iPod’s battery after 2 years, this is baseless. Of the three iPods I have owned, my first being an original 1st generation iPod purchased in December 2001 whose battery is still going strong and is used regularly by my brother. My second, a 3rd generation 40GB model bought in spring 2003, is still going strong as well and is in regular use today, three and a half years later. Orlowski’s joke reference also completely misses the fact that the batteries in most iPods can be replaced, either by Apple, third party resellers or the end-user themselves. A fact he himself alluded to in the previous quote, but has conveniently forgotten just 3 paragraphs later in his article.

But this isn’t the first time Andrew Orlowski has spread this misinformation about the iPod’s battery and iTunes store sales. I found an article dated March 2, 2006 titled iTunes’ long march to market share in which he attributed the exact same joke about iTunes Store sales and the iPod’s battery to Aydin Caginalp, partner at the law firm Partner, Alston & Bird:

“There are 21 songs bought from iTunes Music Store on the average iPod.”

But surely, you’ll point out, momentum is growing?

And here’s the third statistic to remember, which comes courtesy of Aydin Caginalp. He’s a partner at the law firm Partner, Alston & Bird, and he specializes in entertainment law. Here is the reality behind the figure of 21 songs per iPod:

“The iTunes Music Store [ITMS] buyer buys 25 songs in the first year, 15 in the second year, and in the third year, the battery has died, so you have to go out and buy a new iPod.”

It became apparent at that moment that Andrew Orlowski’s latest article is simply a regurgitation of his previous eMusic article into a new one about the Microsoft Zune.

The article goes on about music subscription services, and how “every company wants to be in subscriptions business”, but ignores the fact that the majority of consumers don’t want anything to do with them. Napster’s ongoing financial difficulties is evidence of this. That doesn’t stop Orlowski from trumpeting the success of eMusic, a company that has taken the far distant number two online sales position, despite the fact that eMusic isn’t a true subscription music plan. A quick read of eMusic’s about page reveals that the subscription only allows you to sample the music. Customers have to pay extra if they want to own the music. With Apple’s iTunes Store, you can sample all of the music they sell for free, and only pay when you decide to purchase it. Of course, it seams ridiculous to compare eMusic to iTunes, given that eMusic doesn’t sell music from ANY of the major labels, and iTunes primarily sells music from the majors, but that doesn’t stop Orlowski:

“From the labels point of view, eMusic is simply great for business. While it costs eMusic much more to run its store than Apple - because it’s offers much more than an “airport kiosk” looking to attract impulse hit-buyers - it’s more profitable. eMusic employs over a hundred people providing editorial content, and it works very hard on expert-generated and user-generated recommendations. But the value for labels is greater, because the eMusic store exposes material people woudn’t otherwise see. (In his desire to make the “Long Tail” a one-shape-fits-all buzzword/religious cult, author Chris Anderson wrongly lumps iTunes and eMusic together as examples of “Long Tail”, although one is, and one emphatically isn’t). eMusic fuels the value chain.”

Of course he fails to identify the REAL reason eMusic and other subscription services are better for business: because they are worse for the consumer. They require the consumer to pay up front for music they might not even listen to. eMusic’s monthly subscription fee is $9.99 for a maximum of 40 purchased tracks, $14.99 for 65 tracks or $19.99 for 90 tracks. That’s in addition to the cost of each purchased track, which starts at 25¢ each. So with the entry level subscription, each track brings in a minimum of 50¢ in revenue, less than half of what an iTunes purchase does. Assuming the same distribution costs of iTunes, 25¢, that leaves just 25¢ per track to be shared between eMusic, the label and the artist. That’s about a third of what is available from iTunes. Better for business and the artist indeed. Of course, the equation isn’t even valid, because eMusic will never get the major labels on board at those prices, and iTunes sells indie music and older back catalogue music for the same 99¢ per track, so the artists and labels make much more money on each iTunes track than with eMusic.

The author goes on to repeat the iPod battery lie and adds a long-debunked iTunes Store fallicy with this tidbit:

“What Apple has, then, is a subscription scheme for buying hardware - each device rapidly expires, and there is only one supplier providing a repeat purchase that’s compatible with your iTunes Store purchases. What the music business wants is a subscription scheme for buying music. Somewhere, in the middle they may one day meet.”

We’ve already identified the first part as being misleading a few paragraphs up, so I won’t bother going into it again. The assertion that Apple is the only supplier that provides devices to listen to iTunes Store purchases on, is so ridiculously false, I can’t believe Orlowski even thinks he can get away with it. How he can completely miss that iTunes purchases can play in iTunes, which runs on any personal computer that runs Windows XP or Mac OS X, as well as the iTunes equipped mobile phones made by Motorola, is a complete mystery to me. Of course, if he could miss those most obvious of iTunes Store uses, it’s understandable that he would miss the simple fact that each and every iTunes purchase can be burned to audio CD an unlimited number of times and played on any consumer CD player on the market. For shame Mr. Orlowski, for shame.

Andrew Orlowski is so out of touch with the realities of the digital music market, that he has convinced himself, and attempts to convince his readers, that subscription music services are in huge demand:

“(Unless … they agree they’d shift more respective units under a flat fee. With a universal subscription, we suspect, Apple couldn’t build iPods fast enough to meet demand, and would begin to rival GM in size. It has the best digital music player, bar none.)”

With numerous music subscription services on the market for years, and none of them denting iTunes sales, there is absolutely nothing to support his suspicion that people want to pay a monthly subscription for music. Period. In fact, the opposite is true. Subscription consumers should take note, since they lose 100% of their investment if the company ever goes under, since the only way to listen to your subscription music is to keep paying the provider to maintain your subscription’s status.

So where’s the Microsoft Zune angle to this article? It finally materializes in the last two paragraphs:

“Where does Zune offer Microsoft some hope? Surely not in the Soviet-style industrial design - and surely not from gimmicks such as disappearing, time-bombed songs. Or the fact it brings another incompatible DRM scheme to the public. And while it may do more than the iPod, unless it does the basics very well or better, it’ll suffer the same fate as Microsoft’s phones. Which also do lots of things, none of them particularly well, and which only gadget-heads want to be seen with.

But where Microsoft can gain some rare good-will from the music business is by nudging the public to a subscription model. Not something in the company’s DNA, you may say, but there are plenty who want to see Apple nudged there too.”

Orlowski finally gets something right, summing up the shortcomings of the Zune quite succinctly in that first paragraph, although I feel mentioning the fate of Microsoft’s phones without mentioning PlaysForSure or MTV’s URGE seems nonsensical to me. It becomes even more silly in that last paragraph where he makes it sound like the Zune is the first device/business model to ever push subscription services.

Ignoring Microsoft’s widely adopted PlaysForSure or the Microsoft/MTV URGE alliance shows a real lack of familiarity with the goings on in the portable mp3 player and online music market. Andrew Orlowski seems to have either never heard of, or conveniently forgotten, that Napster, Real Rhapsody and Microsoft have been peddling music subscriptions to the masses for a couple of years already with little success. He also fails to provide any insight whatsoever about why Zune and Zune Marketplace will be any different.

All of the above raises real questions about why The Register wastes their time posting the poorly researched ranting of Mr. Orlowski. Doing so does nothing but damage The Register’s credibility. I would suggest Andrew Orlowski spend a bit of time researching his topics better, otherwise stick with writing about topics he is knowledgeable about as it’s obvious he has no clue about the online digital music market, Apple, iPods or the iTunes Store. Pretending to have one doesn’t help his reputation as a columnist and does a disservice to his readers. I suspect Mr. Orlowski is one of the reasons why el Reg doesn’t have a reader feedback system. In the meantime, he will remain one of The Register’s weakest writers.

3 comments September 17th, 2006

Apple strengthens iPod, iTunes offerings,
reveals living room strategy

Something strange is going on at Apple these days. First there was that un-Job’s like shared performance at WWDC’06, then Apple releases a new high-end 24″ iMac with little fanfare a week before a scheduled press event. Now we have Steve Jobs trotting out on stage wearing a black dress shirt? Where the hell is the black mock turtleneck?!? To top that all off, just to throw us all off, not only did Steve bring back his “one more thing…” encore, which was curiously absent from the WWDC’06 keynote, but he followed that up with “there’s one last thing”! Highly irregular.

Apple has been growing in leaps and bounds over the last 2 years, and I think they are finally starting to embrace the fact that they are a consumer and corporate powerhouse. They’ve got everyone’s attention, so it isn’t necessary to make a big deal out of every product revision. People know what an iMac is, and sure, a 24″ model is an impressive addition to the line-up, along with faster processors, but they don’t need to waste time and effort telling people about it, because people will find out about it just the same. One of the side benefits is that product sales should take less of a hit leading up to major annual events such as MacWorld and WWDC as people come to realize that those events are no longer synonymous with new Macs or iPods. With the fierce pace of new product development going on at Apple, it had to happen sooner or later. More PR time is needed to show off new products, so established product lines can afford to take a back seat from the PR machine.

As for Steve Job’s change in wardrobe, I suspect being on Disney’s board may be influencing him to try new things. Either that or his supplier of mock turtlenecks has discontinued the style. Regardless, my only questions are what took him so long, and would it kill you to try a different colour? Baby steps I suppose. At this rate, we’ll see him in a blue dress shirt in about 4 or 5 years.

Say hello to the new iPods

Yesterday’s announcement was all about Apple’s consumer electronics and media business. Apple took the wraps off upgrades to all three iPod lines, beginning with the top end hard disk based iPod. The new 5.5G iPod, which is available immediately, offers higher capacity on the high end (80GB, up from 60GB) and better battery life for both models. When watching video, Apple claims the 30GB model will provide 3.5 hours of viewing, up from 2, and the 80GB model provides 6.5 hours of viewing time, up from 3 hours–a very welcome improvement for those who felt the previous model’s battery life was anemic for watching videos. A brighter screen, new software features and some useful tweaks to the UI such as a navigation aid that displays the location in the alphabet in translucent letters as you scroll through your music round out this update. The latter feature was seemingly borrowed from the recently leaked details on Microsoft’s yet to launch Zune device. This illustrates one problem Microsoft will have competing with Apple: if they are going to always be behind in getting new features to market, and are unable to keep their details secret, Apple is always going to be able to beat them to the punch.

The biggest news regarding the new 5G iPod has got to be the addition of games that can be purchased and downloaded off of the iTunes music store. Nine titles are available, including classics like Bejeweled, Pac-Man, Tetris, Mahjong and Texas Hold-Em were announced, although more will likely follow. These new games look nothing like the simple games which have shipped on the iPods previously. They are graphically rich and colourful, looking as good or better than the latest mobile phone games. Like the addition of video, the game implementation continues to demonstrate Apple’s ability to add value and functionality to the iPod product line without detracting from the product’s core appeal as a music player. Improvements such as gapless playback, music search and redesigned earbuds are testament to the fact that Apple hasn’t forgotten what people primarily buy iPods for.

While the current generation iPod isn’t going to be a challenger to the Sony PSP or Nintendo DS, it’s clear that Apple is waking up to the commercial potential of mobile gaming. Sony and Nintendo would be wise to keep an eye on Apple’s movements in this space. Sales of games for mobile phones are earmarked to be $2.4 billion USD this year and are expected to reach $7.2 billion a year by 2011. The new iPod game offerings seem intended get a piece of that pie. As the iPod gets more and more power and storage, we may see it become a more serious game platform in the future, and the iTunes Store is a killer distribution model for a video games, given how much of a problem the video game industry has with keeping up with demand of hot titles.

This also marks the first time Apple has allowed third parties, like EA, to write software for the iPod, although they still maintain control over what software makes it onto the iPod via the iTunes Store, for now. The choice to allow the games to play on all 5G iPods indicates that Apple is viewing it more as a new revenue stream and not just a means to sell new iPods, otherwise they could have easily excluded the previous models in order to force owners to upgrade. In fact, with new lower prices of $299 and $399 CDN ($249 and $349 US), it’s not hard to imagine that Apple may be starting to look to the iPod as the razor that will help them sell more media (the razor blades) via the iTunes Store.

The redesigned iPod nano has gone back to the aluminum case design from the old iPod mini, a very welcome change, given how much negative PR Apple got regarding the first generation nano’s tendency to be easily scratching. Unbelievably, the new nano is even thinner than the previous one, while doubling the storage capacity (2,4 and 8GB) and nearly doubling the battery life (from 14 to 24 hours) at the same price points. The new nano also has a brighter screen, text search and letter index display from the 5.5G iPod. In another tribute to the iPod mini, the 2G nano is available in 5 different colours: the 2GB model in silver only, the 4GB model in blue, green, pink or silver, and the 8GB model in black only. All models are available immediately priced at $169, $229 and $299 CDN ($149, $199 and $249 US). There is no doubt in my mind that the 2G iPod nano will be even more successful than it’s predecessors, the 1G nano and iPod mini. Both of which were hugely successful in their time. Apple is doing it’s part by promoting the 2G iPod nano with a new TV, transit, billboard and magazine advertising blitz.

Of all the iPods, the shuffle has gone through the greatest redesign. Like it’s bigger brother, the nano, the shuffle is now clad in aluminum, but has been shrunk to a fraction of the size of the old pack of gum sized model. It’s truly an amazingly small device, which Apple has dubbed the world’s smallest mp3 player. The unit also features a built-in clip for affixing it to clothing. Gone are the built-in USB connector (a step back, from the convenience standpoint, IMHO), which has been replaced by a charging/syncing USB dock which appears to use the headphone jack for connectivity and power. The new shuffle will be available in October in a 1GB model only for $89 CDN ($79 US) and is otherwise feature-identical to the models it replaces. The new shuffle is a major improvement overall from the previous model, but I think it will lose a bit of it’s appeal for those who saw the shuffle as a combination flash thumb drive and mp3 player. Having to carry around the sync/charge cable and dock on long trips makes the new shuffle a little less road warrior friendly, but the smaller size will make up for that somewhat.

iTunes the software, iTunes the store

The second part of yesterday’s announcement focused on an updated version of iTunes software and updates to the iTunes Store. iTunes 7, available as a free download now for Windows and Mac, is a major update with some nice UI tweaks and much wanted features such as gapless playback, support for multiple libraries on multiple hard disks and a “backup to disc” feature. iTunes 7 will also automatically download–for free–any missing artwork for songs in your library, provided you have an iTunes Store account, and the song exists in the iTunes store. This feature alone will be worth the upgrade for a lot of people.

The sources list is now broken up into categories with separate library items for Music, Movies, TV Shows, Podcasts, Audiobooks, etc. There is a Store category which contains iTunes Store, Purchased Music and a new downloads manager. A devices category will display any connected iPods or iTunes compatible phones, and you can now manage all device settings from here instead of having to go into the iTunes preferences. They have even integrated the iPod updater into iTunes, so you no longer have to run a separate utility to update or initialize your iPod, as seen in the picture on the right (click to enlarge).

Two new views have been added, both designed to let you explore your music visually using album art. Album view (top image on the left, click to enlarge) displays each album’s songs next to the album cover, if available, and is pretty much like sorting your list by album, only with the addition of the artwork being displayed to the left side of each album.

The second new view is by far the most impressive feature of iTunes 7, cover flow view (bottom picture on the left, click to enlarge). Cover flow view shows you all your album cover art and allows you to flip through your albums quickly in a fluid 3D animated view that has to be seen to be believed. You can use your mouse scroll wheel, two finger trackpad scrolling or the scroll bar to quickly flip through your entire collection visually. I can see why they added the free artwork download feature. This view mode would be useless if you didn’t have any artwork. Of course those of you who haven’t been bothered to enter artist and album ID3 tags for most of your music are going to have a new reason to want to clean up their music library.

Another new feature that will be much heralded by iPod users is the ability to sync the purchased media on your iPod with more than one authorized computer. Great for keeping the music on your work and home computers up to date, although it appears that Apple hasn’t changed it’s stance on not making music piracy easy since this feature only works with purchased content. All in all, I’m impressed with this new version of iTunes, and I think it’s safe to say it’s one of the biggest updates iTunes has ever seen, helping to ensure iTunes maintains it’s supremacy.

The iTunes Music Store has been re-christened as simply The iTunes Store, finally dropping the term “music” from it’s name, a logical move given they have sold TV shows for nearly a year and the addition of games. Even more logical since yesterday’s announcement of the addition of feature length motion pictures to the iTunes store. No big surprise given Apple’s choice of theme for the event. I think everyone saw this coming, especially after the launch of Amazon’s Unbox movie download service, which I covered in a previous article. As predicted, Apple’s initial offering is limited to Disney owned properties, including Disney, Pixar, Touchstone Pictures and Miramax films.

Steve Jobs was quick to point out that when iTunes launched TV program downloads, they started with only 1 network and 5 shows, but less than a year later they have grown that library to 220 shows on 40 networks. No doubt they will gain support from the other major studios over time. Movies, like TV programs are only available in the US for now, but Apple plans to go international in 2007.

Pricing is pretty much what was predicted, and similar to Amazon’s offering, with the exception of a lower price of $12.99 US for new releases when pre-ordered and during opening week, going up to $14.99 after the first week. Older titles will sell for $9.99 US every day. New releases will go on sale at the same time as the DVD release, which is important if Apple and Disney hope to offer an alternative to DVD. So far Apple has stuck with it’s strategy of only selling content, staying away from the rental model that Amazon Unbox offers. This is a positive for Unbox, as it will likely allow Amazon to stay relevant by differentiating itself in the face of competition from iTunes’ 800lb gorilla.

Apple has also upped the resolution of all video downloads to 640×480 from 320×240, for a 4x increase in resolution. I haven’t been able to nail down exactly what Amazon’s Unbox video resolution is, they say it’s DVD quality, which should mean 720×480, but no one has any exact numbers yet, so the jury is out on whether they have a slight advantage or not. Regardless, the bump in resolution is a welcome improvement. Video now also features “Dolby Surround”, I can only assume that means Dolby Digital, but can’t say for sure. I just feel sorry for anyone who has purchased a lot of video content from the iTunes Store at the lower resolution. No mention was made if those customers will be allowed to download the higher-res version. I wouldn’t hold my breath though. Usage rights is the same as for TV shows and music, 5 computers and an unlimited number of iPods. Like Amazon’s offering, movie purchases cannot be burned to standard DVD video disks, although they can be streamed over a home network and played on a TV connected to any Mac via Mac OS X’s FrontRow interface and Apple remote. But…

…there’s just one last thing.

In usual Apple style, Jobs saved the most interesting announcement for last, although it came in the form of a sneak peak rather than a product announcement. Apple’s final link to the video playback puzzle, the box that will allow you to play your iTunes Store TV and movie purchases on your big screan TV, is a box code named “iTV” which is expected to launch in the first quarter of 2007. Resembling a half-height Mac mini, this box will connect to a TV via HDMI or component video, and has analog and digital optical audio outputs. A built-in power supply means no external transformer to clutter the space behind your home entertainment center. Connectivity comes in the form of ethernet, 802.11 wifi (they didn’t specify which flavor, I suspect this means it may be the upcoming N variety) and a USB 2 port, presumably for hooking up an iPod or maybe an optional optical drive.

The whole thing will operate using the now standard Apple 6-button remote using an on-screen interface similar to FrontRow, although slightly reworked. Steve Jobs demoed it, and it just worked and worked well. The only thing I think that is missing is an optical drive for playing back your content that you’ve backed up to DVD or CD media. The way the device was presented, it required everything to be on your computer. Unless Apple releases some kind of ‘XRaid Home’ media server, this is going to be a pain as it will require you to load the media you want to watch onto one of your Macs or PCs, unless they release a stackable DVD drive option for it that plugs into the USB 2 port. More advanced users will be better off with a Mac mini in their home theatre setup because of the wider support for formats and the ability to play DVDs and media stored on CD and DVD-R. But a lot can happen in 4-6 months, and it’s possible Apple might make changes based on feedback they get. They sort of tied their hands by pre-announcing the price, $299 US, making the iTV a more consumer friendly, lower priced alternative to a Mac mini.

Impressions, MIA

My overall impression of yesterday’s “It’s Showtime” event was that it was a strong update of it’s extremely successful iPod/iTunes business lines, which extends Apple into new territory: feature film and mobile games. The announcement was an even bigger deal from the standpoint of drawing a clearer picture of Apple’s strategy for the next year. If Apple’s midas touch can indeed be applied to these new markets, it’s not hard to imagine them becoming considerable revenue streams going forward, helping to cement Apple’s dominance in digital media even further. It appears the rumors of the decline of the iPod and iTunes store were greatly exaggerated. Apple now has an 88% market share of the legal US download market, up from 82% in May. Apple is the number 5 seller of ALL music in the US, moving up behind the likes of Wal-Mart, Best Buy, Target and Amazon. No small feat, given that Apple only sells digital media online whereas the other 4 resellers on the list still pawn physical CDs.

So what of the widescreen, touch screen iPod and Apple iPhone? Most reputable sources didn’t expect Apple to announce either at yesterday’s event, and the word on the street is we shouldn’t expect to see either until some time next year, if at all. I still have my doubts of whether a touch screen iPod will actually see the light of day, given the tendency of touch screens to attract scratches and fingerprints, but I’m not willing to rule it out completely. I think the iPhone would be a sure-fire hit. There are so many people who are dissatisfied with their cell phone experience, that would gladly ditch it for a mobile phone with the iPod’s industrial design and simplicity. Pressure in the mp3 player market from newer mobile phones with competing capacities to the lower-end iPods will most likely eventually force Apple to enter that space, but not before they are good and ready. The mobile phone market is a fiercely competitive and complex market. If Apple enters it, it will have to be from an aggressive position, not a defensive one, which means they have to make sure they’ve done their homework.

Add comment September 13th, 2006