September 14, 2006

Apple Joins the Video Fray

By Mike Robuck

The news this week that Apple Computer will offer movies over the Internet wasn't necessarily a cause for cable operators to wring their hands and mop their brows in despair over the competition.

Apple has 75 feature-length movies queued up for delivery from the iTunes store to iPods, including several new models of iPods that were also announced this week. Apple will offer movies from four Disney studios - Walt Disney Pictures, Pixar Animation, Touchstone Pictures and Miramax films - at prices ranging from $12.99 to $14.99 for new releases or $9.99 for older movies.

While the move to movies was expected from Apple, CEO Steven Jobs also introduced Apple's iTV device that lets customers send podcasts, music and movies to their flat screen TVs from iPods via Wi-Fi technology. The release date for iTV is next year, and the expected cost will be $299.

Cable's king of VOD throne

Cable is already in viewers' homes with its VOD offerings, and while Apple does have a relationship with Disney - Jobs is a board member - it doesn't yet have access to network and premium channel programming.

"VOD for us is more than just movies," said Jenni Moyer, a Comcast spokeswoman. "It's also about unique, nonlinear content. Movies are an important part of our on demand service, but we've had over 3 billion VOD views (since 2004) to iTunes' 45 million, and you can get that experience on your TV without having to purchase that (iTV) device."

Comcast announced this week that it is now offering 100 hours of HD content a month on its on demand service, which was up from 15 hours previously. (For more on how Comcast got its network ready for increased HD content, read this recent Communications Technology store here.)

Another difference is that the Apple VOD model in its current inception competes more with DVD sales than cable operators since a movie is downloaded to buy, as opposed to downloading to watch in a specific time frame.

"We don't really view it (Apple's offering) as competition, but as a variety of options," Moyer said. "For us, there's no additional cost beyond what you pay for the service."
And while there are millions more TV sets in use than video-capable iPods, Digdia analyst Gary Sasaki said cable operators can head off "over-the-top" interlopers such as Apple by providing content from the Internet via their own headends.

"I don't see the Apple video/movie announcement as a big threat to cable any time soon," Sasaki said. "Also, I think that cable will head them off at the pass, so to speak, if they're smart enough."

VOD: a world view

A report released by iSuppli earlier this week said despite challenges from over-the-top providers and IPTV operators, cable will still have the lion's share of the VOD market going forward.  The report said that the worldwide VOD market will grow to nearly $13 billion by 2010, which is up from $1.7 billion this year, with 2008 being a jumping off point once IPTV and other delivery systems start to mature.

In addition to IPTV deployments, the report cited the growing availability of movie content, the ability to download and burn content to CDs, the increase in consumer electronic equipment with IP connections, and the rise in the mobile-phone TV market as drivers to VOD growth.

"This sets the stage for an epic battle among cable, satellite, IPTV and new broadband video operators," said iSuppli analyst Mark Kirstein, in a press release. "As users expect more interactivity and a greater personalization in their services, VOD is among the key technologies that will address the changing behavior of television audiences."