Original URL: http://www.theregister.co.uk/2010/09/03/apple_tv/

Apple TV: Third time unlucky, Mr Jobs

Going down for the last time

By Faultline

Posted in Media, 3rd September 2010 12:47 GMT

Comment This is the day that Apple lost the war for Over The Top content, not only in America, but globally. The winner can’t yet be announced, but this was the shot that Apple had to get it right, and to us it’s bungled it.

We got the same story from Apple, Amazon and Sony all at the same time and a similar one from Google. And while Apple got all the plaudits, US consumers are not easily taken in. Even though Apple fan boys will go on and on about this product, which is the third generation of Apple TV, in our view it's likely to be a dud.

That’s pretty much the opposite of how the US-centric, Apple-loving press dealt with the $0.99 per TV show story, because it was orchestrated by Apple alongside a revamped iPod line, as the re-emergence of Apple TV in its September 1 announcements.

We’d like to put a different spin on this, one where we give more credibility to the major US broadcast networks, and one which may have eventually create a global effect and something of a content divide. Fox and Disney have tossed around an old idea of Apple’s (about two years old) to lower the price of downloaded TV series to $0.99 from $1.99, and to allow them to be streamed.

But instead of launching it only with Apple, they are going to let everyone who can meet their terms join in. Potentially this could eventually include Google, though we must remember that most of the content businesses (studios) who supply the broadcast networks with content, hate Google passionately because of YouTube and its $1bn lawsuit for showing Viacom copyrighted content.

But it certainly includes Amazon, who also launched, or at least admitted to, a similar service yesterday. It could also stretch to include Sony, which today made it clear that its new Qriocity (pronounced Curiosity) music and video store, would go directly up against iTunes. Netflix itself may also later avail itself of much of the same content directly, as could TiVo and any of these would howl to the courts if anyone told them they could not have it at the $0.99 price.

What Apple appears to have done is turn this move by the two major broadcast groups into something that was a PR victory for its Apple TV, which it relaunched on the back of the deal. The fact that other Apple rivals were able to announce the same details and the same pricing, and the same streaming approach, cannot be a coincidence.

It has long been one of Faultline’s contentions that large content groups made up of multiple media businesses cannot offer one set of terms to a company like Apple and higher or different terms to other rivals – partly due to antitrust, partly out of fear of backing the wrong horse, but mostly out of the desire to not make enemies.

This whole thing is part of broadcast versus cable, and a way that two of the four major US national broadcast networks can instigate a new source of revenue. The other two networks – CBS and NBC we expect will follow, but after a sensible amount of time to make it look like it clearly was not a cartel move, even though it probably was orchestrated across all of them.

So what does that leave Apple with? It has a set top out for $99 called the new Apple TV. But Roku had a $99 set top out two years ago for Netflix movies, and Google has yet to price its set top, which may perhaps drop as low, if not lower than that $99.

Apple has HD content. Well, other OTT services have HD, but one or two have 1080p and Apple is offering 720p. Apple does have the ability to stream from your Apple TV not only to a TV set, but also (across its own brand WiFi we presume) the ability, with the next release of its iOS sometime around November, the opportunity to view the streams on other portable Apple boxes, such as the iPhone, iPod Touch, or iPad, from the Apple TV. Well that’s just a function of them having the same DRM system, and others may too offer that, at some stage, with Android handsets.

You can't take it with you

All in all we are disappointed with the Apple announcement. There is no $30 all-you-can-eat subscription with prearranged TV channels. There are no new deals updating movie content, unless you count the cop-out deal it has done with Netflix, which actually heavily favors Netflix, allowing its service to be delivered to the Apple TV device (along with the other long list of devices which Netflix has in its locker).

This means that Apple is abdicating the role of directly licensing movies for streaming, and instead defaulting to Netflix, although clearly Apple is also trying to license some movies directly. This move would work if Apple later bought Netflix – which although not out of the question is highly unlikely given the Netflix promiscuity when it comes to devices, so don’t bet on it.

TV content and movies will be rented, including first-run movies which Apple has licensed directly, which will cost $5 each. Wait a minute - is that any cheaper than pay per view on cable? Of course not. It’s effectively the same outlet at the same stage. And what about Hulu? Surely this has a price advantage with a $10 a month deal for Hulu Plus? Yes but no movies, mostly TV programs.

The old Apple TV already streams content from YouTube, Flickr and MobileMe, as well as music, photos and videos from PCs and Macs. The new Apple TV has built-in HDMI, WiFi, Ethernet and offers low power operation in an enclosure that’s less than four inches square, 80 per cent smaller than the previous generation. But only an exciting service will sell it whether that’s at $250 per box or $100. Sure, more will take this than before, but it is not another iPad.

This move may double Apple TV sales, but that’s not a large number, and there is no real imperative to buy from Apple since other services, targeting other devices are selling the same content at the same prices.

“The new Apple TV, paired with the largest selection of online HD movie and TV show rentals, lets users watch Hollywood content on their HD TV whenever they want,” said Steve Jobs, Apple’s CEO. “This tiny, silent box costing just $99 lets users watch thousands of HD movies and TV shows, and makes all of their music, photos and videos effortlessly available on their home entertainment system.”

The deal hasn’t changed since the early days of online movies (remember Movielink) and on downloaded or streamed content you are allowed up to 30 days to start watching and then 48 hours to finish watching or watch multiple times – it used to be 24 hours of viewing before so we’ve made some progress.

Apple says that it has 7,000 movies to rent with over 3,400 available in HD, which compared to those available through the Netflix service is not that impressive. Most new releases are made available the same day they are released on DVD. But they are under the Netflix deal as well, Apple has done little here and controlled almost nothing.

The thing is that the 15 million Netflix subscribers are now a dominant force in the US, and Apple feels it has to fit in with it, rather than compete at least for the time being. Amazon on the other hand intends to continue with its Unboxed video but simply add TV shows At $0.99 – also a combination of the two approaches, but it has both sets of content relationships – movies and TV shows, whereas Apple only has some of the movie relationships direct, nowhere near as many as Netflix, hence the very non-Apple like move of signing up to support the Netflix service.

Users will be able to control Apple TV with their iPhone, iPad or iPod touch using the Remote app, available as a free download on the App Store. Once there is an OS refresh in November that should enable streams to be sampled or borrowed by passing portable devices, only from Apple. That’s about the only thing which shows any of the traditional Apple lock-in.

iTunes movies rentals will be available in the US, Australia, Canada, France, Germany, Ireland, New Zealand and the UK and the $0.99 TV rentals are only available in the US.

We have to be careful here. What this deal means is that content which can be viewed for nothing on TV, can be bought. And a 22 episode TV series will cost you more than the DVD, if you buy it one online rental at a time, a total of $22. And at the end of that you can’t watch it again, as you could with a DVD.

Qriocity qilled the...

What is missing from this entire set-up is the relationship that broadcast operators and pay TV operators have with the viewer. That ability to cross advertise programming and introduce new channels. That’s not really here.

Also there are no bundled channels. Netflix is closest to achieving this, since it has a monthly payment coming off its clients' accounts and it has a list of their favorite movies on its web site. Later as it loads more and more TV series, Netflix could become like Apple, but with no exclusive hardware alliances.

If Amazon could magically include video on its Kindle, it would be a smash hit, but it’s simply not equipped for video due to the e-ink which makes reading fine and video not fine, and also because it mostly gets its books over a cellular network, which could not do this heavy HD video lifting. But that doesn’t rule out the Kindle as a video device for the not so near future.

The Apple TV offering requires that you actually have a TV or another device to stream the video to in order to watch it, whereas any device with a screen, such as the iPad, would have been the logical and ideal client for this directly, without it going through the Apple TV. Perhaps a client will be released for the iPad once the Apple TV has made a few sales. But if Apple doesn’t go this route, others will. Amazon Video can be viewed on TV sets directly as long as they have the internet extensions from Samsung, Sony and Panasonic.

Meanwhile we hear that Google's YouTube has also been in talks for several months with Hollywood movie studios about launching a streaming movie rentals service by the end of the year, says the Financial Times this week. Funnily enough Google is talking about films costing about $5 to rent. Surely this identical pricing to Apple TV is also no coincidence. And remember that Netflix customers (who pay as little as $9 a month) can already view a number of online films for no extra charge, which is a lot cheaper than $5.

As we said of Google, in its arrogance, it doesn’t realize that the future shape of TV in the US is being written by moves taken this year – a year when it is still estranged from Hollywood through persistent studio legal actions against YouTube. It needs to fix these now before it will get a movie deal and the same TV content deals, if it goes after them. And anyway Google has already experimented on YouTube with movie deals, and the way it was brought to market alongside YouTube meant few have been sold.

Of course the new movie deals, when accompanied with the planned Google TV box, and also $0.99 TV series rentals, might prove a tad more interesting to the average American. But Google is not quite at that stage yet.

Roku responded to the Apple announcement by slashing device prices to $60, $70, or $100, depending on whether it’s SD or HD or 1080p. Finally Sony needs a mention, announcing that it had renamed its Sony Online Services (SOLS) platform Qriocity, and says that it will take it up against iTunes globally.

It has VOD movies from 20th Century Fox, Lionsgate MGM, NBC Universal, Paramount Pictures, Sony Pictures, Walt Disney and Warner Brothers and Sony has now taken the new platform to France, Germany, Italy, Spain and the UK from the autumn, and will offer Music Unlimited powered by Qriocity, with millions of songs by year’s end. Sony says that over time, it will also add games and e-books to Qriocity. This is the network it should have built years ago, but it’s got the idea at last just in time for the online TV revolution.

As of now Qriocity’s movies can be seen by Internet-connected Bravia TVs, the newer Sony Blu-ray players. But once the entire thing can be seen though a window on the PlayStation 3 network (surely this will happen) it will also mean that video can be place-shifted to remote PSPs and potentially Sony Ericsson smartphones.

Sony says that in future Qriocity will be a service available through third party devices not just those built by Sony, but that we think it’s first port of call is Sony Ericsson. It does sound like Sony Connect all over again, but perhaps this time Sony can manage it without it breaking on the first day (Connect crashed on its first day) and it can at least get all of its divisions to talk about it, not just one. When Sony Connect launched it was like a news blackout compared to the way Apple gets its products written about, and hopefully it has learned from that. ®