Apple Announcements: iTunes Movie Rentals, Apple TV2

As many tech pundits predicted, Apple Inc. CEO Steve Jobs announced an upgrade to his company's Apple TV device. (See photo, left, from the MacWorld Expo by Gizmodo staff.) The new Apple TV allows users to rent movies from the iTunes store and play them directly on their TV screens. You don't have to stream them from a computer, you don't have to have a computer at all. The biggest surprise in the announcement is that all the major movie studios are participating.

Apple has a video guided tour on its web site now. And Macworld has a brief summary of features.

The implications of this device for the entertainment industry are potentially huge. In BusinessWeek magazine, the WGAw's Assistant Executive Director Chuck Slocum said "It could validate everything that we've been saying. ... If [Steve Jobs] also announces that it will be in high-definition and you can order from the TV, it will mean the creation of a whole new market." Well, Steve did, and it probably does. (HD content is rolling out already.)

Much as the iPod has changed the music business, Apple TV and devices like it promise to radically alter the home video market. As tech website Gizmodo puts it, "Netflix is screwed." That's debatable certainly, given Netflix's massive selection of titles and all-you-can-watch subscription model. But the company has made some defensive moves recently including allowing its subscribers to watch unlimited streaming movies on their computers and announcing a streaming set top box with manufacturing partner LG.

And as Apple TV (and NetFlix and TiVo) build this market for direct-to-TV streaming, don't think the cable companies will sit idly by. All of these new Internet-based services are variations on pay-per-view, something every cable company has been trying to promote for years. The cable companies are certain to redouble their efforts... and their boxes are already in our homes.

So however you define it, a market for "new media" distribution of Hollywood content is here and it is growing. This is not a theoretical construct, this is not a fad. It's time for the big media conglomerates to make a fair deal with the people who create the content that streams into homes and drives the bottom line. They can make that offer to the WGA or they can make it to the DGA if that will make them feel better. But the time to make that offer is now.


jimmy said...

I'm wondering if trying to outrun all of these announcement was actually part of the plan by the AMPTP.

They knew what would be announced at CES and MacWorld, but if they could convince the WGA to take a crappy deal before that, they'd be sitting pretty for three years.

But now they have to deal because they have been clearly lying their asses off about the future of new media.

So now they'll pretend they had a number in mind all along, but that the WGA are such meanines that they simply couldn't stand to be in the same room with such swarthy folks.

The thing is, announcements like this had better be predicted by the DGA's multi-million dollar research and informed their negotiations or they are about to look incredibly foolish.

Jason said...

This just shows, it's ALL New Media! In the near future it won't matter where you want to procure your media (via your cable line, your computer, streamed through your Apple TV, on DVD, etc), nor where you want to watch it (on a TV, a computer, an iPod, etc), nor how you want to transport it (on DVD, on hard disk, on iPod, on USB key), it's all going to be the same thing. Stuff you get from someplace that you then watch someplace, and you'll be able to do nearly anything with anything. Apple TV 2 offers bi-directional sync with your computer. Blu-Ray discs are coming with iPod-ready video versions. It's already happening. Stay strong writers! If you don't get $ for New Media, before you know it the AMPTP will say "Sure, it's being watched on TV, but it came through a computer to get there, so it's actually New Media...buh-bye." And don't you think cable companies already use computers to enable their broadcasts? Maybe the AMPTP will proclaim ALL media to be New Media, and then you won't get residuals even for broadcast TV.

Tanja Barnes said...

Glad to hear (and very much expected) to hear they wold bolster Apple TV. As it was in its first iteration, it was ho-hum.

What I'm curious to know is if you can rent HD without an Apple TV.

VDOVault said...

Quoting the MacWorld article:

"Apple's managed to get the support of all the major movie studios, including Fox, WB, Disney, Paramount, Universal and Sony, along with Touchstone, Miramax, MGM, New Line and Lions Gate."

Wow...is there any studio or network not on board with the iTunes Movie Rental store?

Because if you don't get some residuals from this, there go the studio's incentives to ever air reruns, probably faster than I would have anticipated.

Anonymous said...

I hope the writers take note of this because this is going to grow now that Apple has released this. More and more of your $$$ are going to be heading straight into the studios pocket, not yours unless you stand united against the AMPTP. Good luck writers! You have my full support, and the majority of American's full support behind you.

Captain Obvious said...

Shhh, pay no attention to the man behind the curtain. Go on and get mad at the WGA leadership for this disastrous and unnecessary strike. There's no money to be made on the interwebs. Such a ludicrous notion! We need more time to study this newfangled networking contraption! Networking? You mean it'll help me meet new rich dudes? Why, I still haven't even learned how to program my VCR! I best get to work!

I'm getting off on a tangent though. Please, please, go ahead and break ranks. Scab! Rant! Rave! We'll be at the negotiating table once you're "prepared" to make the kind of "deal" we like.

(ominous, echoing cackling ensues...)

The Invisible Hand Behind The Scenes At The AMPTP

Cyber said...


I told you so.

argent said...

I'm not surprised to see this news.
I agree with Jason in what he posted.

I'm a btl costume designer, and don't know a lot of this technology, but I just spent an hour trying to understand what they are calling IPTV. Internet Protocol Television.

I did a google search, and I read a lot of articles, about economic, and technology forecasts for this new media. Some of them mentioning the future subscribers to iptv, from millions in 2007 to billions by the year 2011. It's not that far, only 3 years from now.

I feel that the big companies are moving out of the old entertainment into the new entertainment (so called new media), silently, at dark. Reminds me of what the maquiladoras do in countries like Mexico: The employees leave for the night, a crew comes to the factory and they take out everything, the morning after the workers arrive and there is nothing left, no managers, no owners, no money no nothing. Nobody to negotiate, just a building closed.

I wonder if they'd do something like this? Sell or lease all their content to say Apple, microsoft or google, so one day there will be nothing to fight about, (no broadcasting) because it won't exist, and we will then have to negotiate with google, or microsoft, or apple, a totally new deal, a new media deal.

Being a supporter of the WGA, and seeing my savings go away sadly, I would suggest to all the amazing writers and writers producers, and directors out there, to start creating content for the web iptv, open your own companies, knock on the doors of private investors make deals with the Unions for new media productions, and get a piece of that virtual real estate, and hire us BTL's.

There will always be a hunger for content, always, in all languages.


Bartleby said...

i just finished watching the entire Mac Expo presentation, and its really incredible what Jobs and co. have done. I was a skeptic about digital downloads of movies, but, at first glance, anyway, it seems like they've cracked it. The big hold up is the time it takes to download/stream an entire feature film. Well, with their Apple TV set up, you can start watching in 30 seconds. This is a lot like On Demand, only the selection seems like it will be much vaster once it matures, esp. since every studio of note is on board. The CEO of Fox was even on it presenting the first Blu Ray DVD encoded with a file that can be played on iPod, iPhone, and Apple TV.

This is quite a breakthrough, and will be difficult for studio bigwigs to continue to cry poverty.

Susan K said...

Got a call today from a friend who was on the Macworld show floor and attended the keynote. I asked what all Steve announced (busy worker, can't peek at the net), and when he mentioned the rental deal, I said, "Well, did he say anything about the strike?"

Friend (who does work in larger umbrella of entertainment/gaming biz) said, "hm, didn't even think of the strike. See? I was inside the reality distortion field."

Steve Jobs is the largest Disney shareholder. Oh, and he's on the board of DIS, too. If he wanted to, he could influence the strike outcome as far as Disney is concerned.

Glen said...

Can anyone explain how this is good for writers and producers. iPods, streaming and downloading has pretty much destroyed profit in the music industry. The studios signing up for this seem to be trying to avoid the the fate of the recording companies, but to me they look like they are rocketing faster towards the same fate. Because I don't see how this will be monetized for the producers unless it carries full advertising on both first run television episodes and movies.

But who gets the advertising revenue, Steve Jobs, or networks and distributors or studios? In fact, who has control of distribution with this model?

Does anyone here really have a financial idea of what this all means for movie and television production? Please explain it to me.

Spekkio said...

@ Glen

The iPod and (legal) music download haven't damaged the music industry. CD sales, yes, but not overall. It's the diversity of music and the decline in quality that have contributed the most to the decline in music sales, IMO.

I expect that iTunes rentals and sales for video will work much as it does for music, where Apple takes a tiny cut, the corporation takes an enormous cut, and the creators get almost nothing. (Hence why the WGA, DGA, et al., should fight on.)

Cyber said...

Up here in Canada (and yes, we're supporting the strike up here too -I want Smallville and Bionic Woman back!) we have a good copyright law.

Canada has been represented as 'The Great Pirate North' for some time now, mostly due to content sharing, content shifting, and sending music to friends. However, this helps advertise the music, and the musicians know it. Many of them don't want the copyright law to change. While 'piracy' has gone up, the music industry in Canada, as a whole, has either remained the same or gone up as well.

As for sales... CDs themselves are expensive, as are the cases, inserts, etc. If the music is downloadable, it actually works out cheaper for the customer and more cost-effective for the production companies (yes, even with bandwidth costs, which are realitively cheap if you rent an entire server. And I'm talking 1 Terabyte of space and 2 Terabytes of bandwidth for roughly $200 a month cheap). And then, you only sell as much as is demanded, instead of making x amount of CDs and putting them all across the country in the hopes that they will sell. You also avoid many middle-man costs that physical store buildings have, a part of which goes into all their products.

So really, with movies, even if the companies don't charge much for them, chances are they'd be cheaper for the public through iTunes than with a physical DVD, and the companies themselves might make twice as much money as they would otherwise because of the massive cut in costs of internet sales vs. physical DVDs.

Think of it this way: Just filming a movie might cost $300 million, for a hypothetical example. Let's say the movie makes half that in box office sales. That leaves you with $150 million.

Now let's say we have a dvd in the store. It costs $30. Chances are, the store bought that dvd for $10, because it's standard practice for stores to jack up price of goods 3 times as much as what they paid for them (they have to do that to cover costs, because not everything sells). Therefore, it only cost the companies $10 to make that DVD *and* make a profit on it. Transportation takes a big chunk out of an item's cost. Then we have the dvd cases, the actual dvds, the inserts, etc. So after all that, we can assume that the company is only charging about $3 - $4 for the content on that dvd (Maybe less).

So if the company sells that movie on iTunes for $3 - $4 each time, they make the same amount of money as they would with a physical dvd. If they sell it for $6, they make 30% - 50% more money than they would with a regular dvd. Now let's assume they sell it to iTunes for $6 who sells it for $8. The customer only pays $8, which is much less than $30, and no physical dvd to lug around.

Now the above example was for downloading a dvd to own. With iTunes, currently, the system is for rent. Rent usually involves an expiry date for the movie (a system which can easily be built into the downloaded movie, and already exists today for some programs).

So let's assume the 'rent' is for a week. Let's assume that the rent is $2 (companies getting $1.50 and iTunes getting $0.50). Now if the content on a dvd for sale (as in, a person buys it once and it's theirs) only costs the company $3 - $4, as in the hypothetical example above, then how much money would the companies be making on movies they rent for a week charging only half that? Under that system, renting a movie 2 or 3 times would give the companies as much money as the consumer buying the movie. and many consumers are hesitant to buy movies because they only watch a movie once or twice anyway, unless they really like it. Therefore, they usually just rent.

Now take into account that this iTunes deal will probably involve alot of movies that have already made their production costs back as well as a nice profit. Renting these things through iTunes = more money with less work. The fact that so many big companies have signed up for this means they believe this will be huge. You can bet this will be a standard in the future.

Brian said...

I have been talking to people on sets for the last couple f years about the changes in technology. I found it hard to believe that so many people who work in the entertainment industry where so uniformed about the state of technology.

All The Majors have deals now with Apple, Microsoft and Netflix for direct delivery of content via the internet. These deals have been many months in the making - defiantly before the strike.

I think they were hoping to push off any discussion of this for three years - and hoped that the unions would cave. I think that they did not plan on an early strike - but once it came down - They wanted to use it to clean house and end deals and make it look like the writers were to blame for what was happening, possibly scaring the other unions into capitulating.

But at the Consumer Electronics show and MAcworld - the announcements were clear: There is huge money to be made over the internet - and the Studios were very much informed about it and were hoping to get away with cutting out the people who actually did the work of creating what the studios sell.

Hopefully, all this is going to make the writers, directors and actors see - that there are many ways to cut out the middle men studios. Even though the industry is not going to completely transform overnight - It is coming and the ownership of the copyright and content is going to start to shift. It is lost on TV series and other Work for Hire deals. But I think you will see the beginning of the shift with Original material. THe creators will start to retain control and license instead of give up copyright. It won't go over without a fight, but The change has begun and it will take place.