iTunes/iPod/iTV - First Take on Apple's Announcements

Michael Gartenberg | September 12, 2006, 12:23 AM

It's important to understand the three parts to Apple's news in relationship to each other. It's not just about a new movie section in the iTunes music store but new iPods/iTunes and a way to get content from iTunes to the largest screen in the home. They key to the announcement is understanding that there's a seamless end to end experience for consumers for consuming digital content both within the home and outside the home. It also re-enforces the Apple vision of the universe with the PC serving as a hub for digital content in the home and it all works together seamlessly. The iPod/iPod are no longer only about music and that's going to move the bar higher for new competitors from getting into the market.

Movie Download Service – iTunes now has a nice selection of about 75 movies from Disney (Disney, Pixar, Touchstone and Mirimax) coming in at prices of $12.99 for new titles pre-ordered and in their first week and $14.99 after that. Library titles are $9.99. Don't look at the initial selection as meaning all that much. When the music store opened, it barely had 200,000 songs. When they added TV shows last year, it started with just a handful of ABC shows. This will change fast. We believe that Apple will have greater success than other players have had here. First, unlike competing DRM technologies, Apple has shown that theirs works. Period. No qualifications, it just works. Second, when you're talking about PC based video downloads you need to tell a complete story for mobility as well as getting content to TVs in the home (which is really just a euphemism for the largest, passive display in the home). At the moment, it's hard for competitors to tell that complete story without support for the iPod and without a credible way to get content from the PC to the TV. This is where that hardware and software integration really come into play.

iTv – In a move that we haven't seen from Apple in a long time, Apple pre-announced a product that they're calling iTV. It's not a set top box per say, but it is a small device with every type of digital input you'd want to get all your iTunes content to your TV set, including music and pictures. While Apple wouldn't go into details about the wireless technology, they did confirm that this product is designed to work wirelessly and that they are taking the onus on them to make sure the home network works. That's a pretty big responsibility but we'll have to wait until Q1 of 2007 to see it working. The price point is $299, which is a bargain if it works as well as it demoed. In the short term, the iPod can still connect directly to TV sets using the dock feature but now there's a more complete and elegant solution for getting content from iTunes to other places in the home

New iPods and iTunes – Nice update to iTunes. Easier organization of video and music content and iTunes will fetch album art for you from the store. Very cool navigation called cover flow that can only be described as the 21st Century version of flipping through your milk crate of vinyl albums. Video is now encoded at 640x480 which will make it much more watchable on the PC as well as through iTV.

New iPods are a nice update. 5G iPods (including last years) and now play games (some really nice casual titles like Bejeweled, Tetris, Pacman and other casual games work well and are priced right at $4.99) Battery life goes up to 6.5 hours on the 80gb unit (at $349) and 3.5 hours on the 30gb (which comes in at $249). Screens are brighter as well. There's also support for gapless playback (for Darkside of the Moon). The nano gets a refresh and comes in anodized aluminum in capacities of 2, 4 and 8 gb at price points of $149, $199 and $249. The 2gb comes in silver, the 4gb comes in a green, blue and magenta as well as sliver and the 8gb is only in a wicked cool black. Battery life is upped to 24 hours. No doubt, these will be flying off the shelves. Finally the shuffle gets and update. Again, this is one you have to see, but it's the smallest MP3 player on the market (who needs a phone with a player this small), 1gb capacity and it's only $79. I expect we'll see a lot of cross ownership among these different products.

Once again, Apple has shown the ability to refresh the line and keep things interesting. The new nano line looks amazing and the updated 5g iPod is more optimized for long form video. As for iTV, you really have to see the UI in action to get a sense of how seamless this works.

Bottom line, Apple has sold 60 million iPods to date with 1.5 Billion songs and 45 million videos. Once again they have revised their line with devices and services that will be hard for other players to match. Look for competitors to try and change the message but that's not going to be easy in a market where the message is totally dominated by Apple. At the end of the day, there's no reason to think the iPod will lose significant market share for the next 24 months. Also, it's still early in terms of holiday announcements, we might yet hear another one or two things from Cupertino before the first frost hits in the East.