iTunes Does Movie Rentals & Apple TV Update – First Take

Michael Gartenberg | January 15, 2008, 12:00 AM

This one didn’t come as much of a surprise given the abundance of information that leaked over the last few weeks. The details for content are all the major the studios with initial offerings are on board and 1,000 titles in the next month,100 of those in HD and new releases 30 days after DVD. Expect that to grow over time. Movies can be downloaded and watched within 30 days for 24 hours. Prices are $2.99 for catalogs and $3.99 for new stuff. Add $1.00 for HD. Overall this is a really good move. Let's face it, you might listen to the song ten thousand times in the course of your life. You might want to watch any given movie perhaps once or twice. Video rental is a business model that we know works.

So what’s different here that’s game changing? After all the terms of pretty close to what you’d get with most VOD services. The answer is there are three things that separate this from what has come before.

The iTunes Eco-System – I’ve said it before and will say it again. When you’re talking about protected content (which is of course needed for rentals) devices drive the users to the services, not the other way around. The fact is, this is the rental service that works with iTunes and therefore, Apple TV, iPod and iPhone (rentals will only work with current generation iPods). That means it works on your TV, PC, phone and media player, exactly the type of content flow consumers are looking for. At the end of the day, if it doesn’t work with the iPod, then for most consumers it might as well not exist.

Ease of Use – The biggest problem with WMV based rentals is that they don’t work well. With the exception of the Amazon Unbox/TiVo experience, there’s a lot of complexity with Microsoft’s technology and it can often be a frustrating experience. Apple’s FairPlay has always worked well for consumers and this ease of use, "it just works experience" is going to be important.

Breadth of Content – Apple has the right partners here and it's likely that list will grow. (remember that iTunes store itself only started out with 200,00 songs). As the content grows and comes in sync with the release of content on DVD more and more consumers are going to be enticed into using the service.

Once again, it isn't that Apple has invented something new here, it's how they've done it. While existing efforts have been met with a lukewarm response, we're likely to see something very different in terms of consumer response to this. By mapping to the preferred consumer tech eco system and offering enough content to capture interest, this is going to be an important offering.

The other thing that's clear is Apple TV is no longer a hobby

It's clear given the updates to Apple TV and the integration of functionality here that Apple is serious about integrating content to the TVs in the home. The ability to flow content to all the screens that are important to consumers is strategically important to Apple and no doubt Apple TV is going to go from "hobby" to strategic product in 08. Best part is the ability to rent and download directly from the TV without the need for the computer. The UI is nicely done and makes for a great experience.Love the addition to see Flickr photos directly on the device.

Bottom Line? What iTunes was to music stores online, it now is to video rentals. It's an important move that clearly is going to have an impact on the industry in fairly short order. This will change how folks rent movies and at the same time, drive more consumers into the Apple eco system. By creating a standalone product this will put pressure on competitors like Vudu and at the same time provide another purchase funnel to drive consumers into Apple and the iTunes platform.