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September 11, 2006

Amazon Opens Video Store - Will Apple Follow and then Lead?

The convergence of television and the personal computer is the holy grail of most in the computer business.  Microsoft especially lusts after this as a way of extending the Windows franchise into the living room and another reason for people to keep blindly using the operating system.  While we're at it, let's include telephone service as well.  That's sort of been accomplished with voice-over-IP, and even video services through instant messaging.  These services, however, are still computer based and not casually in the living room. 

There have been creaky steps towards convergence.  The digital lifestyle requires a really fast Internet connection.  There are varying grades of fast, and commercial Internet providers offer acceptable enough speeds, if tolerating a 4 plus hour download of a 2 hour movie is acceptable.  That could never take place in the world of dial-up.  But we're still not there when considering that low-res dvds are in the seven gigabyte range and high res movies are starting out on discs holding between 25 and fifty gigabytes.  No one is going to wait a day or so downloading a high res version of Charlie's Angels when Wal-Mart carries them for around $22. 

That's not the only challenge.  It seems that Hollywood can't quite understand that consumers like to watch movies on television rather than a computer.  There are all kinds of restrictions on nascent download services in terms of portability.  The key, of course, is connecting that television conveniently to a computer.  That's hardly easy with present equipment.  Maybe with high def monitors, although these are still in a price range that is out of reach for the family who can buy $300 commodity PCs and $200 27 inch analog televisions.  There are plenty more consumers in that category than the early adopters.

It is in this context that we look at the two latest developments in online video sales.  Amazon has created a software "unbox" application that allows customers to download movies from the company's video store and play them on a computer.  The TV experience comes along if consumers can connect the computer to the television.  Audio would come through the computer speakers.  DVD burning is forbidden, as is playing nominally compatible media from other outlets.  Amazon is looking at a business model similar to Apple in that it ties the consumer into a complete experience.  Unlike Apple, however, all of the convenience seems to be with Amazon and Hollywood and not with the consumer.  This is especially true when the downloads cost are similar to discs and offer less.  The only attraction is some material such as television shows may be before release on disc.  Still, where is the motivation for consumers to care about this?

The second development is still in the rumor stage, but close enough to fruition to discuss.  Apple is planning to make a special announcement at the end of the week.  Many think it will be the details of a video store, a new iPod to go along, and maybe another model of the Mac mini that could make that transition to a living room Internet device that easily connects to a television.  Oh, and a potential download price of $9.99 could be part of the mix.  Apple is good at giving the consumer value for their online media purchases in spite of vendors trying to squeeze every dollar out of a digital version of a movie.  Apple has the right approach if the rumors are true.  The viewing experience on a four inch screen is not worth $19 to $29 dollars for a download, but might be at the $9.99 price.  Apple has the good sense to assess the market as it is, not as vendors would like it to be.  And they will likely be there long after high def televisions penetrate most homes and broadband is about ten times faster than it is at present.  Online stores in the model of Amazon will struggle until then.

Stories on the Amazon project are in ITWire, Playfuls, the Seattle Times, and the Washington Post.  As for Apple, let's just wait

and see what Steve Jobs announces in San Francisco this Friday.

September 11, 2006 | Permalink

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