Apple rents movies – and crickets chirp

Posted on January 17, 2008

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Apple recently announced that they’d be renting movies via their iTunes service. As a result, I’ve started seeing analysts saying that this was going to make Apple even more dominant than they already are. After all, people are going to want to watch their iTunes-rented movies via their iPods, their Macs, and even on their iPhones, dontchaknow. So the analysts are saying that the iTunes movie rental experience will usher in a paradigm shift from DVDs to streaming.

If you’ve been an observer of the streaming video market over the last few years, you’ll have seen several false starts. Most of the early companies into this market failed for one simple reason – there wasn’t enough bandwidth to enough homes to justify the business model. This has changed dramatically in recent years with the mass adoption of broadband internet connections via cable modems and DSL. But the first power company out of the blocks, Amazon.com, has gone precisely nowhere with their Unbox service via network-connected Tivo boxes. Apparently Apple designed a way to get their products to your TV, AppleTV, but so far as I can tell, it’s even less well regarded than Unbox is (seriously – I discovered it today doing research for this blog, and I’d at least heard of Unbox before), and there’s rumors that Amazon will squash Unbox. And Netflix has partnered with LG Electronics to manufacture a Netflix streaming set-top box for their free (with a mail-order DVD rental subscription) movie downloads.

In other words, streaming movie distribution is coming, but it’s not a paradigm shift – it’s been a slow, inexorable evolution from year to year. Yes, AppleTV version 2.0 enables you to avoid downloading to your Mac before watching that rented movie, but is it really the “landmark event” in this evolution? I don’t think so. Neither does the stock market, which beat up Apple’s stock right after Macworld – sure, it was a bad day for the market in general, but Apple fell more than the market average after what must have been considered wildly underwhelming new product announcements.

And besides – movie watchers tend to like watching their movies on big TV screens, not iPods, iPhones, or even computer monitors. AppleTV may work, but that depends a lot on the other factors of the iTunes movie rental package, like the fact you have only 24 hours to watch your rental once you’ve started (a model that Blockbuster abandoned for their physical rentals years ago and that Netflix never had) before it disappears and the 30-day delay after DVD release before iTunes gets to stream their movies. Neither restriction is exactly viewer-friendly, and either could seriously hamper the success of Apple’s rental service.

I think that the market still isn’t ready for digital streaming, but I don’t mean the consumer market – consumers want their movies off the internet and on their TVs with full HD picture and 5.1 sound, and most of the required electronics either exist already or will within the next year or so. No, I mean the movie market, specifically the industry heavyweights of the MPAA who are as locked in a pre-download mentality as the RIAA members are for music. The music industry is only now finally realizing that they have to adapt or die, and the restrictions on Apple’s new movie streaming service illustrate that the MPAA hasn’t yet learned from RIAA’s mistakes.

For all our sakes, I hope the movie industry has a sharper learning curve than the music industry – RIAA still hasn’t figured it out yet.

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