Minority Report: Apple in your living room

Can it just work?

Having secured a lead in digital music, Apple now hopes to rule the digital movie scene too. But, says Seb Janacek, many questions loom over whether the company will be welcomed into the living room.

Apple's recent announcement that it had brokered a deal with a clutch of Hollywood studios to sell movies through its iTunes Store came as little surprise.

What did come as a surprise was the company's highly unusual decision to pre-announce an entirely new product at the 'It's Showtime' event in September. The tentatively titled iTV is a device for streaming media from a Mac or a PC to a television.

A media centre device has long been predicted by analysts, media outlets and Mac enthusiast sites alike. But for a company that likes to keep its secrets "pretty corralled", as CEO Steve Jobs has put it, the announcement was hugely significant.

At first glance the movie content on offer through the iTunes Store (the service has dropped the 'Music' from its title) is thin. A meagre 75 movies are available for purchase and all from the Disney studios, offering titles such as Cars and Pirates of the Caribbean. As is often the case with new Apple services, the movie downloads are limited initially to users in the US only.

By comparison the recent Unbox movie download service from Amazon has a catalogue of well over 1,000 movies and TV shows from six major Hollywood studios and several independent studios and TV networks.

Apple will be working hard at getting more studios onboard. Jobs' Hollywood links - as Disney's major stakeholder and his tenure as CEO of Pixar - will no doubt aid negotiations. Expect more Hollywood studios to add their content in the coming months.

The iTunes movies are described as 'near-DVD' quality and unlike the flat pricing model on iTunes music, new movies are priced at $14.99 with a rebate for those pre-ordered and $9.99 for older flicks.

The variable pricing model is a concession Apple clearly had to make to the studios. It's also one the record companies have long been clamouring for and one Apple has long resisted. There must be a significant risk that the company will now be drawn back into the arguments over flat pricing for music as a result.

Apple claims its foray into TV shows has been a success. It's currently selling around one million TV shows per week from its iTunes Store, with nearly 50 million TV shows sold since it added video content in 2005.

Jobs described the iTV as the missing piece in the company's home entertainment strategy. A wireless device that looks like a vertically challenged Mac Mini with an array of connection options at the rear, iTV allows content to be streamed from any computer, whether Mac or PC, over a wireless network onto a household television via iTunes software. Apple plans to sell it in the US for $299.

iTV may also allow you to download content directly - Disney's Iger hinted as much during a Goldman Sachs conference shortly after the iTV pre-announcement, when he let slip that the device has a hard drive inside.

The most likely reason Apple took the unusual step of pre-announcing the iTV device has to do with the way it plans to market its range of media-related services - as an end-to-end solution for browsing, buying, storing and watching movies.

The success of Apple's music business has been based on the seamless integration of its products from browsing and buying tracks at the iTunes Store through to transfer onto a Mac or PC and then onto an iPod.

The iTV pre-announcement sends the message that the company intends to offer the same end-to-end service for movies as it does for music.

Amazon has the movie content but it doesn't currently have the same kind of complete solution, which carries the user from purchase to viewing the content, relying as it does on intermediaries to fill in the gaps.

Recent reports suggesting Amazon is in talks with TiVo will go some way to alleviate this. Meanwhile its Unbox video service has come in for some early criticism about the usability of downloads and issues with DRM technology - including the fact Unbox content can't be viewed on iPods. Whether it will work with Microsoft's Zune device remains to be seen.

Amazon provides real competition to Apple in the movie download market and has a lead on the Cupertino company both with the number of titles it has available and with the fact iTV won't ship until the first quarter of 2007, after the holiday season.

In addition to price there are going to be three key battlegrounds for competitors in the movie download marketplace.

Firstly: the content available for purchase. Amazon clearly has the head-start on this but Apple is expected to announce deals with more movie studios over the next few months. The fact that via Apple's Front Row interface users can browse media (photos, podcasts, music, home videos and trailers from the Apple website) from their home computers will build the value proposition for the iTV device.

Secondly: how these services are marketed, not just in terms of advertising but rather in explaining and selling the benefits of the product. The real challenge for both Apple and Amazon and other competitors is that they have to sell the paradigm of TV and movies over the web to the masses and not just to tech-savvy computer users. The TV is about as consumer friendly as technology gets. Video over IP isn't exactly a dark art but it does demand a greater understanding of how technology links together than the music download model.

Thirdly: the usability of the product to deliver on the promise of the marketing. One of the axioms Apple holds dear is "it just works". The company's dedication towards simplicity and elegance has been the cornerstone of its product interface development since the inception of the original Macintosh in 1984.

It's in the second and third areas where Apple is likely to hold the trump cards. It will labour the parallels with the way the iPod works to explain the video service to the masses, and its history of usability is arguably unparalleled.

But whether Jobs can pull off something no tech company has achieved - success in the living room - remains to be seen.