Lively Debate

I am continuously impressed by how well run the new Apple is. I find it entertaining to follow the Apple pre-announcement rumor mill, but I was a bit busy for Wednesday's video iPod announcement. The television part of the announcement caught me by surprise. Most of the speculation that I had seen regarding a video ipod centered around movies or music videos. If it had been just that, I would say "so what" or "who cares?" There are many avenues of distribution for movies and movie downloads doomed to be slow and time consuming. No story here. I didn't even tune in.

Television is different.

The market for television episodes today parallels the market for songs when Apple first entered it with iTunes Music Store. Buying television shows on DVD is increasingly popular. Fox canceled the show 'Firefly' after showing only 11 of 14 episodes. Strong DVD sales, over 500,000, enabled the show to brought back this fall in the form of the Serenity movie. However, buying these television DVDs requires purchasing a season. Much like CDs are sold in albums. Apple's innovation is to offer the sale by episode, just as they offered to sell music by song.

Is there a demand for this? You bet. Through a Tivo overbooking I missed Survivor this week. I would happily pay $2 to see it before next week. Would I buy a survivor DVD? Not a chance. Is everybody at work talking about a show last night that you missed? Two bucks lets you see what you missed. A PVR doesn't help you if you don't realize that you wanted to watch something until after it airs.

The key is the content producers. Will they opt in? I suspect they will. Why leave money on the table? Its also another way to compete with the commercial skipping capability of PVRs. Mark Cuban calls downloadable television the Savior of Network TV.

Along with the video iPods, Apple released a new remote control and some media center control software. There are some folks lamenting that Apple did not go all the way and offer the ability to record broadcast television. I think Apple is smart to stay out of the treacherous and mildly profitable PVR market. The cable and satellite companies are strong competitors. The combination Tuner/PVR boxes work better. Until the alternative technology is ready (cable card), Apple is better off leaving PVRs to others rather than releasing an inferior product.

The other problem with an Apple PVR lies in how cable boxes are sold. The cable/satellite companies subsidize the initial box purchase with a subscription contract. It would be hard for Apple to compete up front with a more expensive box. I'm not sure that all of the conditions will ever be right for an Apple PVR. If the time ever does come, It is worth keeping in mind that Apple wasn't first with an MP3 player. They need not enter a PVR market early to do well.

Apple is better off creating a new market without competition than entering an existing market with strong competition and no clear advantage.

Update:
Ok, without competition may be a bit strong. Microsoft touts their available content in last week's announcement for Update Rollup 2 for Windows XP Media Center Edition 2005. (Someone needs to teach Microsoft how to name things.) Topping the list is Akimbo, an on-demand video subscription service. Apple has beat out the subscription model with pay per download in music. Can they do the same in video?

Following up on the well run company theme, Chuq Von Rospach, a long time Apple Employee summarizes a history of Apple CEOs.