Content Delivery: Apple’s Next Big Venture?

  • Posted: 02 September 2010 12:50 AM

    Our friend PED provides an excellent overview of the stats presented in today’s special media event.

    I’m posting my comment on that column in this new topic for discussion:

    As an independent analyst of Apple I’ve learned not to focus on the individual products or product lines but to focus on a more comprehensive view of the company and its approach to its product markets.

    Today’s product refreshes are a step forward in monetizing after-purchase revenue opportunities through the rental of movies and TV shows. The updates to the iPod line are competent with the iPod touch being the favored product. The new iPods exclusive of the new iPod touch are not going to revive softening iPod unit sales. But they will hold their own in the market and provide for strong seasonal sales during the holiday quarter

    The new Apple TV is a much better defined product than the rather quirky and comparatively expensive product it replaced. It’s a natural buy at $99 for households with a NetFlix account. 

    Apple is shying away from a content monetization and distribution model that requires ever more storage space for the consumer to accommodate the purchases of HD and other storage hogging content.

    Now there’s one major issue to be addressed - the hodgepodge of delivery infrastructure that brings streaming content to the consumer. Under the purchase and store model the playback of content is better controlled and perhaps much more uniform once it’s downloaded and stored for use and reuse. Clearly Apple does not see much of a future in the sales of movies and TV shows and much more of a future in content rentals.

    Is Apple planning to use a portion of its growing cash position to invest in better means to deliver content to Apple product customers? It’s one major aspect of the content and monetization model that is currently outside Apple’s control and has a major impact on the quality of the customer experience.

    If there’s an issue involving the iPhone that’s been outside of Apple’s control it’s the AT&T wireless network. Real or imagined, it’s had an impact on the perceptions of the overall iPhone experience. How does Apple take more control of the delivery of content from iTunes to the customer in a way that’s much more uniform considering the hodgepodge of technologies and services used by consumers?

         
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    Posted: 02 September 2010 02:13 AM #1

    A new vertical integration could include any of these: 

    1. Apple buys a production company (Pixar, RCA, version 2) ?
    2. Apple buys an ISP to compete (undercut) Comcast’s network throttling.
    3. Apple buys Netflix to reach more retail customers.
    4. Apple starts making speaker system and TVs, or buys out Bose or something.  And, expands the partnership with Best Buy.

         
  • Posted: 02 September 2010 09:38 AM #2

    One of my favorite demonstrations of magic by Penn and Teller involved a Film Noir skit with Teller doing all the work and Penn doing the voice over work. Basically it features Teller in a 40’s suit walking up to a lamppost and taking a cigarette out from his pocket, lighting it and taking a smoke. That’s it. They then repeat the whole scene showing how many magical techniques that Teller used to do apparently nothing. Misdirection, palming etc. etc.

    I think this is what Apple did yesterday. Something was going on with the presentation and Apple said nothing. It looked pretty damn awesome on my iPad. And apart from some full image stuttering (something I have never seen before with any other streaming technology) at no point did it down rez, which is something other live streams are prone to at times of high access. Watching my router and reports from friends something else was going on too. It seemed to use a surprisingly small amount of bandwidth considering the size of the file and the quality of the image.

    So despite a few publications saying yesterday that it was all done by Akamai coz they looked at the streams and that’s what it said I think that they missed exactly what they were seeing. I would be pretty interested to know how many people were attempting to view the stream live and what this technology is.

    From DT’s original question I think that Apple proved that they can now encode content and deliver it live when needed. So yes content deliver will be the next big thing. We do require the content providers to actually hand over the content though and there in lies the rub.

    Everyone is completely scared of Apple gaining any foothold in any area in which they (the competitors) are intrenched. When you have people like Edgar Bronfman, Jr. over at Universal mouthing off that he got shafted by Apple then you are going to find some pushback. Unfortunately most of his rants are reduced to the Scooby Doo’s bad guy’s line “We could have gotten away with it if it weren’t for those pesky kids”.

    Apple can, and have built it. The question is “Will they come?”

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  • Posted: 02 September 2010 12:03 PM #3

    I think airtune will be the driving force for a huge number of Apple TV sales. At $99 its a casual expense, like buying an airport express and it is very appealing to be able to stream your Mac, iPac and iPhone content on your big screen TV.
    Then all those Apple TV will become a doorway for Apple content delivery.
    Airtune is the killing app for Apple TV sales and for Apple content delivery.

         
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    Posted: 02 September 2010 12:14 PM #4

    I tend to disagree to the extent that they will still rely on the like of Akamai and their large network of Edge Servers for Video delivery.  Apple doesn’t have that kind of network topology and the NC data center seems to have a different purpose IMO. The addition of Ping to Itunes 10 could grow to require a large server farm and facetime which is really VOIP with a pretty face requires centralized servers for establishing the directory services and centralized control.  Providing a Facetime voice over IP solution that will scale to large call volumes, and offer call quality, as well as supporting new and innovative services is a significant challenge.  Additionally the new GameCenter service will require additional servers.

         
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    Posted: 02 September 2010 02:08 PM #5

    AppleTV is an AirPort Express with AirPlay in a set-top form factor.  AppleTV is a marketing term.  Consumers wouldn’t get it if it is called AE with AirPlay.

    It is conceivable that new AirPorts would be using the A4 chip and come with a HDMI port.  Each TV would be connected to either an AppleTV or AirPort.  TV would be the display for any iOS devices.  In this scenario, cable companies are the biggest losers.

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    Posted: 02 September 2010 02:17 PM #6

    rattyuk - 02 September 2010 12:38 PM

    One of my favorite demonstrations of magic by Penn and Teller involved a Film Noir skit with Teller doing all the work and Penn doing the voice over work. Basically it features Teller in a 40’s suit walking up to a lamppost and taking a cigarette out from his pocket, lighting it and taking a smoke.

    Penn & Teller

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  • Posted: 02 September 2010 04:14 PM #7

    rattyuk - 02 September 2010 12:38 PM

    From DT’s original question I think that Apple proved that they can now encode content and deliver it live when needed. So yes content deliver will be the next big thing. We do require the content providers to actually hand over the content though and there in lies the rub.

    That’s the issue. How to deliver a consistently high quality experience considering the number of networks and technologies through which the content must be streamed?

    What are the solutions?

         
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    Posted: 02 September 2010 04:23 PM #8

    DawnTreader - 02 September 2010 07:14 PM
    rattyuk - 02 September 2010 12:38 PM

    From DT’s original question I think that Apple proved that they can now encode content and deliver it live when needed. So yes content deliver will be the next big thing. We do require the content providers to actually hand over the content though and there in lies the rub.

    That’s the issue. How to deliver a consistently high quality experience considering the number of networks and technologies through which the content must be streamed?

    What are the solutions?

    Perhaps, that’s where the cash hoard would help.  What can Apple buy with $46B?

    Btw, whatever the solution, it has to be global and not US-centric.  A lot of TV shows and movies (mostly VCDs, some DVDs) that my family are watching are not by Hollywood and are not in HD.  SJ is still too US-centric.

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  • Posted: 02 September 2010 04:58 PM #9

    Mace - 02 September 2010 07:23 PM

    Btw, whatever the solution, it has to be global and not US-centric.  A lot of TV shows and movies (mostly VCDs, some DVDs) that my family are watching are not by Hollywood and are not in HD.  SJ is still too US-centric.

    This is the main issue and not one that Apple can fix I am afraid. The content provider are too greedy and too attached to the old way of doing things to actually allow that to happen. I think it is unfair to blame SJ for this Mace as he really has no control over the situation.

    The AppleTV in the UK is looking like 99 quid which is a damn sight more that 99 bucks even accounting for the exchange rate and the VAT which is added to the cost (US prices are ex-tax - UK price inc. tax) And if they haven’t replaced Netflix with iPlayer or some such then this is going to be a serious uphill battle.

    However clever Jobs is at doing deals he ain’t going to be able to get this done.

    Ironically even though it hasn’t really taken off properly most blu ray disks are playable on most players. There is supposed to be region control but most disks are currently shipping with it off. Warner, Universal and Paramount disks are usually region free. They were intending to crack down on this but obviously the cost involved in mastering a disk exceeds the revenue generated by not locking the regions and selling it everywhere.

    One of the problem with having a hobby is that you don’t give it the attention it requires to get it done.

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  • Posted: 03 September 2010 12:39 AM #10

    My experience of the keynote was not spectacular: it stuttered frequently, froze completely at times and did down sample into dithering. And it cut out at the end in the middle of something jobs was saying. And then appeared to jump ahead to the auditorium half empty with people wandering around talking as music played. I should add that I was not watching it directly on a computer, but on my TV via a MacBook Pro and HDMI cable. And that MacBook was getting internet via Airport from a router and DSL modem. But this is exactly how an AppleTV would function, isn’t it?

    I tried watching the version posted on-line today, but it wasn’t any better. Eventually I waited until my iTunes keynote subscription downloaded it and watched it in a clear form. But this version also ended abruptly. In no version did I see/hear the musical performance at the end.

         
  • Posted: 03 September 2010 01:55 AM #11

    willrob - 03 September 2010 03:39 AM

    My experience of the keynote was not spectacular: it stuttered frequently, froze completely at times and did down sample into dithering. And it cut out at the end in the middle of something jobs was saying. And then appeared to jump ahead to the auditorium half empty with people wandering around talking as music played. I should add that I was not watching it directly on a computer, but on my TV via a MacBook Pro and HDMI cable. And that MacBook was getting internet via Airport from a router and DSL modem. But this is exactly how an AppleTV would function, isn’t it?

    I tried watching the version posted on-line today, but it wasn’t any better. Eventually I waited until my iTunes keynote subscription downloaded it and watched it in a clear form. But this version also ended abruptly. In no version did I see/hear the musical performance at the end.

    I think DSL might be the issue.

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  • Posted: 03 September 2010 02:31 AM #12

    Apple’s latest ATV update is reminiscent of the original iPhone, which was only available in 2G. Apple jumped into the phone game and quickly gained mind and market share, though the specs weren’t cutting edge and the network was underdeveloped. Once establishing a foothold, the company was able to ratchet up the pace of improvements and bring people along to where they might not have been able to envision themselves going earlier. (Incidentally, I really don’t think Apple saw the app revolution till it began to unfold ? remember the initial battles against the jailbreakers ? but was nimble enough to think on its feet and turn a hacking problem into a huge feature, inviting developers into a partnership rather than a rivalry.)

    Like that original iPhone, there is so much that Apple wants to do with ATV. Is there a better company on the planet at making incremental advances in its product line? Sometimes features are intentionally held back until they are perfected; other times the market may not be ready for them, or maybe competitors are still so far behind that Cupertino prefers to hang onto an ace to play at just the right future time. In this case, much of the resistance to releasing a do-it-all device, of course, is coming from stubborn content providers who squirm at the thought of Apple reshaping the video distribution business model.

    Meanwhile, this low-priced ATV is a PLACEHOLDER in a yet-to-be-exploited market, with the potential to infiltrate millions of homes and set up an eventual tipping point that will allow Apple to negotiate from a position of strength with the studios. I think we will eventually see iOS apps and subscriptions on the device, strategically released as updates to keep excitement and momentum, and create a profit center that content providers will no longer be able to resist. But for now, ATV is a trojan horse, albeit one with a great deal of utility as is…. though a mere shadow of what it is to become.

    Look down the road a few years, with hundreds of millions of iOS devices consuming video, Apple sitting on a huge cloud infrastructure, and God-only knows-what key components it has added to its portfolio through M & A, and we shall see who dictates to whom regarding content distribution.

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  • Posted: 03 September 2010 02:39 AM #13

    rattyuk - 02 September 2010 07:58 PM

    The content provider are too greedy and too attached to the old way of doing things to actually allow that to happen.

    This is the biggest obstacle Apple faces without question on many fronts ... the paranoia about ceding too much control to Apple feeds this ... fortunately for SJ ... content providers do tend to like $$$$ ... so I think they will have to bend eventually.

    I think streaming the event served two purposes ... to serve as a stress test ... and to take the gadget sites down a notch or two in relevance.

         
  • Posted: 20 September 2010 04:01 PM #14

    Could Apple be working on an IP TV service?

    Yesterday I saw this article:

    http://www.9to5mac.com/27015/airplay-is-apples-go-to-market-internet-tv-strategy#more-27015

    I watched the embedded video and paid close attention to what Steve said at the All Things D Conference. Steve briefly mentioned the lock the cable and satellite providers had on television and basically said the service providers made innovation in the television market really difficult.

    “The only way that is ever gonna change is if you can really go back to square one, and tear up the set-top box, and redesign it from scratch, with a consistent UI across all these different functions and get it to the consumer in a way that they are willing to pay for it. And, right now there’s no way to do that. So that’s the problem with the TV market.”

    “There isn’t a cable operator that’s national. Every single country has different standards. It’s very balkanized.”

    Today I noticed this:

    http://www.electronista.com/articles/10/09/20/apple.in.deal.with.rovi.for.likely.apple.tv.tech/

    Maybe I don’t understand the business that Rovi is in, but it looks like it provides TV guide services. Why would Apple care what the network TV schedules are unless they had plans to leverage that along with a streaming IP TV service?

    An IP TV service would not depend on the traditional TV providers (cable/satellite), and would only require internet service to the home. Apple wouldn’t even need a large share of the television market to shake things up. Apple TV with IP TV service could be a big disrupter in the television market.

    Don’t forget about the huge NC data center under construction. I don’t think that Apple has stated a purpose for that yet. Could it be related to an IP TV service?

    Tell me if I’m headed down the “crazy” track.

         
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    Posted: 20 September 2010 04:22 PM #15

    Francisco Geraci - 20 September 2010 07:01 PM

    Could Apple be working on an IP TV service? ... An IP TV service would not depend on the traditional TV providers (cable/satellite), and would only require internet service to the home. Apple wouldn’t even need a large share of the television market to shake things up. Apple TV with IP TV service could be a big disrupter in the television market.

    Don’t forget about the huge NC data center under construction. I don’t think that Apple has stated a purpose for that yet. Could it be related to an IP TV service?

    Tell me if I’m headed down the “crazy” track.

    Have been waiting for Apple’s IP TV like for so long I can’t remember.  For those with a home theatre system, is so silly that you can’t control the TV via the AV receiver and need an digital optical cable between TV and receiver or a TV and receiver capable of audio return channel.

    Also, have been waiting for an Apple branded TV since 2006.

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