Apple's going to account for sales and earnings from the iPhone and Apple TV on a subscription basis for 24 months after the sale of a unit... Apple said that the reason for this is because they are going to be offering new software features for free for the iPhone and Apple TV.
Now, some people had assumed that this was to take care of the accounting rules that required Apple to charge $1.99 to Mac and MacBook users for a software update to enable the computers to support the Airport 'n' wireless networking. But, as One Analyst sees it, this is really setting up Apple to offer subscriptions via iTunes. Now subscriptions and iTunes seem to be dirty words to Steve Jobs. He is dead set against a subscription based model for music. But what about TV shows and Movies?
I suspect that in the next few months Apple will update Apple TV to allow video rentals of movies and TV shows. If it does not happen this year, then expect it in January 2008. It just makes sense. I look at my own consumption of movies to justify that belief.
I would like to think my situation is one of an average consumer. Due to my family and work schedule, I almost never go to the movie theaters. Why? For most movies, I can wait until its on DVD when I can watch from the comfort of my couch (for example, the last movie I saw in the theater was Pirates of the Caribbean 2. Before that, it was the last Lord of the Rings. So, even though I see almost all of the "blockbuster" movies, 99.8% of them I watch on DVD. I am very happy to be one of the consumers causing Hollywood and the movie theaters so much consternation, but that is another post).
Thus, my consumption of movies really is an "impulse" type purchase - a few times per week I decide to watch a movie. I look for the latest DVD releases first and then I look at other films. Assuming I find something I am interested in seeing (and since much of what is produced these days is crap horror films I won't watch), I am then faced with a trade off - buy an iTunes movie for $9.99 (or more) or, buy a movie off pay per view for $3.99 or, take a 5 minute trip to the Rental Store and rent a movie for $4.29. Each has its pros and cons:
iTunes: PROS: near instant delivery, very little to do on my part except select the movie and watch it either in my computer or my TV. CONS: Expensive compared to other choices, although I will own the movie, I probably would never watch it more than 1 time. Like 95% of the population, I am not a big buyer of DVD's but I am a big consumer of DVD rentals. Also, Apple's selection is somewhat limited right now without "new" releases (i.e. movies that came out on DVD this week).
Pay Per View: PROS: instant delivery, very little to do on my part except select the movie to watch and watch it. Inexpensive. CONS: no "new" releases as Pay per view tends to be about a month behind on new releases.
Rental Store: PROS: "new' releases available (although its very rare to be able to rent a new release the first week it comes out). Inexpensive. CONS: takes some effort on my part to get to the store, rent the movie (and 7 out of 10 times they don't have anything I want to see) and return the movie after I am done watching it.
So, looking at the list, you might be able to tell that generally I'm buying movies off of pay per view and, about 2 or 3 times a month renting from the Store (sometimes more, sometimes less depending on what's out). So, 99.9% of the time, buying a movie from iTunes doesn't even cross my mind due to the cost. But...if iTunes offered new release rentals? I'd use it every time.
And that's the sweet spot Apple has to hit with movies - new release rentals and that's where I think Apple has to get to with Apple TV.
If I were to envision this feature, I would tell iTunes sometime during the week, either through my Apple TV interface or from my work or home computer, that I want to watch 2 new movie releases. Within minutes the first movie would be available for me begin to view on my TV. I should be able to stop, rewind and pause the movie. That's it. Some people might want a purchase option after they watch the movie, although that's not important to me. Others might want the "DVD extra features", although, once again, not too important to me. I want to rent, watch (once or twice), the newest movie release and it has to cost $5 or less. The company that can digitally deliver (ruling out the Rental Store and the Netflix snail mail model) that experience is going to be the one that wins.
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