Commentary: Apple's video jump-start

by Ted Schadler and Josh Bernoff

Apple's new iPod with video, video-enhanced iTunes, and living room-ready computer will create a legal market for video downloads.

In addition to music videos and TV shows from ABC, look for independent film producers, individuals with video podcasts, and content owners seeking a legal download channel to jump into Apple's video marketplace.

Forrester spoke this week with Apple executives Phil Schiller and Eddy Cue about the companies latest products and services. Three years ago, Apple transformed music distribution with iPod and iTunes. Now it is doing the same for video by releasing new hardware, both portable and desktop, new software, and content distribution.

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This iPod does video

Apple CEO Steve Jobs unveils an iPod that lets you play last night's episode of "Lost." Also: a slim new iMac.

Here's what's new:

• Apple, with Disney's help, shakes up video distribution. iTunes now allows consumers to purchase and download videos for $1.99. This includes both music videos and programs from Disney including ad-free, next-day downloads of the hit shows "Lost" and "Desperate Housewives." In a world where popular shows have never before been distributed online or on video-on-demand (VOD), this is a watershed event. With Disney's help, Apple has created a new syndication venue for television--distribution to computers and music players.

• A video iPod plays music videos, TV programs, and movie shorts. Apple's new iPod features a 2.5-inch color screen that is intended for videos as well as music. While Apple is not the first company offering a portable video player or a legal download service--Microsoft got there first with partners CinemaNow, TiVo, Creative, Samsung and Zvue--Apple does it better. Together with its new iTunes video-capable software, Apple created a simple, end-to-end experience for video purchase, download and portable viewing. While the video experience on a 2.5-inch screen is not ideal, these new iPod devices also raise the bar for what a $299 and $399 player can do. Look for consumers to use iPod video to fill spare moments like waiting for the bus with amusing video shorts, video podcasts, TV shows, and maybe even a few $1.99 music videos.

• A new iMac G5 comes with a well-sized remote control for video and music selection. Apple's latest screen-on-a-stand shaped computers come with a new 10-foot interface application called Front Row and a small remote control with simple, iPod shuffle-style controls. The combination allows a consumer to sit on the sofa and watch a DVD, photos, or a downloaded video--or choose a music playlist--from across the room. Although Microsoft's Media Center PCs premiered this idea, Apple has created a PC that belongs in the living room--sleek, flat, and whisper quiet, with a 10-foot interface for regular people. The only thing missing is a TV tuner and a program guide to let the iMac function as a digital video recorder.

• Video podcasts provide a distribution channel for personal and niche video content. Apple's success with podcasts demonstrates the rise of personal media; Cue, the company's vice president of applications, says that more than 1,000 new podcasts are added to Apple's directory each week. The podcast directory will now host video podcasts viewable on any PC running iTunes, including Windows machines. With ad-supported video taking off, Apple will open the floodgates for everyone from news producers to independent filmmakers to channel video through its distribution. Combined with Brightcove, which will unleash the potential of video streaming, Apple's podcast downloads will usher in the start of the video Internet.

© 2005, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.