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Home > Blogtronics > Apple TV: Still not quite there
 Image Credit: Apple, Inc. View all posts by: John Ward | View all posts in category: Blogtronics Steve Jobs announced a new Apple TV at Macworld Expo 2008. He admitted that consumers did not well receive the previous Apple TV and that Apple has responded to some of its shortcomings with a new model. It is no longer necessary to use the Apple TV in conjunction with a Mac or PC. The new Apple TV is a stand-alone device, but it does require a broadband connection. Along with the Apple TV's new slick interface, Jobs announced iTunes Movie Rentals featuring movies from all the major movie studios including 20th Century Fox, The Walt Disney Studios, Warner Bros., Paramount, Universal Studios Home Entertainment, Sony Pictures Entertainment, Metro-Goldwyn-Mayer (MGM), Lionsgate and New Line Cinema. Users can rent movie library titles for $2.99, new releases for $3.99, and high definition movies for $1.00 more. Apple has definitely improved the product, but it still leaves a lot to be desired. I still have no need for an Apple TV.  Image Credit: Apple, Inc. In one of my previous articles, "Why the Apple TV is not a hit", I lamented the fact that the Apple TV doesn't allow the user to surf the Internet. I have pretty much reconciled myself to the idea that Apple will never allow the Apple TV to be used as a proxy for the Macintosh as an Internet browser over HD TV. So what else does it do now or what could it possibly do in the future that would attract my disposable income? Apple's recent deal with the major studios will finally give the iTunes Store a movie library comparable to its music library, but I still don't see that advantage, other than convenience, of spending $2.99 to $4.99 per movie, because really, convenience is all you get. The Apple TV and products like the Apple TV represent the future of home entertainment. There will be a considerable need for media like DVDs for the immediate future, but the death knell has sounded on brick and mortar rental centers like those popularized by companies like Blockbuster and Hollywood Video, which rose to prominence in the 1980s on the backs of VHS rentals. Netflix pioneered the movie rental by mail business and Blockbuster, a latecomer to the 21st century, has followed suit. This has fundamentally changed the movie rental industry. Blockbuster and Netflix's low-cost subscription services make more sense to most people than paying by the movie through iTunes and the Apple TV. While the new iTunes rental service is compelling, similar video on-demand (VOD) services have failed to gain much market traction. Furthermore, the iTunes movie service faces stiff competition from current VOD offerings through cable-TV and satellite providers. Apple TV is more convenient than Blockbuster and Netflex's snail mail service because you don't have to wait for DVDs to become available (usually not a problem with new releases) and you don't have to wait for your movies to be shipped through the mail. Also, you don't have to worry about shipping your rentals back. But when you consider that you get "unlimited" rentals for a low subscription price ($3.99 to $19.99 a month at Blockbuster depending on how many movies you want to watch at one time along with in-store privileges), then Apple TV turns out to be the by far more expensive option. To begin with, you need to purchase an Apple TV for $229 for the 40 GB model or $329 for the 160 GB model. You probably already own a DVD player. Assume that you rent 3 videos a week through your Blockbuster subscription service costing $19.99 a month. That is a total of 12 movies a month (3 movies a week times 4 weeks). It would cost $47.88 through iTunes at $3.99 per movie or $59.88 a month if you rent $4.99 HD movies. You would pay a minimum of $27.89 more a month using the Apple TV or $334.68 a year. This doesn't appeal to me. Does it appeal to you?  The competition from VOD providers is basically on par with Apple TV. There is no advantage in ordering a movie through iTunes and Apple TV instead of using your cable or satellite box. Most consumers who could afford to buy the Apple TV already have the necessary equipment to do VOD and on top of that, current VOD providers offer special products through cable and satellite boxes that will not be available through iTunes such as sports events. The current VOD market is not broken or lacking. Unlike the dramatic change Apple caused to the cell phone industry with iPhone, Apple TV just doesn't provide the VOD market with a similar stimulus. The iTunes store does allow the user the option of viewing the movie later on his or her iPod or iPhone, but you don't need an Apple TV for that. If Apple wants to really move Apple TV units out the door, they should consider a subscription plan. When you consider the added savings to companies like Blockbuster of not having to ship movies to consumers and warehousing DVDs, I don't see why a subscription VOD service wouldn't be a profitable alternative to the current scheme of passing around DVDs over the mail. Even if Apple or Blockbuster had to pay studios the same price per movie that Blockbuster invests in DVDs, there would still be millions to be made using a subscription-pricing scheme over a pay for play scheme when you consider the cost savings. If I were the CEO of Blockbuster, I would be beating down Apple's doors to talk with Steve Jobs. Subscription pricing will eventually become an industry standard practice; hopefully Apple will be the company to make it happen. I have spoken to many people, Mac fans and those generally indifferent to Apple products, about the Apple TV. The response is generally the same. "Why would I need one of those?" or "If I could download anything I wanted for around $20 a month like I can through the mail with Blockbuster, I would get one." Apple TV will not be runaway commercial success until Apple addresses the competition from subscription services and cable and satellite VOD providers.
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