:eek:

http://macdailynews.com/index.php/weblog/comments/12988/

Speculation and nothing more. Not even a rumor from unnamed sources. Really, somebody had a deadline and crapped that onto the page. That's my take.

If ATV users could record from TV, what's the point of the iTunes store?

If ATV users could record from TV, what's the point of the iTunes store?
If iTunes users can import CDs, what's the point of the iTunes store?

Note: I'm not claiming that Apple is going to release a DVR.

I am saying that Apple could make more money with a DVR, than without a DVR. Releasing a DVR, or threatening to can also cause the movie studios to think twice about withholding material from Apple -- AppleTV/Mac users might just view their own material, if none is forthcoming from the studios.
Even in the TV area there are tons of shows not available via iTunes -- this will provide incentive for their release.

If iTunes users can import CDs, what's the point of the iTunes store?


Interesting point, however, you have to buy a CD, but television is "free".

Interesting point, however, you have to buy a CD, but television is "free".
No, because you likely have a CD collection, as do your friends. Sure you can buy more, but it isn't required. And, with the CD you get a better product than the compressed music on iTunes.

On the other hand with iTunes TV shows, you are getting an arguably better product than via DVR: no commercials, no worries about scheduling, old episodes or seasons available, vastly less disk space required than MPEG2 based DTV. Quality is currently inferior to HDTV, but Apple can up it to 720P in which case the only thing going for the DVR will be the "free", which between cable fees and all else, isn't.

Again, as I said before, I don't endorse the rumor. For one thing it would make much more sense for Apple to buy Elgato, not Miglia. Two reasons: Elgato has the software, which is probably more work to reproduce than the hardware. Second the former CEO of Elgato works for Apple. There is a definite connection there. The same clues (Miglia being dropped by Apple & Elgato) could point to an Elgato purchase.

There is one compelling reason for Apple to do the DVR: how are they going to sell AppleTV outside the US, when TV/Movies on iTunes are pretty much US only? They need some way to plug that gap, and as I said above, prod the studios into giving Apple the rights to sell through iTunes -- worldwide.

If ATV users could record from TV, what's the point of the iTunes store?If iTunes users can import CDs, what's the point of the iTunes store?Great question. And one that opens me up for one of my favorite .

There are those who maintain that the iTunes Store's (at least up to now) main purpose has been to add value. Add value to the iPod and the Mac, via iTunes, so that the hardware sale was the main goal. And to a large degree this is true, as Apple probably only makes about 4 cents on the dollar for iTS sales, and out of that has to cover its expenses.

But I think that many people have assumed that with the appleTV, the main goal is to sell content. Maybe Apple is really following its iPod strategy, and the main goal is to sell hardware, with the iTS content as just added value. The goal of the appleTV is to move iTunes content to the HDTV. And that content doesn't necessarily have to originate from the iTS (or Apple would have given us 1-Click ordering from the strato lounger)!

So I think the debate should revolve around whether or not the release of the appleTV is really about Apple shifting gears into milking iTS sales. And I'm not so sure that it is. I think that Apple may be more interested in moving its brand--having that Apple logo appear--prominently into the living room. Expand mindshare: we're not just a computer maker anymore, we can do a lot more for you. Enhance the halo effect (iPod, iPhone, appleTV, we're everywhere you are: it's Ok to buy Apple hardware).

Selling the hardware and software in order to create a market for content seems to be the goal of a lot of Apple's competitors, like Microsoft and Sony (xBox, Zune, PS3, MCE, etc.), and others. But I think that Apple really wants to roll out its digital platform, and will do all it can to see that devices like the appleTV and the iPhone get into the mainstream, and it can't do that if the goal at the outset is to milk content for all it's worth.

Now, none of this speaks to what is up with Miglia. I think we will just have to see. But the divorce of Elgato and Miglia, and the release of the new Miglia products, the disappearance from the Apple Store, etc. all suggest something big is going on. But we'll have to wait to see if Apple really is interested in integrating a tuner and pvr capabilities into its platform. Apple may well see that this is a way to push adoption of their platform, and as just an addendum, more added value, to their goal of selling hardware.

And with selling the hardware comes Apple's vision of the digital living room (more on that in the future). As with Apple assisting with RSS and podcasts, which adds nothing to their bottom line, and having created a great growth oriented industry (podcasting), they can view content as not being the means to an end (maximum profits). Be visioneer, architect, builder and conduit. And then just let it flow. And if you can capture a few dollars from content on the way without gunking up the works (read iTS), and giving people some added value, then so much the better.

Apple recently dropped the "Computer" from Apple Computer, Inc. This was to reinforce the notion that they are (and already have been) moving into consumer electronics in a big way. But they didn't change the name to Apple Media, Inc., or Apple and iTunes, Inc.

I'm sure that in the long run that Apple would like to leverage the iTS for more profits. But as with music, they are happy to allow other methods of letting content into the environment (like being able to rip CD's or iLife). The iTS' real strategic place in Apple's vision is to give people ANOTHER reason to buy their hardware--the notion of added value--not THE reason to buy the hardware. And this goes for iLife, too. Create your own content. Then use the appleTV to move it via iTunes to the HDTV. Vertical integration at its best.

We shouldn't look at Apple through glasses colored by the attempts of others to use content as the driving force behind their moves. Apple knows that funneling content (especially video) is a business largely out of its control. While they have the technology to deliver content as well as anybody, they are not in control of things like DRM legislation, studios reticent to provide content, studio demands for certain licensing agreements or pricing models, sluggish adoption of new delivery modalities by distribution networks used to traditional means, etc. In short, why base the success and profit of a business model (for moving into the living room) on elements you cannot control in perpetuity?

Microsoft has spent the last decade trying to do this from the other way: create an environment where you can control standards, DRM, do the content industry's bidding, allow the content industry to control viewing, fair use and copyright, by dictating how the OS is built (the debate on DRM in Vista speaks to this), and on and on. And then try to sell sub-par hardware/software to milk the content. And it just hasn't worked for Microsoft or anybody else. So how do you succeed? Don't do what they do. Apple is trying to buddy up with the average end user (Hi, I'm a Mac). Microsoft buddied up with big content years ago (and I'm a PC).

And this is exactly what Apple is good at. Apple doesn't need for the iTS to succeed at making a ton of money, because their hardware sales are taking care of that right now. And as long as hardware/software continues to float Apple's boat, and they don't have to rely on milking the iTS for a bunch of profits, then Apple's hardware platform and home theatre landscape can have a lot of room to grow (albeit slowly). It'll be fun to watch--literally.

Great question. And one that opens me up for one of my favorite

That wasn't a rant. It was a novel. ;)

That wasn't a rant. It was a novel. ;)I don't know how novel it was. I've picked up most of the pieces there scattered around the net. :rolleyes:

wildrock,

You make some compelling points and you may be on to something. The real question is how much do they make on the shows and movies? Is the model the same as the iPod? I believe there is a good reason for the 3 week delay of the AppleTV and perhaps this is it.

Personally I don't care either way. As much as I like Apple products I don't think they would do better than TiVo, at least not right away. This on top of the challenge CableCARD support would be, makes it a non issue.

So for now the ultimate setup is going to be Series3 for recording HD content, Blu-ray for playing movies and Apple TV for the rest. By the rest I mean; photos, music, Video Podcasts, and other user generated content like home movies.

You make some compelling points and you may be on to something. The real question is how much do they make on the shows and movies? Is the model the same as the iPod? I believe there is a good reason for the 3 week delay of the AppleTV and perhaps this is it.
I think that the iTunes TV/Movie store stands to make even less money in the near term because of the orders of magnitude higher bandwidth costs as compared to the iTunes Music Store.

Not to say that Apple doesn't have long term plans for conquering the video distribution world, but for now the business plan is for iTunes videos to help it sell Video iPods, AppleTVs, iPhones, Airport Extremes and Macs, as well as promoting the Apple brand to Windows iTunes users. To me that is incontrovertible. If Apple doubles their hardware sales by adding functionality (like a DVR), they will only increase their lock on the mindshare/marketshare of iTunes, but even more importantly they will MAKE MUCH MORE MONEY. They are a public company, that's what the stockholders want.

An AppleTV + an Airport Ex. cost more that the most expensive iPod. Apple could make more money from them than it does from the already huge iPod.

hey guys, first post and thanks for all the great info!
not sure where wildrock got his information but apple does not make 4 Cents per song sold. i have an album up on the ITMS (shameless plug but album/band is called "Tokyo Massage") Apple does quite well selling songs. They take 33% from my record plus the digital distributor takes there cut of 15%. Apple makes a lot of coin selling music. when they sell 3 Billion songs, they gross 1 Billion. not too shabby. Since movies costs more than a song, apple might do quite well selling flicks as well. apple is not just just selling hardware IMHO to make money.

hey guys, first post and thanks for all the great info!
not sure where wildrock got his information but apple does not make 4 Cents per song sold. i have an album up on the ITMS (shameless plug but album/band is called "Tokyo Massage") Apple does quite well selling songs. They take 33% from my record plus the digital distributor takes there cut of 15%. Apple makes a lot of coin selling music. when they sell 3 Billion songs, they gross 1 Billion. not too shabby. Since movies costs more than a song, apple might do quite well selling flicks as well. apple is not just just selling hardware IMHO to make money.Not quite sure if that holds true for the iTS in general. From the Wall Street Journal last week:

"Apple isn't under as much pressure to squeeze profits from iTunes because of the money it makes on iPods. In fact, it earns little from iTunes after paying fees for the music and credit-card processing. ITunes typically pays major labels about 72 cents a track, while it pays most independent labels around 62 cents."So if they pay the labels 72 cents, that leaves them 27 cents to cover their costs. Their 4 cents profit figure was just one I had read several places, from respected analysts. In any case, say Apple grosses about 30%. They sold 1 billion songs last year. That gives them 300 million gross. My 4% figure would show about $40 million profit for the year.

Now look at Apple's overall profits. They made (net) 2.4 BILLION dollars in the last 4 quarters. Then the iTS profits for music would be about 1.5% of total Apple profits. My points earlier were that this level of profit is hardly an incentive to use content profits via the iTS to drive hardware sales.

And to put in perspective, lets take that $40 million for the iTS profit. How many appleTV's would Apple have to sell to meet that? How about 500,000 if it gets $80 profit each (around a 25% profit--very conservative for Apple hardware sales). Not very many. Apple sold 21 million iPods in the Christmas quarter. The profits generated by that overwhelms iTS profits.

My point being, is that it doesn't take a whole lot of hardware sales to dwarf iTS profits. So at this profit/price point, Apple is far more concerned with making the hardware sale, than getting the download purchase. And therefore is not too concerned with competition for iTS dollars, if that competition brings another hardware sale.

In other words, if having a device like the Miglia enhances sales of appleTV's, then Apple may choose to look at that as a good thing, instead of competition for iTS sales. But I'm still not convinced that Apple's going to go that route, for other reasons.

Apple uses the iTS store presence as a way to help sell hardware, not selling cheap hardware as a way to gain iTS sales. The money is in the hardware at this point in time, and will continue to be so for a while. Contrast that with how much money Microsoft lost subsidizing xBox sales, just so it could sell software (games), downloads, and services. And they're still losing money on the whole platform.

Apple just gets it.

hey guys, first post and thanks for all the great info!
not sure where wildrock got his information but apple does not make 4 Cents per song sold. i have an album up on the ITMS (shameless plug but album/band is called "Tokyo Massage") Apple does quite well selling songs. They take 33% from my record plus the digital distributor takes there cut of 15%. Apple makes a lot of coin selling music. when they sell 3 Billion songs, they gross 1 Billion. not too shabby. Since movies costs more than a song, apple might do quite well selling flicks as well. apple is not just just selling hardware IMHO to make money.

This does not take into account overhead of running the store etc. But if you are right than they will loose their tying anti-trust suit.

Also probably worth mentioning is Apple's long term business model.

Apple has always considered itself a hardware company, that makes software. It seems that they see media as software that they can't make in house.

Even today this shows by their reluctance to sell OS X for non-Macs, but instead using it as motivating factor to sell Apple hardware.

wildrock, some great thoughts there--Apple uses the iTS to sell iPods, shouldn't we expect the same priority for the AppleTV. Except, and this has been the complaint since the specs were first released, that the AppleTV can't play back broadcast MPEG2. So people with existing content (i.e. us) who really wanted to find a playback solution in the AppleTV are feeling no closer. Maybe some other news will help connect this--some other software tools or the like. But at the moment the question remains: if Apple's priority is selling AppleTVs over selling shows/movies, how are we going to bring our content to the AppleTV to add value like a CD collection adds value to an iPod?

wildrock, some great thoughts there--Apple uses the iTS to sell iPods, shouldn't we expect the same priority for the AppleTV. Except, and this has been the complaint since the specs were first released, that the AppleTV can't play back broadcast MPEG2. So people with existing content (i.e. us) who really wanted to find a playback solution in the AppleTV are feeling no closer. Maybe some other news will help connect this--some other software tools or the like. But at the moment the question remains: if Apple's priority is selling AppleTVs over selling shows/movies, how are we going to bring our content to the AppleTV to add value like a CD collection adds value to an iPod?

i, too, agree with what wildrock has said. apple makes osx to sell computers and itunes to sell ipods. so it makes sense that their goal is to sell atv's and not itunes.

but druber is right when he points out how QT can't play mpeg2 files without the stupid $20 plugin which makes atv not as useful to the HTPC enthusiast crowd. what i'm hoping is that the ilife 07 (or the next update of QT) will include standard support of mpeg2. this will bring QT up to date with all other media players (is there another one that doesn't have mpeg2 support standard?) and make the atv a more useful device for more people.

But at the moment the question remains: if Apple's priority is selling AppleTVs over selling shows/movies, how are we going to bring our content to the AppleTV to add value like a CD collection adds value to an iPod?And that is the ten thousand dollar question.

Until the appleTV rolls, its feature set and functions get fully reviewed, it will be difficult to ascertain exactly how it will be used, outside of a few known areas. Don't get me wrong here, even though I am looking through the product to the platform that Apple is building, I see the major holes at launch of the appleTV. Video content, particularly movies, is sorely lacking. No HD content to sell, and transmit via that HDMI connection, to your HDTV. No readily obvious or easy ways of using it to play DVDs, or record TV (Miglia rumors notwithstanding).

And as isleofjib pointed out, there are a lot of holes in the system that need to be plugged. Currently, we can point to music content, iLife content, and iTunes Store content. And that's it. All else is a stretch. But it is a lot for some people--enough to purchase one. We can hope for greater video content and HD from the iTunes Store. Hopefully Leopard and updates to QuicktTime and iTunes will improve file support, but that isn't a given. 3d party products and support may come to the rescue, but outside of the Miglia rumors, none are forthcoming, though I anticipate right after the appleTV rolls, we'll hear some announcements.

So as it stands, the appleTV seems geared toward the iLife, iTunes, iPod crowd. That is a huge market though, for the initial foray. The rest of us here will have to work to get it to do anything more than Apple allows out of the box, and it will be frustrating. But give it some time to mature, and Apple will probably have a winner.