Interesting thread. Lots of new directions opening up. I wonder what Blockbuster has up its sleeve?
But really, I think the news of Netflix is a logical outgrowth of their business model. As to tying their service to Microsoft's DRM, it will definitely limit their audience: to Windows PC users (or to whatever players may be licensed to use that DRM on the Mac, which at this point is...??? Zero). Apple's DRM on the other hand is not tethered to an OS, but it is tethered to iTunes. This added flexibility is definitely a plus, as it is platform agnostic. But I read some interesting material at Roughly Drafted
about how tethering your DRM to software limits its applicability.
In this case, one of the hugest limitations I found with appleTV (as to Apple or a partner provided content, that is) is that it lacks the ability to directly go out to the iTS and order content, or directly access other content via IPTV, or any other method like P2P. I initially thought that by Apple's showing how you can access movie trailers via the Front Row-like interface, that it would be logical for them to take the next leap and offer one-click downloads from the iTS to your bigscreen via remote at the strato lounger. My thought is that this convenience would drive appleTV sales and content sales phenomenally. As would the addition of a rental and a subscription model. If you have a romantic moment going, whop wants to get up off of the couch, go into the den, login to the computer, get on iTunes, go to the iTunes store, purchase a flick, and start a dowload. Only to go back to the couch to find that the moment has passed...
because you had to go and play with your computer to do it.
But the problem with Fairplay, is that it needs iTunes to manage it. And how do you get iTunes on the appleTV? Or how do you design another system, or advance Fairplay to work via streaming, or download from the iTS directly to your appleTV? DRM built in to the hardware or whatever software that runs on the appleTV? How do you (or can you) manage purchased, DRM'd content on the computer from the appleTV? This is the huge gap that Apple now needs to cross, and something we know nothing about yet. Apple's last mile. This problem also affects the iPhone. How to purchase from the iTS directly from the iPhone? Port iTunes to OS X running on ARM and build a secure WiFi bridge to AT&T and from AT&T to iTS? It's why Apple has not announced anything about the iPhone having the ability to purchase directly from the iTS. It may be another of SJ's rabbit in the hat tricks yet to play out. Apple needs to advance fairplay and build some flexibility in it that it currently doesn't have (another sticking point with the studios over content licensing?)
So it is good that Netflix is upping the ante here, and forcing Apple to compete against a different model--albeit one that has flaws. I think that Netflix's streaming technology, however, is going to bite them in the rear, as they are already going to throttle lower bandwidth connections, and consumers will suffer sub-par content quality and/or resolution. And will they have the ability to saturate your broadband pipe with an adequate edge distribution network? Or will the cable and dsl providers limit it (net neutrality wars loom large here). Apple has developed a great distribution network through its history with the iTS, swupdate, trailer downloads, and its alliance with Akamai for edge distribution.
I think that the appleTV's supporting 720p is a huge benefit over Netflix's file delivery model. How will Netflix compete in the HD space streaming over an already too narrow network channel? And Netflix will have to rely on Microsoft's DRM, OS, and third party computer manufacturers to develop a system for outright sales, and downloads (as opposed to streams, rentals and subscriptions). This is the huge Apple advantage: an integrated beginning to end solution that is platform agnostic (though linux iTunes would help here).
And for a last bit of speculation about Apple licensing Fairplay, that opens up many different possibilities. Maybe Apple will enter into an agreement with either Blockbuster or Netflix and license Fairplay. The agreement then drives Apple hardware device sales (appleTV and/or content delivery technology and experience) to deliver Fairplay'd content via a rental or subscripton model. This potentially could get around Apple's problems with the studios not wanting to let Apple deliver content via its current model. Or it could just be a leveraging point that Apple could use behind the scenes against the studios. Just pure speculation, and it most likely is way off the mark, but is it coincidence that all of the following stars line up at once: Leopard, appleTV, iPhone, Fairplay rumors, Apple content negotiations, Google buying YouTube (and having a seat on Apple's board), Netflix streaming...???
So the big question, one that makes the appleTV more than a minor niche player, is how does Apple put iTunes, or a compatible web application, on the appleTV (or the iPhone or iPod for that matter), and extend Fairplay off of the computer, allowing lesser devices to purchase and manage the DRM? That is the million (multi billion) dollar question.
So there are still so many angles here as the pieces get put together, and the puzzle becomes a little more clearer, and players show their cards.