Apple Storms Hollywood

While most of the announcements around new iPod devices last week were underwhelming, Apple’s recent changes to iTunes could point to a much wider strategy to revolutionize how media is consumed in the future.

Understanding iTunes LP and iTunes Extras

For the near future, Apple’s dominance in the mobile entertainment market will remain uncontested. Entering its 8th year, the iPod has successfully morphed from an interesting new player in a small category into an all-purpose platform spanning the breadth of the audio consumer electronic landscape, portions of the mobile phone business, and while its AppleTV business is still lagging, the introduction of iTunes LP can easily be seen as part of a revamp for that platform.

The company talked a fair amount about the ability to add extra content to music tracks, forming an experience that is much more akin to that of a music LP. But let’s stop for a second and think of what a stereotypical Apple customer might look like? Somehow, the immediate image that pops in my mind is not someone who was born prior to the late 70s.

Sure, now that the iPod line has established itself as the dominant line in the portable entertainment consumer electronics world, one can see a lot of people over 40 sporting the devices but truth be told, most of Apple customers are probably younger and, to them, LPs are either something that belongs in a museum or falls in the category of music snobs. The sit-back experience and add-ons that came with most LPs is not how they have ever experienced music and it is highly probable that they will not change their behavior because Apple believes that retro is cool.

The music experience is more of an ambient one, where the track itself is the thing and where even music videos have mostly fallen by the wayside (YouTube killed the video star?) In today’s short attention span world, extra attachments to media exists in two places: on DVD and on BluRay disks, technologies best experienced when dealing with a TV screen.

In fact, when delving into the details of the iTunes LP specification,developer Jay Robinson discovered the following:

The LP frame seems to have a width and height of 1280×720. This is nice, but means I get ugly scrollbars all over my 13″ MacBook screen.

The resolution seemed interesting as I remembered it from somewhere but had to think about it for a few minutes (I’ll get into that in a the next paragraph) but it was fascinating to me that one would experience ugly scrollbars on a MacBook. Say what you want about Apple products, ugly is not something that generally comes to mind. In find, the fact that things were ugly on a computer monitor immediately gives us clues into where Apple may be going next. Since we can safely assume that Apple would not push something ugly out the door, we can also assume that the 1280×720 resolution is no fluke. And since it looks ugly on a MacBook, we may think of where else this type of media can be consumed.

720p?

1280 x 720 is the kind of 16:9 ratio that is found in a 720p high definition video mode. That mode has become more or less the default low end mode for high definition and is how most television broadcasts in the US and Western Europe are handled. It is also a format that most plasma or LCD TV can handle. But also of note is that it is the highest resolution format offered in terms of movies and TV shows sold through the iTunes store, and the highest resolution HD video resolution now supported by AppleTV players.

So we now have a clear sign that the iTunes LP content seems specifically formatted to be best experienced on a TV screen and it seems that Apple’s recommendation would be to use an AppleTV to do so.

And then, this week, Apple retired its low-end AppleTV and dropped the price of its mid-range (now entry level) offering by one third. Such a move is not just based on the idea of moving units but appears to represent a potential need for disk space and anyone who looked at the size of a DVD or Blu-Ray disk can attest to the fact that such video offerings can chew up space relatively quickly. And extras tend to add a fair amount too, which seems to increase the need for space if you are intent on renting or selling DVD or Blu-Ray like content via the Internet.

Add to this the general reluctance Apple has had to supporting Blu-Ray in their computer hardware platform (the main advantage of Blu-Ray, according to its advocates, is the ability to display video at a higher resolution format than 720p) and it seems Apple is gearing up for an assault on that category (especially since the problem of extras is now solved by iTunes Extras).

720p Recording

Meanwhile, on the Mac, the new operating system came out with a version of Quicktime that removed ability to support plugins for extensibility. While Apple is already a strong player in the video editing world, offering both professional (Final Cut Pro) and consumer (iMovie) tools, it is also interesting to note that they are starting to introduce light editing video capabilities directly into the operating system.

We already know that the iPhone 3G S can record video, a key feature of the offering, and we’ve just witnessed the introduction of video recording capabilities within the iPod Nano (and we can assume that it’s only a matter of time before the iPod Touch gets its own video recording capabilities) but here’s where it gets interesting: the iPhone 3G S could theoretically shoot 720p video as all the hardware to do so is there.

The rise of YouTube and the success of Flip cameras have shown Apple that a portion of the consumer market is interested in recording and viewing video. While the YouTube offerings tend to be generally of a lower video quality, the introduction of 720p as a default recording chipset in Apple’s offerings appears consistent with the company’s attempt to cater to a higher end whatever market it enters.

So it would seem to be a normal progression for Apple to eventually move its product lines to producing 720p content that can then be redistributed.

Today, that exporting can happen via synchronizing one’s iPhone’s GS or exporting content to iTunes, YouTube, or MobileMe from Quicktime X. MobileMe and YouTube appeared to make sense but why export to iTunes?

A user generated marketplace

The success of the iPhone as a development platform has surprised many, myself included. In the short span of a few years, Apple has created a marketplace that is rumored to be selling US$200 million a month’s worth of application software in increments of about a dollar. If you’re making 30 percent of that revenue by hosting the apps and handling the distribution, you might notice.

I would venture that there are now a number of discussions around Apple as to how to reproduce this phenomenon across other categories. With the rise of YouTube, Last.fm, MySpace, and other, Apple is now also witnessing the rise of the independent and while the company has had some success in bringing video content to the iTunes store, it has not been able to get the rich margins it is getting from the music industry (something the music industry now appears to regret) and from iPhone developers (who, for the most part, are not large companies) from TV and movie producers.

True, the company now offers rentals and sales of video content but what if it could open up a marketplace where every independent content creator could distribute content? What if independent movie-makers or musicians could sell directly through the iTunes store and provide content on all the apple platforms (TV, iPod, phone, computer) with a single click. I suspect that many would be willing to give up 30 percent of their revenue in order to get to that public.

The components all seem to be there and it seems to me that it won’t be long before Apple starts pushing the idea that we are all content producers (an old idea at Apple, which was at the source of their creating the iLife suite) and we can all make some money at producing that content. Having done so, Apple would not only have control of the music industry but could also assert itself in the TV and movie space.

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