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Apple's move pushes TV toward Internet delivery

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By Rob Pegoraro
Thursday, September 2, 2010

SAN FRANCISCO -- The slow-moving struggle to unplug TV viewing from its traditional business model just got more interesting -- and messier.

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Over the past few years, companies big and small -- from name brands Microsoft and Google to newcomers such as Roku and Boxee -- have tried to bridge the gap between the Internet and the TV to let viewers watch the shows and movies of their choice on the biggest screen in the house. At a media event here Wednesday morning, Apple rejoined that effort.

The Cupertino, Calif., company unveiled a lineup of TV show episodes for rent on its iTunes Store. All rent for 99 cents and come in high-definition and without commercials.

To go with that TV inventory -- as well as a catalogue of movie rentals -- Apple introduced an upgraded $99 version of its Apple TV media receiver. Chief Executive Steve Jobs pitched this paperback-size black box as the simplest way to watch a la carte TV delivered via the Internet to your high-definition set.

Apple's updated video vision falls in line with that of such competitors as Amazon's video-on-demand store and the free, ad-supported viewing available at the Web sites of the TV networks and Hulu, which is owned by some of them.

All those offerings mean free viewers don't have to pay for things they don't want to watch -- unlike the traditional programming model, in which they subscribe for a large bundle of content and then proceed to ignore most of it.

Music listeners got used to that years ago thanks to the success of music download stores such as iTunes and Amazon's MP3 store, which let fans buy only the tracks they like from a new album. But the TV industry has been remarkably successful in resisting that transition. Apple's event showed how difficult it will be to finish that job. The company could get only two major networks, Fox and ABC, to sign onto this U.S.-only venture.

Jobs suggested that the other networks "will see the light," and he has reason to hope so. Apple could get only one major record label, EMI, to sell music without "digital rights management" restrictions on iTunes in 2007, but by last spring, the other labels had all agreed to dump DRM.

Altimeter Group analyst Michael Gartenberg agreed with Jobs's forecast. "They'll bitch and moan about the 99 cents, and then they'll all sign up," he said right after the event. "My guess is between now and the holidays. They'll get on board."

But in this case, Apple might have had to concede even more to Hollywood. Apple is providing TV rentals only as live streams over the Internet, while it rents movies as digital downloads.

That limits a rented episode's availability to viewers blessed with enough bandwidth to carry high-def video in real time -- and to devices capable of connecting to that access.

As one apparent result, the new, even smaller iPod nano, which Apple introduced alongside the Apple TV, doesn't have video support. You can watch iTunes rentals only on a Mac, a Windows PC, an iPhone, an iPod touch or an iPad.


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