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Apple's move pushes TV toward Internet delivery

By Rob Pegoraro
Thursday, September 2, 2010; C01

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

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.

Amazon is heading the other way. Not long after Apple's event, Amazon's video-on-demand storefront began selling, not renting, 99-cent downloads of TV episodes.

But viewers who buy an Apple TV won't be able to watch those downloads (although they can view Netflix streams over the device), just as owners of Internet-connected TVs and Blu-ray players compatible with Amazon's service can't use either to watch Apple's rentals.

Much of this incompatibility is driven by the TV and movie studios' insistence on DRM. The recording industry finally got over DRM -- in part because customers often find that those usage restrictions block many legal reuses of their purchases.

But in the realm of video, even Apple seems to have decided that it can't close that particular sale.

If computing and electronics firms somehow magically agreed on a single standard for streaming and downloaded video that complied with Hollywood's DRM dictates -- stop laughing! -- another issue would prevent many viewers from canceling their cable, satellite or FiOS TV packages.

That's professional sports. If you want to watch a live game without paying a Comcast, a DirecTV or a Verizon, you have few options.

You can limit yourself to the minority of games broadcast over the air, provided you have good digital TV reception at home, or you can camp out at friends' houses or in sports bars.

But if you want to switch to Internet viewing, you might first need to become a fan of a team from another city: Many online-viewing packages, such as Major League Baseball's MLB.tv, exclude games involving teams based near you.

So it's going to remain easier to accompany a cable or satellite box with an Apple TV -- or a Roku receiver or such upcoming Internet-video tuners as Logitech's Google TV device -- than it will be to retire one in favor of Web watching.

Don't like watching the sorry state of TV programming grind on like that? Sorry -- this drama just got picked up for yet another season.

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