Showtime: The Big Picture

Wednesday, 13 September 2006

Apple came into yesterday’s “Showtime” special event with an awfully high set of expectations to meet. First, the entire show pretty much had to be about movies — adding major motion pictures to the iPod Music Store, providing them in a high-enough quality format, releasing iPods capable of playing them, and, somehow, getting them onto the biggest screen in most people’s homes: their TV.

Remember that many people expected, realistically or not, to see these announcements at last year’s iPod/iTunes special event. To make this leap, to begin their effort to do with digital movies what they’ve done with digital music, Apple needed to overcome all of the following problems, pretty much all at the same time:

• Bandwidth and Storage vs. Fidelity — Higher quality video takes longer to download and requires significantly more space to store on your hard drive. Last year they drew the line at 320 x 240 resolution H.264-encoded video for their TV shows. That’s perfect for fifth-generation iPods, which sport 320 x 240 pixel screens. That’s far from perfect for computer displays (the smallest display Apple has sold in recent years is 1024 x 768, and their smallest current display is the 1280 x 800 on the 13-inch MacBook) and even worse for big-screen TVs.

  Increasing the resolution, however, increases download time, increases the amount of space they take up on disk, and increases Apple’s not-insignificant bandwidth bill.

• iPod Limitations — Last year’s original video-playing 30 GB iPods were advertised as offering two hours of battery life, but everyone I know who owns one says they get less. You can’t sell two-hour movies to play on a device that only gets 90 minutes of battery life. But people are also clamoring for bigger iPod screens — which would consume more battery power. Screen size (and brightness) are in direct opposition to longer battery life.

• Movie Studios — The studios control the rights to their movies, and Apple needs their permission and agreement with regard to usage rights. The problem is that most film industry executives, much like their counterparts in the music industry, would seemingly prefer to see this whole “Internet downloads and digital media” thing just go away, so that they can just keep making money in the future the exact same way they’re making it today. Their sense of entitlement regarding the preservation of the status quo is such that, when faced with any technology that threatens to upset it, no matter how cool, how clever, how convenient it might make things for us, their customers, they attempt to legislate it out of existence or to encumber it with odious DRM restrictions. Their initial resistance to the home video revolution two decades ago was as futile as their resistance to the download revolution today.

  Apple, on the other hand, has always been in the business of embracing new technology, and of making new products and services that make their customers happy. There’s nothing unique about this — that’s more or less what most companies, of any size, are trying to do, unless they’re part of a cartel or hold a monopoly. But Apple is so good at it that their customers are on the company’s side — Mac users are famous (and/or infamous) for outright rooting for the company, as though it were a sports team or a favored political party. The mainstream corporate music industry, as represented by the RIAA, sees its customers as an enemy, as a horde of dishonest would-be thieves. The film (and TV) industry isn’t quite in that position, but then neither is their DVD revenue stream nearly as threatened by casual bootlegging as is the music industry’s CD business. At least not yet. But they (i.e. the film industry) certainly seem more aligned to the RIAA’s line of thinking than to Apple’s.¹ In short, they want higher prices and more stringent, if not outright odious, DRM restrictions; Apple wants lower, flatter prices, and more liberal usage rights.

Yesterday’s announcements came remarkably close to satisfying all of these expectations. They haven’t performed any miracles — the new iPods don’t have larger screens; the new iTunes movie store debuted with only 75 titles, all from Disney; and the long-awaited missing link to the TV isn’t shipping until next year — but it was clearly an auspicious start to Apple’s inevitable entry into the movie business.

Steve Jobs

At the WWDC keynote a month ago, Steve Jobs delegated much of the presentation to three of his top lieutenants: Phil Schiller introduced the Mac Pros, Scott Forstall introduced and demoed many of the new features coming in Mac OS X 10.5, and Bertrand Serlet did all the Microsoft bashing. This — combined with the fact that Jobs, at WWDC, struck many as not quite fully enthused and appeared to have lost some weight — fueled speculation that he was ill, a scary thought given his recent bout with a rare but treatable form of pancreatic cancer. The theory being that he was either too ill or too tired to conduct the entire keynote solo, and/or that he was beginning to groom potential successors for the role of company showman.² This rumor had enough legs that Apple issued a statement that “Steve’s health is robust”, which is great, but doesn’t explain the tag-team WWDC keynote presentation.

My theory is that Jobs hated this year’s WWDC keynote, because he hates showing unfinished work. Some people, and some companies, love to talk about work in progress. But not Jobs, and, therefore, not Apple. Given the state of the current 10.5 seed and the estimated “spring 2007” ship date, Leopard is obviously far from finished. But as the next revision of the platform that everyone attending WWDC works on, it had to be the central theme of both the conference and the keynote.

Jobs’s extraordinary marketing savvy and famed reality distortion field leave some people with the impression that he’s a talented fabulist. That’s wrong, though — Jobs, in my opinion, is a terrible liar and a poor actor. When he’s able to convince people of things that aren’t true, or that are exaggerations of the truth, it’s because he believes what he’s saying. The reality distortion field isn’t something he projects willfully; it’s an extension of his own certainty. Remember his on-stage demo last year of the Motorola Rokr iTunes-compatible phone? His contempt for the device was palpable; when he failed to successfully switch from song playback to accept a call, he seemed poised to just toss the thing off-stage and cry out that it was a piece of garbage.

If he struck you as at least somewhat unenthusiastic on-stage at WWDC, I say it’s because he was unenthusiastic, because he really couldn’t bring himself to be happy about showing these Leopard features that aren’t ready to be shown.³ Better, then, to trot out Forstall, who seemed to have genuine enthusiasm for the 10.5 works-in-progress demonstrated at WWDC.

Yesterday’s “Showtime” event, however, was another story. File this one away as a primo example of Jobs’s on-stage talent. The difference from last month’s WWDC is that these are products that are done, that have already been raised to satisfy Jobs’s impeccable standards. The iTV demo was clearly an exception, but it is a unique case. Whatever the reason for its months-away ship date, I don’t think Apple really wanted to show it now. Vaporware pre-announcements distract customers from currently available products, but in this particular case I think Apple felt they had to reveal this now, because if they hadn’t, the lack of an answer to the “But how do I play these videos on my TV?” question would have been more of a distraction from yesterday’s iPod and iTunes announcements than the iTV vaporware announcement was.

The State of the iPod / iTunes Empire

Jobs opened the show with a selection of impressive numbers:

• Apple claims 88 percent of non-bootleg music downloads in the U.S.⁴

• 70 percent of 2007 model year cars sold in the U.S. have available iPod connectivity. Not “MP3-player” connectivity. iPod connectivity. Note to Jobs: Send nice Christmas presents to the engineers who came up with the proprietary iPod dock connector port.

• 450,000 Nike + iPod Sport Kits have been sold in fewer than 90 days. Not Nike + MP3 Player Sport Kits. Nike + iPod.

• The iTunes Store is the fifth-largest music reseller in the U.S., and expects to pass Amazon early next year, at which point they’ll trail only Wal-Mart, Best Buy, and Target.

• Apple has sold 1.5 billion total songs to date.

The most remarkable thing about Apple’s iPod/iTunes platform is how incrementally it has grown. These annual iPod/iTunes special events garner tremendous fanfare, and deservedly so, but it’s really just been one small evolutionary step after another.

It started with nothing more than a $399 5 GB Mac-only MP3 player and a Mac-only jukebox app. Then they officially supported Windows, albeit without iTunes,⁵ and only on PCs equipped with FireWire. Then the iTunes Music Store, still Mac-only. Then the Windows version of iTunes. The expansion to a family of iPods: the Mini. Then photos and color screens. The Shuffle. Then, a year ago, the Nano and video iPods. And, now, after a year of selling 30- and 60-minute TV shows, feature-length motion pictures. Walk, jog, run.

Steady, consistent improvement and expansion, one step at a time — and now it’s a juggernaut. The iPod and iTunes show just how beneficial it can be to be first to market. Apple has had the benefit getting to this point slowly but surely; anyone who wants to compete with them now is forced to try to catch up all at once or settle for just one piece of the pie.