Daniel Eran Dilger
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Apple TV Digital Disruption at Work: iTunes Takes 91% of Video Download Market

iTunes video market share
Daniel Eran Dilger
This quarter’s NPD report on video downloads flies in the face of claims made by certain analysts claiming to have the answers required to turn around the supposed “failure” of Apple TV. Echoing his earlier claims that iTunes faced a dire future, Forrester Research’s James McQuivey recently took Apple TV to task, fretting that his guesstimate of sales didn’t match his earlier sales prediction. Based on McQuivey’s guesswork, Silicon Alley Insider’s Dan Frommer offered suggestions for “fixing” it.

While it has become fashionable to mimic the complaints of others when talking about Apple TV, the more shocking reality is that the product is actually working as intended to strengthen Apple’s plans for the digital disruption of television. Here’s why.

The Reports of My Failure Have Been Greatly Exaggerated.
Pundits are having a field day launching barbs against what they like to describe as the “failure” of Apple TV. Shortly after its release, Steve Jobs referred to the product as a “hobby,” and so far Apple hasn’t released any official forecasts or actual sales figures for it, making the “failure” claim seem a bit premature.

After all, the definition of failure is missing intended objectives. What many wags have failed to grasp is the objective Apple aimed toward with the Apple TV. The most troubling problem for Apple TV naysayers, however, is that Apple leads the industry in video downloads by a wide margin. Apple TV also has no real leading competitor. No doubt Apple’s video rivals would love to be saddled with that sort of failure.

Compared to the record shattering sales of Apple’s iPods, the iPhone, and its line of Mac computers, the lack of any solid information on Apple TV sales does stand in stark contrast. It’s not just that Apple TV sales haven’t been reported yet; retail checks and estimates by third parties aren’t unearthing any hint of wild underground interest in Apple TV either.

However, Apple TV hasn’t ever been positioned as an expected hot retail seller by Apple. Unlike the iPod at its release in 2001, or the iPhone earlier this year, there is no existing fire under the market for products that do what the Apple TV does. In that respect, the Apple TV is more like Amazon’s Kindle ebook reader, which is attempting to pave a road that has never been well traveled.

In-depth review: can Amazon’s Kindle light a fire under eBooks?

A Decade of Failure in TV Set Top Boxes.
It would be hard to imagine a tougher industry to successfully enter. There are already plenty of participants losing big money. In the TV set top box business, hardware makers exist at the mercy of content providers. It’s not just a simple game of building a better mouse trap, but rather a daunting task of delivering competitive features that require expensive hardware while competing against effectively free products, all to sell content that has little room for profit potential. There have been many casualties along the way.

In 1995, employees from Apple and its General Magic spin off started WebTV. It used a slim RISC box to turn a TV into a basic web and email client using a dialup link. Microsoft bought the group in 1997 and later converted it into a WinCE device tied into cable TV service called MSN TV. While WebTV was initially profitable, Microsoft lost big money trying to port it from a Sun Solaris based platform to a Windows NT backend, and killed it in the process.

Readers Write About Media Center, Apple TV, HDTV

In 1997, Tivo got started selling its Digital Video Recorder, which worked like a VCR but time-shifted broadcast content using a hard drive rather than tape. Tivo started profitably selling hardware, but then ran into competition from cable and satellite providers who copied the same idea and bundled the hardware price into their subscriber service fees.

Tivo depends upon cable or satellite broadcast TV for content, which puts it in a difficult position to compete against the direct offerings of service providers. Primary reliance on broadcasts also means Tivo charges regular fees for obtaining programing guides. Recently, Tivo has worked to develop video podcasts and pop up ads to keep itself afloat as it hemorrhages cash: it lost $52 million last year, and is on track to lose even more this year.

Apple’s iTV & The Case of the Missing DVR

After giving up on selling a standalone TV box, Microsoft released Media Center as a Tivo-like DVR application for Windows, and bundled it with specially equipped PCs. It also rolled out Media Center Extenders with hardware partners such as HP to deliver the TV captured on a Media Center PC on an actual TV. HP pulled out of the MCE business last year to get started on its own efforts, but consumers haven’t responded with enthusiasm for PC DVRs or extenders.

Apple TV: Turn DVI into HDTV; HP Drops Microsoft
Windows XP Media Center Edition vs Apple TV

Microsoft also tied Media Center features in the Xbox 360, which can similarly relay content from a Media Center PC. It has also began selling direct downloads of video content from its Xbox Live store. While Microsoft has announced shipping lots of Xbox 360s to stores, as of November it has only signed up 8 million Live subscribers, despite the fact that the unit comes with a free trial Live subscription.

Live is also primarily used for gaming, not downloading video content. That’s why Microsoft doesn’t place anywhere in the top 99% of video downloads: it only has a minuscule fraction of the installed base of iTunes. While certain pundits like to talk about Microsoft’s video offerings as much as they like to talk about the future potential of the Zune, consumers aren’t actually buying either of them.

Forbes’ Fake Steve Jobs Is Also Fake On Apple: When Cost Is No Object: Microsoft Media Center
Ten Myths of the Apple TV: Xbox and Hardware

The closest direct competitor to the Apple TV is Vudu, a new company offering a box with hardware support for 1080p HD and Dolby Digital surround. Currently, its main catalog of movies offers a picture with less than DVD quality, although it plans to offer more HD movies in the future. Downloading HD movies requires a fast Internet connection and high compression, making it a middling alternative between Apple TV and HD disc players.

Apple TV Advantages.
How does Apple TV compare? Apple is where Tivo would like to be; Apple TV is integrated into a large selection of video podcasts, but also offers TV and movies on demand. Tivo, like Microsoft’s Media Center, relies on integration with a cable provider. Once users are locked into a $50 – $100 cable contract however, the prospect of paying for more content on demand from an alternative service makes little sense. That has helped to marginalize Microsoft’s efforts to follow the success of Apple’s iTunes sales.

Unlike Apple TV, Vudo only offers movies; it makes an expensive alternative to a service like Netflix, which offers true HD quality media discs and a much wider selection of DVDs than Vudu can. Vudu costs $400 and individual movies range from $1 – 4 for rentals, and $5 – 20 for purchases. Once downloaded, there’s no way to use Vudu rentals or purchases outside of the unit itself.

Apple TV isn’t tied into a cable subscription and isn’t dependent upon subscription rentals or media sales. It’s an alternative viewer that puts iTunes content on your widescreen TV. In addition to playing iTunes TV, movies, and video podcasts, it also plays music from your iTunes library and shows off photos from your iPhoto albums. Apple also added a direct viewer for YouTube content, and promises to offer additional free features via software updates.

Inside Apple TV

Inside Apple TV

How Apple TV Fits.

Because it works with iTunes, all the content you buy for it can also be used on iPods an the iPhone. That places Apple TV in a position unmatched by anything else on the market. Apple TV is also a standalone purchase, not a loss leader hoping to boost Apple’s future media sales aspirations.

Rather than being an expensive razor with expensive blades like the Vudo, or a superfluous razor that plugs into an electric shaver like a cable DVR solution such as Tivo or Media Center, Apple TV is an alternative razor handle that works with the blades people are already buying. Apple doesn’t make much money on the box; it offers it as an alternative way to use content so that consumers can feel confident buying Apple’s other shaving products.

That business model means Apple doesn’t have to sell millions of Apple TVs for the product to be successful. Apple TV only has to prevent people from leaving iTunes to sign up for an alternative service to use with their TV. Saying that Apple TV is a failure for not selling into the millions is like complaining that Apple didn’t sell a lot of 4GB iPhones. If iTunes users are buying the more full featured Mac mini or using an iPhone or iPod with video output cables in order to watch their iTunes video on TV, it’s actually good news that they’re not buying the cheaper and less profitable Apple TV instead.

Pundits like to talk about their fears of cheap products cannibalizing the sales of more expensive ones, but seem entirely oblivious of the possibility that the opposite could happen. Perhaps they’re looking too hard to find bad news on Apple.

Scott Woolley Attacks Apple TV in Forbes, Gets the Facts Wrong

Thinking Inside the Box.
Apple is already selling iTunes video content for the studios at a pace that is generating its own weather. Why are analysts insisting that Apple drop its successful strategies that are working and instead chase the failure of DVR makers fighting for relevance in a competitive market controlled by cable and satellite providers?

The real potential for TV lies online, in selling content that isn’t beholden to another distributor. Integrating Apple TV with cable providers would be about as successful as relying on Sears to retail its computers; Apple only really boosted Mac sales after it began selling them in its own retail stores. Similarly, the expectation that cable and satellite providers would happily pay Apple to get involved as a middle man between them and their subscribers is not well thought out.

But that’s exactly what Microsoft is doing as it works to involve itself in IPTV, an acronym that relates to cable TV distribution using the Internet Protocol. Despite its name however, IPTV don’t really involve the Internet or anything open; it’s just a modern signaling system for distributing digital video over the same closed networks the cable providers already control, commonly as exclusive municipal monopolies.

IPTV sounds a bit like VoIP, the technology that promises the potential for replacing proprietary, closed telephone networks with voice traffic over the open Internet. In reality, IPTV is more like the shift to digital signaling in cell phone and long distance networks, which boosted network efficiency for operators, but didn’t change anything for consumers or challenge the power structure of the status quo.

TVoIP is an alternative name for actually using the open Internet to deliver video in the pattern of VoIP. While people asking for TVoIP often have something else in mind, Apple’s iTunes is delivering that right now. It’s not just a candidate in the race; it has already won by a landslide.

Give us TVoIP, not IPTV | Brad Ideas

According to data published this quarter by NPD, based on sales from early 2007, Apple has a 91% share of all video downloads and a 99% share of all online TV programing. Of all video downloads, the 9% that doesn’t belong to Apple represents movie sales, a market segment Apple also leads with a 42% majority share. The remainder is split between Vongo (21%) which offers a subscription movie service, and two competitors that both sell and rent movies: Movielink (15%) and CinemaNow (15%).

That leaves Microsoft’s Xbox Live, Amazon Unbox, WalMart, and others all scrambling over 7% of 9% of the video downloads market, a 0.63% remainder. A year ago, pundits suggested Amazon would trample iTunes right out of the gate with its competitive movie downloads service.

The Apple iTMS vs Amazon Unbox Rivalry Myth

iTunes video market share

NPD Group: Electronic sell-through has slow growth – 10/5/2007 – Video Business

It’s All Downhill From Here.
Vongo, Movielink, and CinemaNow were all created by broadcasters or movie studios, and all compete to rent out exploding media DRM. All are jokes even among the studios; Movielink was shopped around and finally unloaded on Blockbuster a few months ago.

It’s no coincidence that they all sound a lot like the recording industry’s failed attempts to push exploding media DRM in music–Rhapsody, Duet, Pressplay, and Napster 2.0–and it should come as no surprise that iTunes has been steadily gaining on them since Apple entered the movie business just a year ago.

Rise of the iTunes Killers Myth

Apple hasn’t released new video download sales figures since January. However, Apple’s video downloads grew faster over the previous year than its music sales did: between January 2006 and 2007, iTunes doubled its iTunes cumulative song sales from one billion to two billion, but more than tripled video sales from 15 million to over 50 million downloads.

Apple’s iTunes sales have since surpassed three billion. Is it likely that video sales subsequently slowed down dramatically in 2007 with the release of Apple TV, the iPhone, and video capable iPod Nano? The numbers NPD published were based on video sales that occurred before Apple had released any of those video-friendly products.

In other words, Apple took over 99% of TV downloads in its first year of selling video, and managed to gobble up 42% of the movie market within a few months of offering movies in iTunes in late 2006. In comparison, CinemaNow was founded in 1999, Movielink in 2002, and Vongo in 2004. No wonder there are so many industry wags complaining about Apple’s media sales: iTunes ate into movie sales faster than the iPhone has displaced smartphones. I bet you’ve never read that before.

iPhone Grabs 27% of US Smartphone Market

iPhone Grabs 27% of US Smartphone Market

Next: Should Apple TV’s success be “fixed” by converting it into a Media Center clone?

What do you think? I really like to hear from readers. Comment in the Forum or email me with your ideas.

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  • lmasanti

    “Unlike Apple TV, Vudo [sic] only offers movies;…”

    December 11, 2007 12:01 AM PST
    Vudu adds TV shows
    Posted by John P. Falcone


  • John Muir

    Even the Apple friendly sites have long insisted that the Apple TV was a half hearted product and recently echoed eachother on the “iTunes video sales sure aren’t going like music” meme. Good to hear from someone who actually bothered to investigate for themselves instead of relying on received wisdom.

    Sometimes it even surprises me that Apple can do so well while their fans swallow the gloomy fairytales created by their competitors. But then I remember what uninformed speculation amounts to!

    Always good to hear your view on Apple’s next big thing: its emergence as the first media giant of the internet generation.

  • lmasanti

    “…sites have long insisted that the Apple TV was a half hearted product…”

    For me, it is the iPod video: buy in iTunes, sync with your Mac, show away from the computer! (OK, with the iPod you use earbuds, with TV you use a TV set)

  • Sri

    Though TIVO is, as you say, hemorraging money, they have a fantastic product. Despite being a “mac house”, we’ve eschewed the Apple TV in favor of Tivos- the DVR capability is second to none and it’s ease of use is high enough to be an Apple product. The icing on the cake is the ability to download Amazon Unbox videos to any Tivo in the house. (Exploding media is a ridiculously dumb idea with music, but everyone understand movie rentals- and between $1.99 to $3.99 to “rent” new releases through Amazon and Tivo is more than fair compared with the local rental chain.)

    Yes, this means we’ve started to buy media we can’t actually play on our computers (The DRM is Windows/Tivo only), but the ability to download TV shows directly from our couch is worth it. And let’s face it- no one really wants to sit in front of a 17 inch LCD when you have a (big, dumb, cheap) CRT TV in the living room- even if TV resolution sucks.

  • http://www.pwnership.com tomreeves

    Any thoughts about Apple creating more distribution deals with independent productions that fail to find distribution through traditional movie studio / cinema channels? Tom / pwnership.com

  • Brau

    Well, iTunes sales are certainly great for Apple’s bottom line but don’t do a thing for me. I don’t buy videos and can’t buy movies (Canada) via iTunes, I don’t own an iPod or an iPhone (and likely never will). How well these items play together is a non- issue to a person like me. I have an Airport Express for streaming my music and I couldn’t care less about viewing photos or slideshows on my TV. All I want, is to view my Mac video content on my TV *without* having to re-render everything through iTunes and upload it to the AppleTV – a process that makes my G5 blow like a hurricane for hours. AppleTV could easily have incorporated a video folder to be sync’d with your Mac and included Quicktime to play them. Instead, Apple has artificially limited media playback (via iTunes only) to the point I just cannot justify the price (and added hassle) just to watch my EyeTV recordings. In its current form I just can’t recommend an AppleTV to anyone. I am desperately hoping the upcoming iPhone/iPod SDK release will cover the AppleTV and we’ll see some radical upgrades. If not, I will forgo the Apple infrastructure and buy an Xbox – like many other Mac users I know have done – and that would be a shame because I would rather support Apple.

  • OlivierL

    This is not 7% of 9% : 7% is only for the movie download where Apple has 42%.
    The 9% is the 1% from the TV download and the 58% for the movie download.
    Based on your figures, the movie download is 14% of the total download.

    So Microsoft’s Xbox Live, Amazon Unbox, WalMart, and others all scrambling over 7% of 14% of the video downloads market, a 0.98% remainder, not 0.63%.

  • OlivierL

    About the Next : Should Apple TV’s success be “fixed” by converting it into a Media Center clone?

    I would personally like an easy way to offload my iTunes content on an always available storage (USB HD on my Airport Extreme ?) with remote access like this content never really left my internal HD. And easy access from any location inside my house : AppleTV, main computer, laptop, etc …

  • http://homepage.mac.com/johnnyapple johnnyapple

    Daniel said “If iTunes users are buying the more full featured Mac mini or using an iPhone or iPod with video output cables in order to watch their iTunes video on TV, it’s actually good news that they’re not buying the cheaper and less profitable Apple TV instead”

    Thank you, exactly! Actually, I think the TV looking iMac is enjoying some impressive growth due to Apple TV halo. I’ve seen it happen in person at Apple stores. So how is coming in to look at a $300 TV player turning into a $1500 Mac purchase a bad thing? It isn’t.

  • Brave John

    The AppleTV is good, but it could be better. Few things that could be done to improve it:

    * Enable iTunes to rip DVDs (requires the consent of media companies, so I’m not holding my breath)

    * Include or at least enable the installation of third party codecs. Many of the downloadable contents on the net comes in open source format, it’s a pain to have to trans-code everything in order to view it on your TV.

    * Add to iTunes a separate preference for video location; and allow multiple video folders. Video eats a lot of hard drive space. Supporting multiple folders allows the user to use multiple external drive to store their video contents and expand on demand.

  • http://www.stat.ucla.edu/~jose HG

    Apple having 90% market share must be a small number compared to the total potential market. What is Apple doing to grow the legal download market and getting the industry and the culture more involved?

    I’m concerned that Apple doesn’t represent the vast entertainment industries interests and that the entertainment industry will find ways of circumventing Apple as a result.

    I suppose this new digital distribution network is in the early stages of its development and there will be more chaos before things settle out.

    I’m hoping the players don’t think that the competition has to loose in order for them to win. That’s a lesson that Apple had to learn the hard way. But when NBC pulls out of iTunes and starts making partnerships with companies that shut out the Mac user-base out, then I see that companies are falling into this trap.

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  • John Muir


    If you want a lot of flexibility, go for a Mac mini instead of that Apple TV. It’s what I do myself and it’s highly recommended. I also make use of that system as a 24/7 personal file server on the side, along with EyeTV doing my DVR work and Front Row handling the presentation side.

    In fact, it’s just what Daniel mentioned!

    As for the Xbox, I recommended one of those to a friend back before the PS3 and Wii hit Europe. He’s a pretty serious gamer and owned all three consoles the last generation round, so was just itching to do it anyway. Dead Rising was pretty good, but his 360 bit the Red Ring before long and he sprung for a PS3 during the month long delay MS took in shipping him a replacement console. If I were him I’d be pretty pissed off, but as the gaming gourmet he’s merrily enough buying different titles for both systems now anyway!

    As for media though: does he use his 360 for rentals or purchases on his 40″ Samsung HDTV? No. It’s rented DVD’s and BluRay for the PS3 which doesn’t sound like a hairdryer sitting right under the set every moment it is on. Maybe someday he’ll go for digital downloads, but not quite yet.

    Two very different setups. Unless some 360 only games titles really appeal to you and/or you have a Windows machine somewhere with all the WMP content you fancy … I wouldn’t back the Xbox.

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  • OlivierL

    The PS3 also happends to be one of the best DVD upscalers. Since the 1.80 firmware, people have sold their 1500€ Denon DVD player with Faroudja or HQV top quality hardware upscaler and deinterlacer to buy a 400-600€ PS3 that also happends to play BluRay, plays next-gen games and can act as a media server.
    I also think I’ve read somewhere that it could stream from iTunes server but that needs to be double checked.

    So, AppleTV for iTunes integration and FairPlay compatibilty and a PS3 for physical media playback.

  • John E

    Very thoughtful analysis. the discussion about IPTV/TVoIP was too short though.

    first, the cable companies will be shifting in the next few years to IPTV, which will greatly expand their delivery capabilities for customized streaming of HDTV to every subscriber. instead of a hundred On Demand films to choose from like now, it could be thousands. Then they can compete much more effectively with Netflix, UnBox, and the rest for rentals.

    second, the phone companies are now entering the field with TVoIP service. AT&T is rolling out U-Verse with hybird mainline fiber/local copper networks (hence constrained overall bandwith that limits picture quality), and Verizon is rolling out its all-fiber optic FIOS service. these services will compete directly with CATV, more and more each year, offering much the same services. unlike CATV, they can also compete with iTunes for music/movie purchases.

    and all these providers are all bundling combined phone, internet, and IPTV/TVoIP services into a single package at some overall discount. so almost every household will have one or the other.

    As to Apple, Apple already sells a Home Media Center. it is the Mac Mini with Front Row. Apple just doesn’t call it that. it was not until the 2007 upgrade though that the Mini had enough power to handle all kinds of high definition video smoothly. and you can totally network all your other computers, iPods, etc. with it, controlling and sharing everything for presentation on an HDTV/Home Theater setup. it still would benefit from further improvements, like (n) wifi and a CATV input jack. And Apple has not enhanced Quicktime to provide a slick interface with iTunes/Front Row for conveniently recording and processing video of all kinds from all sources – although it certainly could, the Quicktime software (including the mysteriously hidden AVCVideoCap) already does it. this forces users to add third party hardware/software like EyeTV products or the Roxio programs. but it should be as easy as iMovie/iDVD instead.

    so the Mini alone is not yet as full a featured and integrated home media center as the Vista media center yet, the truth must be told. but thankfully Apple eschews all of Vista’s punitive DRM. i look forward to the next Mini upgrade in 2008, whatever they call it, hoping a Quicktime makeover comes with it too.

    Given that the Mini is a home media center already, there is no business reason to have a much cheaper AppleTV do all that. buy a Mini instead. the question is what lesser set of features does AppleTV need as an “extender” of iTunes and iLife that will compete effectively with all the other available and future on-line services? DVR? internet? streaming video?

  • John Muir

    @ OlivierL

    When he recently got the 40″ Samsung, I popped over to see just what it could do; and yes the PS3 is surprisingly good at upscaling DVD’s. We went through a pile of stuff and saw a lot of images which couldn’t be told from 1080p any practical distance from the screen to our untrained eyes, and some others which were downright curious.

    Star Wars Episode III comes to mind … which gave away many of its green-screen effects as characters appeared slightly detached from the scene! It’s a subjective effect which really needs to be seen in person, but both of us spotted it instantly among the CG composite movies we tried. I expect it was actually the upscaling being too true to the original video, though keener critics would need to explain it to me!

    For fairness we also tried the 360, and leaving the racket it makes aside, it wasn’t as good. Hardly surprising because it wasn’t even on HDMI, but some things were especially glaring. He put in a DVD of Lost and the sand and sea water looked off in some strange way. The PS3 wasn’t perfect at upscaling them either (just think of what sand really is to guess why) but again wasn’t quite as messy. Sony have certainly made the better home cinema device.

  • josh

    i’ve gotta agree with john muir. a mac mini is really the ticket for internet video. i guess this makes daniel’s point about it actually being good news for apple. i’m planning on repurposing an old ibook as my tv server. basically, i just want to be able to run quicktime player, etc. at full screen on my tv. but this isn’t for the casual consumer. i would actually prefer it if tivo put this kind of functionality into their box. we have one and my wife can actually use it with minimal intervention by me. the ibook as a server… not likely.

  • pbreit

    I like the Apple TV and think it has a bright future but this is a dumb article.

    No one is buying TV shows online…they are simply *watching* them…for free…at networks sites or sites like AOL Video and Hulu.

    Apple’s biggest problem right now is that it doesn’t offer a lower cost way to watch TV shows and movies ONCE (which is what most people do with most video content). Apple needs to put out a pay-per-view, subscription and/or ad-based offering.

  • OlivierL

    About IPTV and telecom companies.

    In France, we have a very dynamic DSL market. A recent provider, Free, was the first to provide a brand new service : triple play and now every french DSL provider do the same. Triple play is ADSL + VoIP + IPTV.

    I will describe Free setting because this is the on I have but other provide have similar settings.

    There is a 2 box system : one hooked to your phone line, providing ethernet + Wifi for internet and phone jack for VoIP, a second one hooked to your TV, with Wifi or ethernet connection to the 1st box.
    The box linked to your TV provides TV feeds + VOD services + recording + time-shifting + media center. Free presents itself as a “pipe” company and welcomes any content owner on its platform.
    We currently have 7 VOD providers, with monthly rates or per film fees. They provides more than 1000 of movies and documentary and catchup TV. TF1, the channel broadcasting “Heroes” in France has set up a VOD service where you can see the subtitled episode the day after it had been aired in the US instead of waiting for months to be dubbed and aired in France. This is the most efficient way to fight piracy from people eager to watch the episodes ASAP. As Free is acting as a platform here, the same VOD providers are serving their content on other ISP networks too.
    There are 80 free channels and up to 200 subscriptions channels, from 0.5€ to 20€ per month.

    Since then, I’ve almost stopped buying DVD : a movie is typically 2-4€. There’s even a channel with a 6€ only monthly rate ! There are about 40 movies only but a 3rd if renewed every month.

    For more details : http://adsl.free.fr/tv/

  • OlivierL

    For PS3 ($400) vs Denon 3930 ($1500) comparison, you have the following French AV forum

    And for PS3 vs XE1 vs PCHC

    Those are in french but there are screenshots you won’t need translation to understand.

  • OlsonBW

    I’m all over the place on AppleTV. I’ll just go through some of it.

    I understand –why– AppleTV doesn’t have a CD/DVD player built in. I think it is flawed reasoning though.

    Want one? Go up one step and buy the Mac Mini. Ok, except that the default hard drives are too small on the mini. Buy a larger hard drive which you pretty much have to hook up externally and you loose the size of the internal drive, unless you setup them up as software RAID where you span one partition across both drive (yes a version of RAID can do this).

    Ok, you’ve done all this and you are around $800 for this setup not including any content. OUCH! And you can’t play any good highly graphic games like DOOM IV, etc., lightning fast like you could on a PS3 or have fun games like the Wii (LameBox and LameBox360 don’t really even deserve a mention here).

    Note that the PS3 has BlueRay which the AppleTV doesn’t. Sure the PS3 is being sold at price or below price with the games expected to make Sony all of the money until the manufacturing gets the costs down.

    The point is though, the PS3 does (which mods that don’t cost money) what the AppleTV does plus gives you a lot more AND has BlueRay.

    It’s hard to justify to the wife that you buy something that you don’t do anything with other than hook it up to the TV and it “sucks movies and songs” to the TV from your Mac (or —ugly face— PC). No DVD drive. No games. No way when we can get a PS3 or a Wii.

    Note that we don’t have any kids and never will. The same is likely true of the AppleTV because of the above.

  • Brau

    Thanks, John Muir. Your comments, among others here, are valued and I can see perhaps a PS3 might be a better purchase despite my not being “a gamer” if I decide not to go the Mini route. I always like to purchase with the future in mind, so a Blu-Ray drive can be justified. I’m going to hold out a bit longer to see if Apple opens up the AppleTV before giving up on it.

  • http://www.roughlydrafted.com danieleran

    @pbreit: If nobody’s buying TV online, who bought the 50 million video downloads from iTunes last year? It remains to be seen where video is going due to the delay in reporting sales, but Apple has already sold a video program for every 100 iTunes albums.

  • John E

    one obvious and easy improvement to AppleTV is to let its USB port be connected to a hard drive that would store all your home media files via a wifi network. hard drives prices are dropping like a rock, you can get 1 terabyte for under $500 and it will be even cheaper next year. this would free up all the disk space on your other macs for other things, or alternatively provide a complete backup of all those precious files.

    i do this now with a firewire drive connected to a Mini. the advantage of that (which i did not expect) is that Time Machine sees this disk and backs it up to another drive along with the Mini itself.

    frankly, i think it was just plain dumb of Apple not to include this simple and valuable option in AppleTV v.1. they ain’t perfect.

  • addicted44

    There is a slight issue in your calculations. I am guessing the 91% share Apple has includes the 42% share Apple has in movie downloads. Depending on what percentage of video downloads are movie, or TV, the Amazon et al. are fighting for 7% of anything ranging from 9% to 99%. However, your point about Apple having a major lead still stands. I would appreciate it if you could get the required info and correct this detail.

    One knock against Apple has been why it has shied away from adding a TV tuner (which are relatively cheap) and provide customers access to a ton of already paid for content. And the other one is the inability to purchase content from your Apple TV.

    I think Apple is trying to change the TV market here which accounts for knock 1. They are actually trying to make the a la carte model possible, which the FCC is trying hard to regulate. Instead of me paying Comcast $50 every month to watch 3 weekly shows (South Park, Family Guy and House), I can pay Apple about $25 (not including Season Pass discounts). And I can watch it on demand, and without adverts saving about 40 mins a week (another $45 saved a month).

    The second one is a little harder to fathom. I think it would be wise of Apple to add an iTunes Store section that lets people check out the top 10 lists, and buy directly, or browse everything the way it is seen in the Browse view of the iTS. This would be ridiculously fantastic for video podcasts, allowing all the couch potatoes to access tons of free videos on demand without having to move their butts, just like they do when watching TV.

    Do this, and the only thing left to do would be to stream college football online for free! And then I can wean myself off the Comcast drug…

  • Robert.Public

    I had made a comment on one of the previous articles about iTunes as a rental store. This may be the only real way to save the Apple TV’s relevance.

    I personally think the future is basically all about on demand high res content that can be on all of your video devices simultaneously until returned (how about a .mac online viewer while I’m at it).

    Dan envisions “slots” that hold movies and there is a monthly fee for access to the catalogue. I agree with that as nearly every person I know is on Netflix.

    How about a greater number of slots for TV programming for another fee. You could have your movie section of say, 2, 3, or 5 movies and then have another section for TV shows of say, 5, 10, and 20 slots.

    This would seem to me to create a video ecosystem that Apple could do without looking backwards to DVR’s. I’d like to think that this manner would encourage sales of their video devices (and even .mac subscriptions if they got a Youtube-like player)

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  • John E

    ultimately, maybe it’s all about price. i rent 8 DVD’s from netflix a month for $14, so that’s less than $2 each. i could also use 14 hours of “instant watching” if i had Windows, say 6 more movies, which would bring the combined price down to about $1 each. good deal.

    so that is the price point Apple needs to match. iTunes now, $2 per TV show is too much. $2 per music video is way too much.

    if Apple would just buy Netflix with all that cash it has, it would solve all our problems.

    but the bigger point is, all media content is now worth far, far less than the content owners are willing to admit. the message of file sharing is just that: prices have to come down across the board. the good old days of high prices for movies and music are totally over, they just haven’t faced it yet. they need to change their business plan to volume sales. after all, the actual cost of a digital download is pennies compared to the greater cost of a physical DVD whose shipping alone is over a dollar .

  • pbreit

    NBC alone streamed over 300 million shows in 10 months.

    I repeat: no one is buying TV shows online.

  • John Muir

    @ OlsonBW

    If discs are important to you, there are obviously other answers right now. The PS3 is increasingly competitive because Sony are in a vicious platform war against the 360 and HD-DVD. Sony lose money on the PS3 console so that they can push Blu-ray players into people’s homes, like they did with DVD on the PS2 at first. The problem for them at the moment though is that the Wii has come from nowhere and put Nintendo in pole position: despite having no high-def capability. I’d wager that the PS3 is doing well against the 360 now as both their game libraries really come to life, but Sony are in a much harder fight this time given the third option Nintendo provides, and indirect competitors like Apple too.

    My Mac mini makes sense as I use it for several always-on tasks, as well as for watching video and playing music. One of its key features was its energy efficiency: 40 Watts even when pushing the CPU hard, compared to 180-200 Watts for the PS3 and 360 (I measured them myself). It’s also quieter than even the PS3 when side by side, and I appreciate that when in my own home!

    @ pbreit

    My friend was playing around with (if I remember) ABC’s free downloads recently too. But they were driving him mad. He’d get connection errors and weird warnings about using the same IP address too many times … wha? Also, his PC is the one thing he has which can outdo the 360 for background noise. I think he tried the ad supported downloads as a taster, after I suggested he try iTunes. Alas, they seem to have put him off the whole idea for now, so the DVD / Blu-Ray rentals remain!

    In other words: don’t be fooled by such figures until you find what people are really doing while they’re counted.

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  • OlsonBW

    I was one of those that was purchasing the 20 Tonight Show packages. I wasn’t happy about getting only the first half of the show that didn’t have the interviews. But then with the package it was only 50 cents for each show and no ads.

    Note that I was watching them on my iMac with from iTunes and I don’t have an AppleTV.

    The second part is Front Row which is like AppleTV now. It is really stupid that all TV shows and movies are all bunch together in one long list with no EASY way (or not at all) to separate them out into shows, genre’s etc.

  • http://www.roughlydrafted.com danieleran

    @pbreit: comparing 300M free streams with 50M paid downloads is a bit like comparing P2P torrents with iTunes music sold. NBC also broadcasts TV to 300 million american TVs 24/7, but that doesn’t mean its making money doing so, if nobody is watching. NBC is currently at the bottom of the big networks and is paying $500,000 apologies to advertisers for missing minimum viewer numbers.

  • dallasmay

    I am a fan of the ?TV, but I -and most other people- will wait to spend our money on it until there is some form streaming service on it. There is no reason I can think of for there not to be. My wife and I have now completely dropped all TV viewing except for that which is streamed from network websites. I really believe the future is streamed, not owned. Period. And I would happily pay $15-20/month for it to be ad free.

  • pbreit

    “comparing 300M free streams with 50M paid downloads is a bit like comparing P2P torrents with iTunes music sold.”

    Not even in the same universe. P2P torrents are not legal and certainly not content-owner-approved. NBC streams…the precise opposite. One (ONE!) network did 10x the volume in its first 10 months than iTunes’ in its last 12 months.

    The point is: 1) people don’t want to pay $2-5 for one TV episode and 2) it’s asinine to assert that iTunes has 99% of the “TV Download” market.

  • http://ephilei.blogspot.com Ephilei

    I went with a MacMini instead of AppleTV, which is actually quite bad for the consumer (tho good for Apple). The extra RAM, processor speed, and bluetooth on on a Mini is superfluous when all I wanted was something that play more formats and external drive support (without hacking).

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  • annonymous_man

    I don’t think Apple has ever announced sales figures for HD digital downloads of movies or TV Shows. Also, they have not announced sales for TV shows at all (whether SD or HD) since October 2008 when they announced October 16, 2008 that 200 million episodes of TV Shows had been sold on the iTunes Store.

    I wonder how much market share Apple has in the new HD digital download market and how much money has been made from iTunes in selling HD TV and movie content.

    I’d also wonder how many Apple TVs have sold, and how many video capable iPods including click wheel models (iPod Nanos with video, 5th Gen Video iPods, iPod Classics) and iPod Touches have sold overall — how much market share do they have for iPods as portable video players.

    I know they don’t report Apple TV sales but wish they would at least report the number of sales for HD digital downloads — how much market share they have for HD digital downloads etc so the number of free HD digital downloads as opposed to paid HD digital downloads can be factored in then compare Apple’s market share of HD digital downloads to those of other companies like Amazon with their UnBox Video download platform, Microsoft XBox Live Video Marketplace etc.

    I know Apple has come to dominate the digital download market not just for music but delivery of video online as well via downloads but all the sales numbers and market share statistics were taken before HD downloads on iTunes and other services took off.

    This article states in its title “Apple TV Digital Disruption: iTunes takes 91% of Video Download market” but is that entire 91% of SD video? Who is leading in HD downloads is it Apple also? I would assume so but by how much. I wish they would give us some sales numbers for HD content.

    Of course its sub par HD at 720P (not full 1080P) but that’s still better than SD 480P video.