200 million TV episodes sold in iTunes - but does it really matter?
Apple said Thursday that it has sold 200 million TV episodes on iTunes. This is significant, but only a drop in the bucket in the overall scheme of things, and networks probably will only see a small amount from these sales.
The company also announced that iTunes would offer HD TV shows from all four of the major broadcast networks–CBS, Fox, ABC, and NBC–and that it had sold over a million HDTV episodes since last month. Again, very solid, but will it replace conventional ways of accessing this type of media? Probably not.
To put this into perspective, Apple sold the 200 million episodes over a three year period. If each show sold for the standard $1.99 iTunes price and the networks took a 70 percent cut then they would have made about $280 million. That means that $93 million a year would be left.
Regardless, the truth is that even in a best-case scenario for iTunes sales the numbers are a trickle compared to regular network numbers. The Television Bureau of Advertising reported for August that total broadcast ad revenue was just over $11 billion for the second quarter.
That’s worth repeating: $11 billion for the second quarter. Alone.
But does this mean iTunes won’t be a significant video distributor in coming years? Not likely. The numbers show that a lot of people are willing to pay for mobile content, the same content they can watch for free via broadcast or at Web sites like Hulu, which may sound odd, but convenience is a big motivator for many customers apparently.
iTunes 8 causes major Vista headaches
You think that Apple has the resources to test iTune 8 on all kinds of platforms, so there’s little excuse for this sort of thing.
Reports are emerging this morning that the newly released iTunes 8 doesn’t like Windows Vista very much, though the Apple forums indicate its a more sporadic problem. Some are seeing the much beloved blue screen of death after connecting iPods, etc with iTunes 8 running.
The solution seems to to be to uninstall the whole thing and reinstall it, and apparently the USB driver file with it may cause a conflict on some Vista systems, depending on the devices installed. Lovely. Even Apple seems to have fairly low regard for Vista, it seems.
One of the issues with this is the secrecy with which Apple does its beta testing; this is what typically happens when you don’t do widely public testing, with its myriad hardware configurations and users of various skill levels. I understand their perspective on this, but…you end up with a product that doesn’t always work on different types of configs the way it should. Hopefully, Apple will patch this one up pretty quickly and all will be well.
Here’s the Apple thread (Warning: it’s big and loads slowly).
Apple event yields few surprises, incremental improvements
The recent Apple “Let’s Rock!” event displayed the old adage “if it ain’t broke, don’t fix it” in action as CEO Steve Jobs announced a series of incrementally improved products, updates and managed to indicate that the iPhone may even work as it should have in the first place soon with the 2.1 firmware update. We’ll go through the highlights one by one:
iPhone update: Most believe the 2.0 iPhone OS to be one of Apple’s most bug-infested releases in years, and Jobs announced the 2.1 update to be released Sept. 12th will fix poor battery life, frequent dropped calls, and apps that don’t work. When even the creator uses the phrase “lots of bugs”, you know they had to do something.
iTunes 8: The awaited iTunes 8 was announced, with support for HD programming, new features and bug fixes, and “Genius”, the contextual intelligent search feature described further below.
New slimmer iPod Nano, iPod line updates: No, it isn’t earth-shattering, but a new longer, slimmer iPod Nano was announced, along with new color choices for various lines, and price reductions for a few models. Investors didn’t seem overwhelmed, but many who follow Apple didn’t expect anything apart from incremental improvements and to be entertained.
Also announced was the “Genius” playlist feature to be added into the next generation of Nanos, iPod classic and iTunes), an intelligent feature that allows to pick a single song from your player, and it will generate 25 songs that share similar musical tastes or characteristics. Of course, it depends on the available music in your collection, but it’s still a very interesting potential feature. There will NOT be an upgrade path for some of the new features for iPod products, which is a bit of a shame, but not a surprise.
Jobs is still alive, news at 11: Jobs even joked about rumors that his health wasn’t very good. He seemed energetic and fine, according to most reports from people attending the event.
Jack Johnson, iTunes Giant: Jobs announced that Jack Johnson was the top-selling iTunes male artist of all time. A bit of a shock, but then again, sleepy guitar music might be just the thing after a hard day of work.
Apple held the status quo, which is good and bad: they make good products with a solid set of features, but companies that are established and comfortable tend to take fewer risks and are slower with innovation (see: Microsoft for Exhibit A of this business axiom). It’s good to be on top of the heap, but hopefully Apple can step things up a bit in the future to keep the innovation flowing. For now, their engineers seem happy with a solid single rather than a home run.
Online Movies - Are we there yet?
The recent surrender of HD-DVD in the latest format war has got us thinking about online video rentals - so we thought we’d review the options available today.
Streaming or downloading full movies instead of renting or buying physical media is nothing new. As happens time after time in the world of technology the real first adopters are the adult industry and the hackers/pirates. The adult movie folks have been providing video content only for years now. And we all know well that hacker-kids have distributed full dvds in online format for some time as well. If both these groups can handle it successfully why not the movie studios?
With the rise in popularity of Youtube consumers have grown familiar with online videos and the entire medium has gained market acceptance. Fears that studios once had over the customer acceptance of less-then-highest quality video have disappeared. Consumers bandwidth will only increase in the future allowing for higher quality.
Netflix: As part of the base netflix subscription all customers can watch unlimited movies online - free. Tough to argue with that deal. The biggest downside is the selection, of course the online library of movies are limited. Quality is above average and the program is very easy to use. As netflix offers more movies into this category it will have an even bigger market impact. We have to wonder when/if they will start charging for the service. Another challenge for Netflix is getting onto the TV and into the living room - not everyone is willing to watch movies on the PC or laptop. Watch for a partnership with Microsoft, Nintendo or Sony in the future. But right now it is the market leader for cost and ease of use.
Amazon Unbox: Amazon has been at this market for quite some time (opened in 2006). Unbox offers a wide selection of newly released and classics at near DVD prices ($14.99 for most movies) and rentals for lower cost (4.99 in most cases). Although the service received mixed reviews when it was released it has improved over time.
The videos can be played on about 20 handheld devices (again - big drawback if you can’t connect the PC to the TV). They’ve since partnered with Tivo to allow purchase of videos which can be sent directly to your living room Tivo system for review. Of course Tv shows are also available for those into that type of thing (who really buys and watches old tv episodes?!)
Apple - iTunes: When it comes to online media - iTunes is still the name we all think of first. Apple has made available movies for download since 2006. Of course they use the itunes market place and application to support the download service. The move catalog matches the size of Amazon’s and most physical rental stores. Pricing is equivalent to Amazon (about $14 a pop) with the edge going to Apple for ease of use. Naturally the advantage is apple’s in the device category as legions of iPod Video’s and Nano’s can show movies and tv shows purchased through itunes. Recently Apple released the AppleTV device (getting into your living room.. sound like a familiar theme?). It allows for move rentals (HD content too) as well as the rest of the itunes HTPC functionality - plugged into your TV of course. So far its received a bit of a lackluster response (for an Apple product that is) and we’ll hold our breath before we tell anyone to run out and buy one.
Comcast (ondemand): The biggest name in the video on demand cable industry - comcast leads the pack. One of the first cable companies to roll out on demand video (which comes free with their digital cable package). This competes with downloadable purchases and rentals head to head. Comcast has the advantage in many areas since they are already entrenched in the consumers living room, have market share and control much of the delivery. The ease-of-use factor cannot be dismissed either. Consumers have embraced the video on demand service in a surprising fashion and other cable vendors have been struggling to catch up.
Directv on demand: Directv is fighting to catch up to Comcast on the movie delivery/video on demand front. Their vod service is still in beta. The distinct disadvantage for Directv is not controlling the consumers broadband as Comcast does, meaning Directv VOD users must rely on their existing dsl/broadband to download video content to their DVR system.
Slingbox & Orb: Both worth a mention here as similar software packages and devices which allow for ‘place-shifting’ of video content. You can pull your recorded TV episodes from the living room and watch them on the cell phone, in the hotel room, or at work. Not mounting any big-time competition with the video rental/download services yet - but keep an eye on them. Either could provide a medium or means of easy distribution in the future.
None of these are set to overtake Blu-ray or DVD sales in 2008 - but with the delay in adoption of hidef movies caused by the format wars you can bet that they’ve gained traction.
You can bet your gold-plated dvd’s that downloads will overtake physical disc purchases by 2011.
Any comments or additions are welcome. We’ll be glad to update this as they come in.
Music Download Services: Choices for 2008
As little as 8 years ago if you said the words “Music Download Service” to most people they would have looked at you with a puzzled expression on their face.
Not any more!
Today downloading music over the internet is one of the chief reasons many people want to get connected to the World Wide Web in the first place. Portable Music Players and then the advent of the Music Downloading Service in the past decade have vastly changed how music is made and marketed by it’s producers, and then distributed to it’s consumers.
If you’ve spent any time doing much of anything on the internet in the past year or two, chances are you’ve come across one of the growing Music Downloading Services that are now available.
The growth of this particular industry has actually led to a marriage of sight and sound; many popular PC video players available over the internet, such as RealPlayer or Window Media Player, now automatically provide connectivity to music downloading services. When RealPlayer is installed on a new computer it will also install a secondary program which offers music downloads from Rhapsody Unlimited, which also happens to be owned Real Networks, the creators of the Real Player.
Like many Music Downloading Services (MDS), Rhapsody offers a free trial period where prospective customers can download music for free until that trial period ends and a membership must be purchased for the service to continue.
Not all MDS’s are alike. Many of them have a different model of doing business.
Some MDS’s let you download as much music as you want, just as long as you pay your monthly subscription fee. Others charge you a small fee per each track downloaded from the service. And still others charge you a monthly subscription fee AND a per track downloaded fee.
Also, very few Music Download Services seem to still be using MP3’s (MPEG-1 Audio Layer 3) as their main format for downloading. Many of the services have now switched over to the Windows Media Audio format (WMA).
Most of the top MDS’s will have a song database of almost 2,000,000 to choose from.
E-Music and Wal-Mart have less, but unless you consider 500,000 to 1 million songs to be pretty small, that shouldn’t matter.
Even after you’ve downloaded the songs from their service, the MDS’s can still maintain control over them. Copy technology named DRM built into the files downloaded can limit the number of times a song can be burned to a CD, or if it can be burned at all. Microsoft has been a big supporter of DRM and has built support into Windows Media player to download the appropriate licenses and play DRM tunes. If the license is not found, the song cannot be played at all, nor copied or moved. In recent months an anti-DRM sentiment has risen through the music consumers and industry has begun to respond with non-DRM song downloads.
Some services will let you burn CD’s from whatever songs you downloaded from them. Others will only let you burn songs that you purchased individually for that purpose.
Many of the MDS’s require you to download an application to play their tracks. Tracks from those services are usually configured to ONLY run on that particular application. Other MDS’s will let you play their tracks on any media/audio player.
Rhapsody Music Service:
http://www.rhapsody.com/home.html
Subscription is $12.99 monthly plus 99 cents for each track downloaded / Must have Rhapsody application to play tracks / Number of songs: 1,000,000 / File Format: WMA / 99 cents for each track burned to CD.
Napster Music Service:
http://www.napster.com/choose/index_control_2.html
Subscription is $12.95 monthly for service, 99 cents per song for purchase./ Must have Napster application to play tracks / Number of songs: 5,000,000 / File Format: WMA - DRM / Only purchased tracks can be burned. ‘To-go service’ for additional cost allows you to take music with you on your portable device.
iTunes Music Service:
No subscription, but does have a 99 cent per track download fee / Must have iTunes application to play tracks / Number of songs: 5,000,000 / File Format: AAC - DRM(Advanced Audio Coding - specific to Apple iPods) / All tracks can be burned to CD’s but same playlist can only be burned up to 7 times / Tracks will only work on an iPod and no other portable players. Itunes has a 60% market share. TV Shows and Movies are now available as well.
Amazon.com:
http://www.amazon.com/MP3-Music-Download
Amazon is the upstart in the industry. Offering single song and album downloads at a price that undercuts itunes. Single songs are 89 cents each, albums are $9.99. The songs are mp3 format – and no drm. These means that the you can take your music and play it anywhere, copy it to a portable device or burn it to Cds. With the ease of use and the Amazon brand name this store is gaining momentum quickly. As it does so does the movement to offer DRM free tunes.
eMusic:
Charges a flat fee of $10 for up to 40 downloaded tracks / Requires eMusic Download Manager to access the songs, but they can played on any media/audio player / Number of songs: 500,000 / File Format: MP3 / Any track can be burned to a CD.
Yahoo Music (MusicMatch:
Subscription is $9.95 a month plus 99 cents per each track downloaded ($74 for a 2 year contract) / Requires Yahoo Jukebox application / Number of songs: 2 Million / File Format: WMA - DRM / All tracks can be burned to CD’s but the same playlist can only be burned up to seven times.
Virgin Music Service:
http://www.virgin.com/companies/virgindigitaluk/virgindigitaluk.aspx
Subscription is $7.95 monthly plus 99 cents for each downloaded track / Requires Virgin Music application / Number of songs: 1,000,000 / File Format: WMA - DRM / All purchased tracks can be burned to CD.
Wal-Mart Music Service:
http://musicdownloads.walmart.com/catalog/servlet/MainServlet
No subscription, just a fee of 88 cents for each track downloaded / Requires no application / Number of songs: 1,000,000 / File Format: WMA - DRM / Purchased tracks can be burned to a CD up to 10 times.
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Almost all of these MDS’s offer a free trial period, so you can test the waters before purchasing anything.
ebooks success: Can Amazon Kindle Inspire?
E-Books: A Guessing Game
In honor of Amazon.com’s Kindle let’s play a game and try to guess the forecast for ebook sales over the next few years.
In 2007 the ebook market is in the infancy stage. Despite Sony and Amazon.com both releasing consumer friendly devices ebooks have yet to gain widespread consumer acceptance.
Based on the reach which Amazon.com has in customer base, the proliferation of technology and the comfort of consumers purchasing electronics and virtual goods online - I forecast the sales of ebooks in 2008 will be $25 to $40 million. This is a small fraction of the overall publishing revenue per year as you can see below.
A few numbers of note (numbers are rough estimates):
2007 Literature Rate: 50%
US Population:300 Million
PC Penetration: 60+%
Itunes Downloads: 2.5 Billion
Amazon.com customer base 40+ million
# of books purchased per year - per consumer: 4
Publishing Industry revenues in 2006: $25 Billion
As we see electronics advancing the trend is convergence. The long term trend will no longer be for a separate gps, handheld, cell, mp3 player, etc - but for one unified device.
We can already see this happening with cell phones, organizers, cameras and mp3 players. As technology evolves this trend will only increase. This will result in a super-set of market size for any good or service that can be delivered to that device. Ebooks will be just such a product. In 10 years I see pocket sized devices that project onto any surface, that read and translate any text, are simple, powerful and consumer friendly. Based upon this the potential consumer (or market size) for ebooks will be in the range of 50 Million in the US, 400 Million Worldwide.
In technology the market is nearly always guided by innovators and then grown by imitators. The cutting edge innovators first create the product, unit or system in order for the innovators to make it affordable and bring it to mass production. This holds true for older products such as dvds, downloadable movies and music. From Beta video players to 8-tracks the innovation piqued curiosity in the marketplace, but little else. Until the imitators came along and created copies and more drove prices down.
The same will hold true in the e-book marketplace. As Amazon and Sony are on the cutting edge of innovation - others (like Microsoft) will sit back, watch customer reaction and learn.
At the right time the imitators will enter the market and bring volume of both product and consumers.
Let’s compare ebooks to the popular itunes - as itunes provides a near-as possible model (discounting the hardware device for ebooks which has yet to appear)
Examine the itunes sales for 5 years (again - estimates):
Itunes:
Year 1 = 70 million
Year 2 = 370 million
Year 3 = 602 million
Year 4 = 1.5 billion
Year 5 = 2.5 billion
As we can see - low volumes for the first year but nearly double each year after. I will concede that Apple’s ’star’ power has helped itunes sell in such rapid pace.
Discounting that affect for ebooks (although it certainly a possibility.
2008: 40 Million
2009: 75 Million
2010: 135 Million
2011: 200 Million
2012: 350 Million
These figures are arrived by extrapolating the # of consumers who purchase books per year, as well as textbooks (which I predict will be the first large ebook market to hit critical mass). They are much lower then itunes volumes as you can see - as we’ve got a much lower base of consumer for books then for music.
Adoption of ebooks will be similar to music. The major difference in adoption really lies in the behaviour of the consumer. Music is vastly more popular of a medium then literature, and is much less ‘easier’ of a consumable. Meaning that consumers can make use of downloadable music in many different ways, while working, playing, in recreation and anywhere that the device follows. The consumption of music does not require dedicated attention as does literature. This creates a much tougher challenge for the adoption of ebooks - both in terms of device (hardware) and usage patterns. Music is rather indifferent to device, some may be stylish, others not - but all have the overall same delivery methodology. Until the innovators can find an acceptable delivery platform the volumes will not materialize. However, once the acceptable platform is found it will be imitated and the pattern will closely follow that of the music downloads.
The attitudes of digital content have changed dramatically in recent years. The Internet as we know it and worldwide web passed the 10 year maturity mark and has saturated through the population at a staggering rate. As this has happened the flow of information and data has followed and opened up opportunities and marketplaces which we could only dream. As the generation X’ers grew up into expendable incomes of their own they began to influence online purchases. These purchases are no longer limited to physical goods (ie . amazon.com) but now virtual services and goods such as movies, music and ebooks are common. Music content delivered electronically opened the floodgates and direct delivery of movies via electronic methods is now hitting its stride. As often occurs with new technology the old producers had difficulties (and still do) monetizing their product in a new delivery method. Early delivery methods were prone to theft and abuse. Ebooks have struggled to catch on to this new marketplace as no consumer friendly device has been introduced to satisfy the apparent need. There are many less consumers for electronic literature then movies and music, and whereas a movie or music can be delivered to a computer literature is not often read online. Attitudes have changed, but roadblocks still remain.
Hardware devices play the pivotal role in widespread adoption of ebooks. The critical hurdle which must be overcome is finding a consumer friendly hardware device which can be marketed to the masses. The Kindle (Amazon’s) is a leap forward on that front. The device addresses several important consumer concerns such as ease of use, ease of purchasing ebooks, readability, portability and battery life. The Kindle is an advanced ebook reader and Amazon is a true innovator. The major flaw (or hurdle) to the Kindle is the price-point, $399. At that price the average consumer will not jump into an unknown or unproven technology. The major advantage of the Kindle lies in the wireless ability to connect to the ebook marketplace and download fresh content. The benefit Amazon has given to the market is in innovation. The new device will test out the market and provide feedback to other device makers on what works, what is accepted by the consumer and what does not. The hidden benefit is in market awareness. Since Amazon is such a large public entity many have been exposed now to the Kindle (many more consumers then those exposed to the Sony ebook reader). Market awareness is raised for the ebook product itself and downloadable literature.
The flattened marketplace of our era has created many opportunities for businesses, products and sales. The ebook will reach out to educators and recreational consumers alike -given time, consumer acceptance and ever changing technology.
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