One year after shutting down its Ovi Music Unlimited streaming service that came bundled with its smartphones, Nokia is trying again. On Tuesday, just ahead of its official unveiling of its first Windows Phone 8-powered Lumia handsets, Nokia announced a new music streaming service that will come bundled with its devices. Unlike Ovi Music, however, the new service will be free — no ads, no subscription fee. While the idea of bundling content with devices is not new, increasingly, content services are integral to device makers’ hardware strategies.
Nowhere is that more true than with Amazon, whose Kindle e-book readers and Kindle Fire tablets are essentially portable front doors to Amazon’s digital content stores. And sure enough, Amazon on Tuesday, just ahead of an expected announcement regarding a new-generation Kindle Fire, Â announced a new deal with Epix to bring new-ish Paramount, Lionsgate and MGM films to its Prime Instant Video subscription service that comes bundled with the Amazon tablet.
The trend is becoming so pronounced that some analysts are speculating that content service providers will need to start building their own hardware to remain competitive. Simulmedia CEO Dave Morgan, for instance, makes the case of aÂ Yahoo-branded TVÂ in the current issue of Ad Age.Â Conversely, Brian Lowry of Variety wonders whether even Apple can remain competitive without its own subscription-based iContent services.
Here’s our prediction: The new Microsoft Surface tablets will come bundled with Xbox Live, giving the tablets their own, closely linked content service and taking the highly popular Xbox Live platform beyond the game console.
by Chuck Parker
Iâve spent the last few weeks having renewed discussions with a variety of people whose opinion I respect in this space, including those in the Twitter-sphere, the blogosphere, and in plain old real life, and with the NCTA Cable Show happening in Boston next week, I think it is the right time to open this debate up again.
The debate is simple: Who is going to disrupt the current Pay TV industry?
A few months ago at the OTT Con in Santa Clara, I had this discussion in spades with many of the participants in the would-be âcable killerâ world (most of whom themselves are âcord cuttersâ or at least âcord thinnersâ). My takeaways after those discussions were that it was incredibly premature to even think about âOver the Topâ or âbroadbandâ video killing the established Pay TV operators like Comcast, DirecTV and Verizon because only the metrics had indicated that all of the current players combined had only made a minor dent in TV Viewing (3 hours of online viewing vs. 34 of traditional viewing per week, 2% of the $200B TV advertising spent on âon-lineâ video) and that so far the only business being disrupted in a serious manner was DVD sell-thru, which was suffering as much from physical Netflix and the shift from purchase to rental as it was from digital Netflix. My brief conclusion then was simple: Large pay TV operators were bringing in an average monthly bill per household of close to $100 (ARPU) and the would be disruptors were still in the sub-$15 range and those Pay TV operators were âStriking Backâ with their own TV Everywhere solutions, so any would-be survivors in the next 3-5 years would have to deliver an incredibly compelling user experience (UX) centered around Discovery (likely on the second screen).
Gigaom tried to articulate this a little more clearly in a recent article (that perhaps started this debate anew) called the 7 ways Comcast is killing the cable killers. In short, large operators have implemented a multi-pronged strategy of defensive and offensive initiatives including blocking peer-to-peer (P2P) traffic, prioritizing traffic on their network (i.e., giving their own video priority), implementing data caps and data cap exceptions (for their own TV Everywhere traffic), and unleashing offensive TV Everywhere strategies to counter Netflix and Huluâs impact (StreamPix, authenticated Hulu, HBO Go, etc).
But perhaps we should take a step back and look at the wider âhome entertainmentâ industry and look at what is driving content creators, distributors and consumers to change their business practices and viewing habits. Despite the recent decline in the physical media segment of the industry (DVDs and Blu-rays), physical media still represents 47% (~$15B) of the âpay for playâ video consumption market, while Pay TV has been slowly growing its share at 34% (~$11B, not including sports) and what we would affectionately call âDigitalâ (including PPV, VOD, SVOD, and EST) represents only 19% (~$6B), though this is the fastest growing segment. Since it is unlikely that consumers are going to significantly increase the amount of hours of video they watch (who has 37 hours anyway?), we should assume that any further growth in digital will either come at the expense of the physical DVD world or the Pay TV networks. Since Pay TV has continued to grow during the expansion of digital, it is probably a safe assumption that it will either slow its growth or stay flat in the next 3-5 years while physical media continues to decline.
But when you dig deeper into the economics behind all of this, you find out that the big money makers for the content creators and distributors are Pay TV packages and the sell-thru of movies and the least profitable segments are the subscription digital services and the subscription physical rental services….
Read the rest of Chuck Parkerâs article at his blog here.
The debate is simple: Who is going to disrupt the current Pay TV industry?
A few months ago at the OTT Con in Santa Clara, I had this discussion in spades with many of the participants in the would-be "cable killer" world (most of whom themselves are "cord cutters" or at least "cord thinners"). My take aways after those discussions were that it was incredibly premature to even think about "Over the Top" or "broadband" video killing the established Pay TV operators like Comcast, DirecTV and Verizon because only the metrics had indicated that all of the current players combined had only made a minor dent in TV Viewing (3 hours of online viewing vs. 34 of traditional viewing per week, 2% of the $200B TV advertising spent on "on-line" video) and that so far the only business being disrupted in a serious manner was DVD sell-thru, which was suffering as much from physical Netflix and the shift from purchase to rental as it was from digital Netflix. My brief conclusion then was simple: Large pay TV operators were bringing in an average monthly bill per household of close to $100 (ARPU) and the would be disruptors were still in the sub-$15 range and those Pay TV operators were "Striking Back" with their own TV Everywhere solutions, so any would-be survivors in the next 3-5 years would have to deliver an incredibly compelling user experience (UX) centered around Discovery (likely on the second screen).
Gigaom tried to articulate this a little more clearly in a recent article (that perhaps started this debate anew) called the 7 ways Comcast is killing the cable killers. In short, large operators have implemented a multi-pronged strategy of defensive and offensive initiatives including blocking peer-to-peer (P2P) traffic, prioritizing traffic on their network (ie giving their own video priority), implementing data caps and data cap exceptions (for their own TV Everywhere traffic), and unleashing offensive TV Everywhere strategies to counter Netflix and Hulu's impact (StreamPix, authenticated Hulu, HBO Go, etc).
But perhaps we should take a step back and look at the wider "home entertainment" industry and look at what is driving content creators, distributors and consumers to change their business practices and viewing habits. Despite the recent decline in the physical media segment of the industry (DVDs and Blu-rays), physical media still represents 47% (~$15B) of the "pay for play" video consumption market, while Pay TV has been slowly growing its share at 34% (~$11B, not including sports) and what we would affectionally call "Digital" (including PPV, VOD, SVOD, and EST) represents only 19% (~$6B), though this is the fastest growing segment. Since it is unlikely that consumers are going to significantly increase the amount of hours of video they watch (who has 37 hours anyway?), we should assume that any further growth in digital will either come at the expense of the physical DVD world or the Pay TV networks. Since Pay TV has continued to grow during the expansion of digital, it is probably a safe assumption that it will either slow its growth or stay flat in the next 3-5 years while physical media continues to decline.
Ok, so what does that mean?
The content creators need to find a way to reduce the impact of the two least profitable market segments on their business. They need to:
- convert physical rental to digital rental (where they change their economics from a ~25% split to a ~70% split),
- provide consumers a reason to purchase content digitally vs. renting, and
- support their large Pay TV customers in their battle with the disruptors who are delivering the most impact on subscription digital rental.
Practically, this means they:
- support digital rental windows that are on par with the physical windows by supporting Apple/iTunes, Vudu, Amazon and of course Pay TV Operator VOD while constantly reducing the viability of physical rental distributors (pushing the Netflix and RedBox windows out past the digital rental windows or forcing them to buy from Wal-mart and others instead),
- put tremendous effort behind UltraViolet and Disc to Digital programs so that consumers can build a digital library of owned titles and attempt to drive household movie purchases per year from the current average of 7 back towards its 2004 zenith of 14, and
- empower Comcast in their StreamPix efforts, support the TV Everywhere models of DirecTV and Dish's Blockbuster, and consistently ratchet up the content cost for Netflix to acquire their content to a price on par with their subscriber base (meaning they pay the same as Comcast for content deals).
- the VOD and PPV offerings from our cable and telco operators were completely abismal until iTunes, xBox, and Hulu launched (and the BBC iPlayer in the UK), forcing the Pay TV operators to improve their own VOD and catch-up channel offerings to combat "churn" (cord cutting, cord thinning), and
- the success of Netflix has forced those same Pay TV operators to launch their own TV Everywhere strategies including HBO Go and StreamPix.
Does this sound like a deal to anyone or does it sound like the consumers are getting the short end of the stick?
A few things to think about first:
- Apple does not support Ultraviolet, so you will not be able to view your converted library on your iPad or AppleTV.
- There will be content gaps. Disney does not currently support Ultraviolet, and there will be many other smaller studios that don't yet support them either (the other 5 majors do). I am curious to see how this will be handled on April 16th at your local Wal*Mart store.
- If my memory is correct, the average consumer in the US currently has a library of about 70 DVD and Blu-rays (I will try to dig up this data to confirm). That mix in 2012 is probably 80% DVD and 20% Blu-ray (I am making an educated guess about penetration over time). So the cost to convert the average person's library (assuming all titles were supported by Ultraviolet) would be roughly $182. Ouch! I have over 400 DVDs and about 40 Blu-rays, so I need to get a 2nd mortgage to convert my library.
- $2 vs. $5 presumably for better quality video. Let's think through this. Your typical DVD puts out an average bit-rate of about 10 mbps in video rate (this is a measure of how much data is transferring from the disc/player to your tv screen). I say average because intense scenes (big explosion, etc) push more data and slow moving scenes push less. The average bit-rate of a Blu-ray is roughly twice that (about 20 mbps). The typical "SD" or standard definition download or stream from iTunes, Amazon, Netflix, Vudu, Hulu, etc, is around 2 mbps. What is typically called "HD" for high definition is pushing 4-6 mbps (720p vs 1080p matters here because there is more data to push). Vudu's "HDX" is supposedly in the 10 mbps range. Now I am sure all of the videophiles out there (and the experts behind download services compression algorithms) will jump in here to say that they are compressing the data "in a smater way" than is typically done for DVD and Blu-ray and therefore get a better picture as a result. I would dispute that for a wide range of fact-based reasons, but even if we gave them a 20% improvement based on this urban legend, what do we have: We are paying $2 for a video to be transferred to my digital locker that is only 20-30% as good as my physical SD version and $5 for a video that is 25-30% the quality of my Blu-ray HD version. Seems like a pretty poor deal.
- What are my options? Well, legally, none. Despite the urban legend that I can rip DVDs and Blu-rays for "personal use", it is still illegal according to the digital millennium act. But what if I were a 19 college student who perhaps cared less about these kinds of laws? I could use a number of paid-for and free software programs available on the internet to "rip" a copy of the DVD or Blu-ray into an .mp4 file. Let's pretend I pay $30 for "good software" (making this up). Let's pretend that I have to spend 12-15 minutes each time I want to make a copy for my personal consumption (typing in the title, the destination, importing into my program for viewing, etc, though the actual transcoding might take an hour while I am doing something else). Let's pretend that I get paid $10 an hour as a college student. My 70 title library would now "cost" me $170-205 (12-15 minutes) to put together. The cost for this library moves and and down based on the consumer's perception of the value of their own time.
- What about quality trades? The great thing about getting an officially sanctioned copy of the title in your digital locker is that it has all of the searchable metadata (title, summary, cast, etc) already done for you. The pro for using locally available software is that you can have a high-quality encode (depending on the source and your tool) every time (ie better than the $5 version).
- What are my options moving forward for new titles? A little research on Amazon tells me that I can buy an "Ultraviolet enabled" version of the title when I buy new movies. The price difference varies. It seems that Warner Brothers is including it with the DVD and Blu-ray for nearly the same price as the discs used to be alone, where as Paramount, Sony and others are charge $2-7 more for a bundled product that is the DVD + Blu-ray + Ultraviolet Digital Copy. My other alternative is of course to buy it from iTunes (typically at the same price as the DVD or Blu-ray), and while I do not get the physical disc nor do I get an UltraViolet compliant digital copy, I get the movie in my "iCloud" service, and can download/stream to any of my apple devices (AppleTV, iPads, etc). If you have tried registering a purchase in Ultraviolet, you know that the experience is complicated and confusing--unlike a purchase from Apple. There has been some activity (from Paramount) offering the digital-only UltraViolet copies to consumers, but this is typically not the case (ie buy something in Vudu, it is stuck in Vudu).
- Solve the pricing issue. Give the consumer a bulk-rate discount to convert 50 or 100 movies at a time to encourage them to do it. Drop the $2 vs $5 disparity since both are inferior in quality that the version on the disc in the first place.
- Create digital service options that are Ultraviolet compliant. Meaning, let me purchase a movie in the Vudu service and view it on my Amazon or Flixster service. Make all the other digital services as easy as using iCloud when accessing my digital locker.
- Get the rest of the content creators / studios to join UltraViolet (they all have agreed to iCloud for Apple).
- I am not going to suggest they get Apple to join UltraViolet because with iCloud for movies, it is clear that with iPads covering 85%+ of the tablet market and the iCloud service being simple and free, they don't need join--they just need a legal physical library conversion option (which I doubt the studios will grant unless they join UltraViolet)...
Content distributors have begun to embrace devices such as Appleâs iPad and iPhone as âsecond screens,â delivering supplemental content in sync with broadcast television programs. But Apple, according to a new report, may soon market its mobile devices as the primary controllers of consumersâ home entertainment experience, as the company looks to fulfill late founder Steve Jobsâs vision for transforming the television business.
Apple is working on an Internet-connected television that would receive streams of television shows, movies, and other content, according to The Wall Street Journal. Such a television â which would work in tandem with devices like the iPhone and iPad, according to the Journalâs sources â would represent an evolved strategy for Apple, which currently markets the âApple TVâ streaming media set-top box. The company has remained âvagueâ in sharing details of its plans in talks with media executives; however, as the Journal reports, the talks themselves suggest that Apple is moving forward with its strategy.
Announcing first-weekend sales for its new iPhone 4S, Apple also said that some 20 million customers have signed up to store content via the companyâs free iCloud service, which launched last week.
The service encountered hiccups on Friday both in meeting general demand (via All Things Digital) and in recognizing shared accounts across multiple devices (via Ars Technica). But iCloud was fully functioning as of Monday morning, according to an Apple status page.
Apple also announced that it had sold than four million of its iPhone 4S, which the company launched in the U.S., the UK, and five other countries on Oct. 14. The phone will be available in 22 more countries on October 28; Apple is also set to launch a premium version of iCloud for music, iTunes Match, by the end of the month.
While revolutionizing communications with products such as the iPhone, Apple co-founder Steve Jobs also transformed the media and entertainment business with the Mac, the iPod and iPad, and the iTunes Store. The New York Times recounts Jobsâs life and achievements with Apple as well as Pixar. Billboard surveys the impact that Jobs had on the music industry and the legacy he leaves. All Things Digital, meanwhile, reflects on the way forward for Apple.
Among the new product announcements Apple made today at an event at its Cupertino, Calif. headquarters (via gdgt):
â˘ Appleâs iPhone 4S, available Oct. 14, will mark the first time the company offers 64GB of storage in its smartphone (for $399). The new model features a processor thatâs twice as fast at CPU tasks as the chip in the current iPhone 4; other features include 1080p HD video recording capability. The current iPhone 4 will now sell for $99 (featuring 8GB of storage), while an 8GB iPhone 3GS will be a free option for cell phone subscribersâincluding Sprint customers.
â˘ Appleâs free iCloud service will launch in the U.S. on Oct. 12. Meanwhile, iTunes Match, Appleâs premium cloud music service, will debut at the end of the month. In reviewing iTunes Match, Appleâs Eddy Cue said that the service would âstreamâ songs to usersâ mobile devices; but the consensus remains that iTunes Match will not offer a streaming component like Amazonâs Cloud Music Player.
Despite steady growth in app downloads on Apple devices, music remains the primary activity for the average iTunes user, according to a new study from research firm NPD. However, the percentage of users who purchase music through iTunes has fallen since 2010, as has the percentage of users purchasing video content.
The iTunes platform attracts one in four U.S. Internet users (51 million people), an increase of three percent since last year, NPD says. More than half of all iTunes users (54 percent) have uploaded music to an iPod or listened to music on iTunes in the past three months, while 28 percent downloaded a free app (an increase of four percent over the prior year) and 16 percent paid to download an app (also up four percent).
The total number of U.S. consumers purchasing content from iTunes increased by one million people this year, and a larger percentage of those purchases came from app buyers. While 82 percent of iTunes content buyers purchased music and 31 percent purchased apps in 2010, just 75 percent of iTunes content buyers have purchased music in 2011, while 39 percent have purchased apps this year. iTunes video buyers, meanwhile, have declined by one percentage point to 19 percent this year.
âThereâs no reason the music or video industry should accept a loss of buyers, as device preferences change,â says Russ Crupnick, NPDâs senior vice president and entertainment analyst. âThey have significant opportunities to foster discovery, engagement, and purchases using the tablet platform [namely the iPad].â
NPD based its findings on 4,011 completed responses from a May 2011 survey of iTunes users age 13 and older.
While tablet computers are poised to be a top-selling product this holiday season, Apple has cut its fourth-quarter manufacturing orders for the iPad 2 by 25 percent, according to JPMorgan analysts (via Bloomberg). The move could signal preparations for holiday-season introduction of a third-generation iPad; or it could represent Appleâs revision of its iPad sales forecast as Amazon readies a rival tablet for market (via 9To5Mac).
Speculation abounds that Amazon will introduce a Kindle-branded device that will be competitively priced against other tablets, with a model featuring a 7-inch screen perhaps selling for $250 (via PC World). The device also may include membership in Amazon Prime, a service package that offers streaming movie and video rentals as well as unlimited two-day shipping on physical purchases from the online retailer.
Itâs still unclear whether iTunes Match will offer music streaming, despite a video clip (via Insanely Great Mac) demonstrating what appears to be a streaming function in Appleâs forthcoming service.
An Apple spokesperson tells All Things Digital that iTunes Match users will need to store songs on their iPad, iPhone, or computer after they access them from their cloud-based iTunes Match account. Even though it has released a beta for iTunes Match to developers, Apple is remaining cagey on whether the service requires actual downloads of songs to devices, or whether users will be able to store songs in a temporary cache, as Spotify Premium users can to play songs while in an offline mode.
We may have to wait until Appleâs fall introduction of iTunes Match to ascertain just how it stacks up against a paid streaming service such as Spotify Premium. But one fundamental difference between Apple and its streaming rivals is already evident.
Although Apple will charge an annual $25 fee for iTunes Match, customers will only be able to access music that they have purchased from iTunes (or acquired from elsewhere). This is in keeping with the access-upon-ownership model that Apple, in cooperation with studios, recently effected for television programming on iTunes.
Spotify Premium is more akin to the subscription model of Netflix: users pay $120 a year for unlimited streaming access to most any music in the companyâs 15-million-song catalog. Users can supplement their Spotify playlists with music that they have acquired from iTunes or elsewhere (e.g., Beatles tracks); but Spotify does not offer even Premium users the ability to store music in a cloud-based streaming locker.
With Steve Jobs announcing his resignation as Appleâs CEO, speculation abounds regarding how Tim Cook, Jobsâs appointed successor, will run the company. Cook reportedly has emailed Apple employees to reassure them that the company âis not going to changeâ (via Ars Technica). Analysts and tech industry observers hold similar expectations: PC Magazine, for example, notes Appleâs clear roadmap for its iPhone, iPad, and MacBook products.
Amazon and Walmartâs Vudu are taking a new tactic in their competition with Apple to establish themselves as entertainment providers to iPad users.
Amazonâs new Kindle Cloud Reader lets iPad users purchase and read Kindle e-books, while Vudu is bringing its Internet video-on-demand service to iPad users. Both of the new apps are accessed via Web browser, as opposed to being based on Appleâs iOS operating system. The difference, which should be invisible to iPad users, enables Amazon and Walmart to avoid having to pay Apple a cut of e-book and movie rental purchases, respectively (see the San Francisco Chronicle). The companies also remain free to update their apps as they see fit, whereas updates to native iOS apps are subject to Apple approval (via TechCrunch).
Vudu appears to be facing pushback from Disney, which is withholding availability of its films via the iPad app (via the Los Angeles Times). Also, playback on the iPad is limited to standard-definition only, “due to restrictions by content providers,” Vudu says.Â Meanwhile, Amazonâs Kindle Cloud Reader currently lacks the magazines or other periodicals that are available for purchase within the Kindle app specifically designed for Appleâs iOS (via Wired).
Watch âThe Throne:â Retailers Mull Response Over iTunes and Best Buy Exclusives for Jay-Z and Kanye West Album
Since July 25, Appleâs iTunes has enjoyed a pre-order exclusive on âWatch the Throne,â the anticipated Jay Z and Kanye West release, under which customers can download a single immediately and receive the full album four days before its Aug. 12 street date. Now comes news (via Billboard) that Best Buy has secured a two-week exclusive sales window on the Def Jam albumâs deluxe CD edition â drawing ire from independent brick-and-mortar shops.
Independent record stores â which have long groused about the effects of top acts cutting exclusive-release deals with mass merchants and big-boxers â addressed a letter to Jay-Z and Kanye West personally, asking the artists to reconsider the distribution strategy. Otherwise, individual shops are vowing to increase prices on the artistsâ releases, or pull them from shelves entirely.
Amazon, meanwhile, might be mulling whether to sell the MP3 version of âWatch the Throneâ in another 99-cent promotion â a move that Billboard notes would be designed to alter consumer calculus on pre-order promotions going forward.
In tandem with Appleâs digital-exclusive release of the Lion OSX upgrade, the company is reportedly discontinuing physical distribution of its software products, such as its iLife â11 suite (via AppleInsider).
As with Lion, Apple will market the software exclusively at the companyâs App Store, which debuted in January.Â Beyond clearing shelf space at Appleâs retail stores, the discontinuation of boxed software will impact resellers as well, AppleInsider reports.
Apple began selling its Lion upgrade to the OSX operating system as a $29.99 digital download from its App Store today, one day after the company announced that its iPad business has overtaken revenue from Mac computer sales.
During its third fiscal quarter, Apple sold 9.2 million iPads, worth $6 billion in revenue, while it sold 3.9 million Macs worth $5.1 billion in revenue (tables atÂ SplatF). Discussing the quarterâs results during an analyst call, Apple chief operating officer Tim Cook said that is was âclearâ some of the companyâs customers were purchasing iPads instead of new Mac computers. âBut what really excites us,â claimed Cook, âis more customers chose to buy an iPad than a Windows PCâ during the quarter (via Forbes).
The Lion upgrade introduces iPad-inspired features to the PC interface; reviewing the performance of the OS as well as the digital installation procedure, The Wall Street Journalâs Walt Mossberg acknowledges Lion as a âbig leapâ from Appleâs previous Snow Leopard OS. âIf you are willing to adjust,â Mossberg says, âitâs the best computer operating system out there.â
Apple has relaxed or removed several requirements of subscription apps that are marketed via its App Store, in a move that signals a revenue-sharing compromise with content providers.
App publishers may now offer in-app content subscriptions at whatever price they wish, according to Mac Rumors, which first reported the policy changes. That means content providers are free to charge premiums for in-app subscriptions to help offset Appleâs 30 percent cut of purchases. In addition, app marketers such as Netflix will be able to continue selling subscriptions outside the Apple store without having to add in-app subscription options to their Mac or iOS apps.
The revisions effectively reverse policies that Apple announced in February, which were set to take effect June 30.
More at Billboard, which reports that Appleâs policy change comes as a relief to music streaming subscription services such as Rhapsody and MOG.
In contrast to the cloud music services of Amazon.com and Google, Appleâs âiTunes in the Cloudâ lacks a streaming component. That surprises some music industry observers:Â Wired, for example, had expected Apple would introduce new streaming-based features to iTunes such as online song sharing or collaborative playlist building capabilities. On its face, Apple’s forthcoming iTunes Match seems to be about increasing access to music, but as All Things Digital reports, the service remains rooted in the concept of ownership, with Apple continuing to emphasize the primacy of downloading content to individual devices.
Younger digital music startups contend that none of the new cloud-based services go far enough in developing new models for record labels and publishers. âWe canât enrich the music industry,â says Beyond Oblivion CEO Adam Kidron, by “going to the same five percent [of consumers] who already pay for music.â Kidronâs company advocates integrating the cost of an unlimited music license into the price of new entertainment devices or services.
The âiTunes Matchâ service â part of a slate of new iCloud products that Apple unveiled at its Worldwide Developers Conference on Monday â will offer music fans a simple way to sync their digital music collections across multiple devices, while providing record labels and music publishers with another potential revenue source.
For a $24.99 annual fee, Apple will provide iTunes users with cloud-based storage of up to 20,000 songs, automatically âmatchingâ music that wasnât purchased in iTunes to high-quality, DRM-free equivalents from the iTunes retail catalog.
During his conference keynote, Appleâs Steve Jobs pitched the value of iTunes Match as saving users time. Compared to rival cloud music storage services from Amazon and Google, which require users to upload their libraries to online accounts, Appleâs hard-disk scanning capability means that music library transfers are complete in âminutes, not weeksâ (via The Wall Street Journal).
Apple made no mention of licenses by record labels or music publishers for iTunes Match, but the industryâs major players are reported to have agreed to new licensing terms with the company, which remains the leading digital music retailer in the U.S. The new service, if successful, would seem to provide record labels and publishers with some compensation for downloads that music consumers continue to acquire illegally.
While iTunes Match is set for a fall launch, Apple made available on Monday a free beta version of âiTunes in the Cloud,â offering syncs of usersâ previous iTunes music purchases across as many as 10 Apple devices.
Separately, Apple announced at the conference that it would market its Lion upgrade to the OS X operating system exclusively via the digital Mac App Store. The $29, 4GB release will be the first operating system upgrade that is unavailable on optical disc.
More iCloud and iOS news at Ars Technica.
More reported facets of Apple’s streaming music plans with labels, ahead of the company’s iCloud announcement June 6:
â˘ Universal Music Group will join the three other major record companies in supporting the service, reports CNET.
â˘ The iCloud music service will initially be free to iTunes customers; ultimately, Apple eyes charging a $25 subscription for cloud-based music storage and streaming, reports the Los Angeles Times. The music service also will support advertisements. Labels will take a 70% cut of revenue, with music publishers claiming 12% and Apple reserving the remaining 18%, according to the website’s sources.
â˘ Apple is paying labels between $100 million and $150 million in advance fees to launch the service, according to the New York Post.
In a preview of its June 6 Worldwide Developers Conference, Apple says that it plans to unveil an âiCloudâ service next week, along with new generations of its computer and mobile device operating systems. There is word yet on iCloud will include at its launch date, which also remains TBA. The trade press has reported that the company has closed deals with three of the worldâs four major record companies to offer a consumer service for cloud-based music streaming and storage.
While Appleâs cloud-based music service remains a rumor, BusinessWeek reports that the company may bundle streaming iTunes music access as part of a relaunched MobileMe service.
MobileMe users currently pay $99 a year to have access to their contacts, e-mails, and other data synchronized across multiple devices. Citing anonymous sources, BusinessWeek reports that the Apple music service would scan usersâ iTunes libraries and mirror their collections in a cloud-based locker.
While such a service could effectively enable users to stream songs that they have obtained illegally, record companies and publishing organizations would be getting paid for the streaming rights, according to the report.
Following a CNET report that Apple had completed deals with EMI Music and Warner Music Group for a soon-to-be-launched music storage and streaming service, Bloomberg reports today that the computer maker has signed a licensing agreement for the service with Sony Music as well. That would leave Universal Music Group as the last among major record companies to reach an agreement with Apple for the anticipated service, which could be previewed at Apple’s developers conference in early June.
Meanwhile, GigaOm reports on the speculation that Apple may incorporate âscan and matchâ technology into the service, eliminating the need for users to spend time uploading their music collections to a virtual locker (as the cloud services of Amazon and Google require). Apple acquired the technology â which scans a userâs hard drive and matches song files to those already stored on company servers â when it purchased the Lala streaming music service in 2009.
Apple has signed cloud-music licensing agreements with both EMI Music and Warner Music Group, and could complete similar deals with Sony Music and Universal Music Group as early as next week, according to a CNET report.
Citing âmultiple music industry sources,â CNET says that it appears increasingly likely that Apple will launch a cloud-based music storage and streaming service, with potential support from all of the worldâs top four record companies. An announcement could come June 6, when Apple opens its annual worldwide developers conference; though CNETâs sources have cautioned that they have no knowledge of Appleâs product rollout plans.
Amazonâs launch of a cloud music service without record company support in March, and Googleâs introduction of a similar service earlier this month (also without label licenses), may well have changed the tone of labelsâ long-rumored cloud licensing negotiations with Apple. More at TechCrunch.
Ever aggressive in its bid for a greater share of the digital music market, Amazon is lowering its sale prices of select hit tracks to 69 cents each â nearly half off of what many of the songs fetch on iTunes.
Amazonâs 69-cent MP3 store lists some 200 best-selling songs, all of which are transferable to the companyâs new Cloud Drive and Cloud Player services upon purchase. Apple markets many of the tracks for $1.29 each.
Whether the tactic gives digital music consumers enough of an incentive to change their habits remains to be seen: more on this angle at the Los Angeles Times.
Discussing its fiscal second quarter earnings (ended March 26), Apple said that sales at its iTunes store totaled $1.4 billion during the period, representing a 27% increase from a year ago and a new record for the company.
Apple, per its custom, did not offer further details on its iTunes sales. As All Things Digital reckons, paid apps likely drove the revenue increase. While Apple still maintains a dominant share of the digital music and video markets, the global market for music downloads has seen tapering growth, while markets for Internet video-on-demand andÂ electronic sell-through of movies and TV shows remain nascent.
With its Cloud Drive and Cloud Player, Amazon is betting that it can entice customers to upload their entire digital music collections to the companyâs servers, in exchange for the ability to play songs on any computer or Android mobile device.
In launching the new services on Tuesday, Amazon is also looking to gain a jump on Apple and Google, both of which are reportedly mulling introductions of similar cloud-based offerings later this year.
âWeâre excited to offer you the ability to buy anywhere, play anywhere and keep your music in one place,â Amazonâs chief executive, Jeff Bezos, says in a letter sent to account holders today (via The Wrap). Customers who purchase an MP3 album from Amazon will now receive a cloud-based copy of the music for streaming as well. Users of Cloud Drive can upload up to 5GB of MP3 or AAC files for free, gaining additional storage by purchasing music at Amazonâs MP3 store or by paying an annual subscription fee.
Customers can use the service to store photos, videos, or documents as well, according to Amazon.
Apple, in comparison, still urges iTunes customers to back up music that they purchase via iTunes onto physical discs.
Amazon rejects the notion that it needs to renegotiate its music licenses with labels to offer the new services. âWe donât need a license to store music,â Craig Pape, Amazonâs director of music, tells The New York Times. âThe functionality is the same as an external hard drive.â
But as sources tell the Times, digital copyright laws may be more nuanced. The legality of the streaming service may also stand as a separate issue from Amazonâs purportedÂ ability to store customersâ music collections.
Amazon.com looks to lure Android device users away from Googleâs Android Market with daily price promotions and âtest driveâ previews of apps. As TechCrunch reports, Amazon retains control over app pricing, unlike Android Market or Appleâs App Store (where developers set prices). The pricing policy will enable the retailer to offer popular paid apps, such as Rovioâs Angry Birds, for free under a âfree app of the dayâ promotion.
Amazon will have to defend its use of the term âApp Storeâ before a California federal court, with Apple filing a trademark infringement suit against the retailer late last week (via Bloomberg). Apple has received approval for its own âApp Storeâ trademark from the U.S. Patent and Trademark office, but Microsoft has filed an opposition to the registration.
Judging from the self-reporting of some 10,000 online consumers, research firm NPD estimates that streaming subscriptions, Internet video-on-demand services, and other digital video products have grown to account for âone quarter of all home video volume.â
Netflixâs share of all digital movie units (downloaded or streamed) reached 61% between January 2011 and February 2011, according to the NPD survey. Comcastâs VOD service places a distant second at 8%. DirecTV, Time Warner Cable, and Apple each claim a 4% share.
âSales of DVDs and Blu-ray Discs still drive most home-video revenue, but VOD and other digital options are now beginning to make inroads with consumers,â says Russ Crupnick, NPD entertainment industry analyst. âOverwhelmingly digital movie buyers do not believe physical discs are out of fashion, but their digital transactions were motivated by the immediate access and ease of acquisition provided by streaming and downloading digital video files.â
NPD also reported consumer perceptions of four modes of digital video acquisition, including electronic sell-through (EST), Internet VOD (iVOD), cable VOD, and subscription streaming. While Netflixâs streaming service is rated as providing the best âoverall shopping experienceâ and âvalue for price paid,â consumers rate iTunes as having the most âcurrent releases available.â
While Apple has yet to offer early sales figures for its iPad 2 tablet, released in stores on March 11, analysts estimate the company may have sold close to 1 million units over the weekend (via Reuters). According to Ticonderoga Securities, the figure is equal to sales of the iPad 1 during its first 28 days of availability in 2010; the the firm attributes the sales increase to a broader distribution network, a broader market for tablets, and the new deviceâs feature set (via All Things Digital).
Some observers had been expecting Apple to announce Wednesday a refresh of the companyâs cloud-based MobileMe service, complete with new digital music capabilities for its device users. But MobileMe received no mention at what proved to be Appleâs unveiling of a thinner, camera-enabled iPad. (Apple also announced a $100 price cut for its first-generation iPad models.)
PC World muses that a MobileMe upgrade may still be in the offing, perhaps arriving in tandem with Apple’s presumed fifth-generation iPhone this summer.
Appleâs long-anticipated complement to its iTunes digital music store will not be a stand-alone subscription streaming service like Spotify, but rather a cloud-based rights locker for iTunes customers to access their music purchases from any Apple device, the Financial Times reports.
The service could debut as early as this summer, the paper reports. Meanwhile, Spotify is still reportedly negotiating with major record labels to launch a U.S. version of its European subscription music service. Google also is fixing to enter the space with a cloud-based locker service of its own.
More at Ars Technica, which spotted the FT report late last week.
Less than a day after theÂ Wall Street Journal reported that Apple has commenced production of a second-generation iPad for release in the next couple of months, speculation is underway about the companyâs plans for an âiPad 3â in the early fall.
TechCrunch notes the rapid iPad follow-up could help Apple maintain its lead over competitors such as HP, whose TouchPad is expected this summer.Â Daring Fireball reckons that September 2011 could see the release of a âproâ or âHDâ version of an iPad 2 that would begin shipping in early April.
Appleâs iTunes store accounted for nearly two thirds of U.S. electronic sell-through and Internet video-on-demand consumer spending combined in 2010 (64.5%), according to new research from IHS Screen Digest.
While Appleâs total market share declined from 74.4% in 2009, the research firm notes that the companyâs continued dominance coincides with a 60% revenue increase in the overall EST/iVOD movie business during the year.
IHS research director Arash Amel notes that while competing services proliferated in 2010, âiTunes managed to grow because of the introductions of the iPad and the second-generation Apple TV, which have spurred the companyâs movie rental offerings and have invigorated the iTunes multi-screen ecosystem.
âWe expect that in the United States, Appleâs strong performance in iVOD will allow it to continue to bypass the video on demand services offered by many major cable operators,â Amel adds.
Microsoftâs Zune video platform claimed the No. 2 spot for EST/iVOD consumer spending in 2010, with a 17.9% share, followed by Sonyâs PlayStation store (7.2% share).
More details at iSuppli.
As digital commerce continues to heat up, Apple is now requiring retail app developers to offer an in-app purchasing option for content such as e-books, the New York Times reports.
The new requirement comes to light following Appleâs rejection of a Sony iPhone app that would have let users purchase and read e-books from Sonyâs Reader Store.
Sonyâs app would have operated like Amazonâs Kindle app for the iPhone and iPad, which opens a browser window to enable new content purchases over the Web. Under Appleâs new requirement, the developers must offer users an in-app purchase option as well â with such purchases subject to a 30% revenue cut for Apple.
The news follows a similar rift in January between Googleâs Android market and social game site Kongregate.
More than three quarters of iPad owners (76%) use their iPads at least five days a week, while 55% of owners use the device everyday, according to Knowledge Networks. But these users are largely bringing a âfree Internetâ mindset to the iPad, with only a small portion of users willing to pay for content.
The research firmâs recent survey of 205 iPad owners and users shows a preference of an ad-supported model for content access over a pay model by nearly a 6-to-1 ratio. Additionally, six of the seven top reported iPad activities are familiar ones such as web surfing and email.
Some 70% of iPad users have read an e-book on the device, while 61% have read an electronic magazine or journal, and 51% have watched network TV programs. Yet only 13% of iPad users would be willing to pay extra for an iPad-friendly version of a print magazine or TV show that they already pay for in its conventional format (i.e., a magazine or pay-TV subscription).
Users who watch TV episodes or movies on their iPads most often learn about the content from branded apps created by services such as Netflix, SlingBox, or YouTube. Word-of-mouth comes in second in the Knowledge Networks survey, ahead of TV networksâ own apps and Appleâs iTunes store.
App downloads from Apple passed theÂ 10 billion mark over the weekend, representing exponential growth (233%) from one year ago. But how much revenue does the growth represent?
Itâs difficult to ascertain â Apple does not break out app revenues in its earnings, reporting instead total revenue for music-related products and services (including the iTunes Storeâs app sales). But as All Things Digital notes, the app revenue growth rate is likely lower than the surge in app downloads.
For both Appleâs last fiscal year (ended Sept. 25, 2010) and most recent quarter (ended Dec. 25), net music-related product and service sales grew by 23%. The relatively modest growth rate is likely a result of tapering digital music sales, along with the fact that free apps are still more popular than paid.
As it happened, the 10 billionth-downloaded app â Neon Play’s Paper Glider game â is free (albeit ad-supported).
Total app downloads from Appleâs App Store have not yet overtaken cumulative digital music sales at iTunes, as market research firm Asymco expected they would by the end of 2010. But Asymco asserts that app downloads, if they reach the 10-billion mark in January, will surpass iTunes track sales by the end of March.
The total-apps figure already represents an attach rate of more than 60 apps for every iPhone, iPad, or iPod Touch sold, the firm estimates. As Gamasutra points out, Asymco does not take into account users that have replaced an old iPhone or iPod Touch with a new version; this factor likelyÂ drives the actual app attach rate even higher.
Also among the unknowns: the balance between free and paid content, something that has not historically been much of a factor on iTunes.
In a statement to employees, Apple CEO Steve Jobs announced today that he was taking a medical leave of absence “so I can focus on my health.”
Jobs, who took a six-month medical leave from Apple in 2009, said that he would continue to be involved in “major strategic decisions for the company.” Apple COO Tim Cook is assuming day-to-day oversight in Jobs’s absence.
“I love Apple so much and hope to be back as soon as I can,” Jobs said.
More details atÂ CNN.
Key details of Verizon Wirelessâ iPhone announcement this morning:
â˘ The carrier will begin to offer Appleâs iPhone 4 online and in stores on Feb. 10. Pricing for the phone starts at $199 with a two-year service contract.
â˘ The Verizon iPhone will run on the carrierâs CDMA network. âWe have designed this network for customers to have an optimum experience,â Verizon executive Dan Dee told reporters at a press conference in New York (via Engadget). âWe have been drive testing this on our network. Weâre now into the thousands of devices, and we could not be more pleased.â
â˘ Appleâs deal with Verizon is multi-year, but non-exclusive, Apple COO Tim Cook said at the press event.
â˘ The CDMA network functionality appears to be the chief difference between the Verizon iPhone and the version of the device available via AT&T. Unlike AT&Tâs GSM network, Verizonâs network does not support simultaneous voice and data usage, Engadget reports.
â˘ Regarding apps and entertainment, Verizonâs website delivers Appleâs standard pitch for its App Store. The site makes no mention of Verizon offering iPhone apps in its own store; nor does it seem that the phone will offer Verizon-branded entertainment features such as V Cast mobile video.
Verizon Wireless plans to introduce a version of Appleâs iPhone at the end of January, according to a report in the Wall Street Journal today. The company is expected to announce the new device at a press event in New York on Jan. 11.
Speculation abounds that Verizon will offer subscribers an unlimited data plan for the iPhone, an option that rival AT&T stopped marketing to new subscribers with Appleâs launch of the iPhone 4 last summer. No details have been leaked regarding how Verizon iPhone subscribers will download apps and other content to their devices: e.g., whether Verizonâs own V Cast service for mobile video and other entertainment will have any presence or integration with Appleâs iOS ecosystem.
Verizon used last week’s CES event to talk up the promise of mobile video services, as well as the rollout of its 4G network: more at CNN.
Apple toasted more than one million app downloads from its brand-new Mac App Store yesterday. But the store â which brings iPhone and iPad apps to the screens of computers running Appleâs OS X Snow Leopard operating system â has left some publishers vulnerable to piracy.
Game and other software publishers that have failed to follow Appleâs instructions on validating consumer receipts for paid apps may find themselves unwittingly validating bootlegged copies, according to Daring Fireball. Hackers reportedly need only paste the receipt code from a legitimate Mac App Store download (free or paid) into the bootleg copy to run it.
The site notes that while the hack does not affect all of the 1,000-plus apps currently on the store, it has plagued âAngry Birds,â the game that continues to top both iPhone and iPad paid app charts. More on the issue at CNET and Ars Technica.
Separately, Beta News reports on the ramifications the Mac App Store holds for content licensing: unlike software publisherâs traditional per-machine licensing scheme, the store grants usage rights on a per-account basis.
Jeremy Allaire, chief executive at online video platform Brightcove, says competition between rival standards will be a key factor to watch in the evolution of online and mobile video next year (via TechCrunch). Yet this standards war — which actually will drive more video onto more devices, Allaire says — may not be the type packaged home entertainment marketers are used to.
âSeveral alternative stacks are emerging for encrypting / securing and then, in turn, delivering video in a high-quality and reliable manner to all platforms and devices,â Allaire says.Â The battle between Apple and Adobe is already underway. âAnd now,â Allaire notes,Â Â âGoogle will get in the mix with Widevineâs technology…We should expect that, like with On2âs video codecs which were open-sourced as the WebM video standard, Google will open source and freely distribute the Widevine technology, as well as bundle it as a standard part of the infrastructure in Chrome, Chrome OS and Android browsers and operating systems.â
Nearly half of Black Friday shoppers (42.1%) purchased books, CDs, DVDs, Blu-ray discs, or videogames during the post-Thanksgiving weekend, according to a National Retail Federation survey conducted by BIG Research. The percentage is up from 40.3% in 2009, and 39.0% in 2008.
The holiday weekend saw an increase in the total number of shoppers: 212.5 million, up 8.7% from 2009. Average spend per shopper (for all purchases) rose 6.4% from last year, to $343.31.
The increased spend in entertainment media coincided with more shoppers purchasing other discretionary items such as jewelry and toys.
âWhile Black Friday weekend is not always an indicator of holiday season performance, retailers should be encouraged that a focus on value and discretionary gifts has shoppers in the spirit to spend,â says NRF chief executive Matthew Shay.
Individual media and entertainment companies enjoyed early holiday season success. Nintendo estimates that retailers sold 900,000 combined units of the Nintendo DS family of portable gaming systems and 600,000 Wii consoles between Sunday, Nov. 21, and Saturday, Nov. 27 (via Business Wire). Meanwhile, Piper Jaffray analysts visiting brick-and-mortar Apple stores on Friday reported brisk iPad sales (via Business Insider), while Apple offered one-day discounts on other products online.
Holiday Marketing: Walmart Touts Midnight Deals; Apple to Host Online âEventâ; Barnes & Noble to Offer DVD Discounts
Some more last-minute announcements related to holiday sales of entertainment products at major retailers:
â˘ The vast majority of Walmart stores will be open 24 hours on Thanksgiving Day, with in-store specials commencing at midnight and 5:00 a.m. on Nov. 26. Midnight deals include more than 90 DVD titles including âLord of the Ringsâ and âIce Ageâ for $1.96; some 60 Blu-ray titles including âThe Dark Knightâ and âSuperbadâ for $5 each; and Disneyâs âToy Story 3â DVD for $10.
â˘ Apple plans to hold a one day âshopping eventâ at its online store on Nov. 26, according to a new teaser page at its website. The company gives few details but promises âdozens of great iPad, iPod, and Mac gifts.â
â˘ Barnes & Noble will sell âhundredsâ of DVD titles for 30% to 50% off in stores beginning Nov. 26. On Monday, Nov. 29, the discount on select DVD and Blu-ray titles climbs as high as 80% at the retailerâs website (www.bn.com).
Media outlets have characterized the road that the Beatles took to iTunes as âlong and winding.â In actuality, EMI chief executive Roger Faxon tells AP (via NPR), the deal between the label, Apple, and the bandâs Apple Corps ultimately was âquite easy.â
And quite quick, according to The Hollywood Reporterâs legal blog, THR, Esq. The publication reports that Faxon, who became EMIâs CEO in June, made a key decision in royalty negotiations with the group that led to the iTunes agreement. Whatâs more, the law firm that drafted the contracts, London-based Eversheds, only began its assignment on Oct. 25, according to an interview with UK-based site The Lawyer.
As it turns out, Apple didnât have much of a surprise in store for those who closely watch the digital space â but itâs good news nevertheless.
At long last, the Beatles have arrived at iTunes. Shoppers can purchase individual tracks ($1.29 each), albums ($12.99 each), or the bandâs entire collected output ($149.99). The latter set contains the same material as record label EMI marketed last year in mono and stereo CD editions, both of which are still widely available.
The digital albums are exclusive to iTunes through some time in 2011, an EMI spokesman tells All Things D.
Without the Beatles (and a handful of other legacy acts), the iTunes store was incomplete. Sure, the notion of âcompletismâ has evolved from 2004, when Apple introduced the digital-boxed-set concept as part of its pivotal iPod marketing partnership with U2. As any fan of the Netflix or Pandora Radio apps for iPhone/iPad would agree, todayâs entertainment services want to be more complete in the breadth and depth of content they offer.
But consumer takeup of such access-oriented services is not mutually exclusive with their continuing desire to own copies of their favorite movies or music.
Todayâs Apple announcement, then, is essentially in furtherance of increasing availability. And you know that canât be bad.
Apple promises âan exciting announcement from iTunesâ tomorrow at 10 a.m. ET, with a homepage teaser leading to frenzied speculation from digital entertainment industry observers.
All Things Digital doubts the company will unveil a streaming service or music subscription packages, as none of the websiteâs label sources claim knowledge of any new distribution deals with Apple. But USA Today cites a Piper Jaffray analyst who believes Apple will announce backups of usersâ music collections as an extension of its Mobile Me service. GigaOm notes Appleâs Ping is still wanting for Facebook integration. Billboard, meanwhile, muses the iTunes music store may finally stock Beatles albums.
Hasbro looks to one-up the View-Master concept from its archrival Mattel with a set of binoculars that attach to an iPhone or iPod Touch to create a 3D video experience.
Hasbroâs âMy 3Dâ device will launch in the spring of 2011 at a price of $30, according to AP, which first reported the news. The product will work with free and paid video apps marketed on the Apple App Store. Companies developing My 3D apps include DreamWorks Animation and the 3D television network from Discovery, Sony and Imax, according to AP.
Apple will soon be lengthening song previews in its iTunes Store from 30 seconds to 90 seconds, in efforts to spur track sales, according to CNET. The site publishes a letter that Apple sent to label representatives earlier this week detailing the plans; longer samples will come to songs over 2.5 minutes in length. Apple had planned to debut the longer samples on iTunes in September, CNET says, but rights negotiations with music publishers stalled the rollout.