Video iPod…The Art of the Deal [Archive]

Jason Dunn

10-13-2005, 08:35 PM

The following article is written by an industry insider, anonymously referred to here as Steve Sanders. Job's announcement of an "experiment" into video content delivery with the new video iPod is nothing new, nothing earthshaking. His announcement of a video iTunes database "experiment" is nothing new. Iger's announcement that they will offer some of the most popular TV shows as "pay-for-play" downloads the day after their appearance is nothing to write home about. It is the complexity, the simplicity, the elegance of the deal. It is a shift in the time/space continuum. It is a paradigm shift that will effect, change and influence the direction and actions of the PC/CE and entertainment industries. In this instance it isn't about the pixels…it's about connecting the dots! Jobs has had a beautiful run with iPod and iTunes. It has changed the way ordinary people think about, interact with and use their music. The closely intertwined two have shaken the foundation of the RIAA which is trying desperately to deal with the new landscape, the brave new content world that gives both musicians and their audience freedom of choice.<!> Eisner and Jobs butted heads big time over the Disney/Pixar relationship. The egos of both parties wouldn't allow a deal no matter how much money was exchanged by either organization. Iger enters and the playing field has changed. Now two parties can discuss without animosity, with no prior history. The slate is clean and both firms can again talk! In addition to a movie relationship which both parties dearly want and need, Disney has other assets which have huge potential…ABC TV and its years of television content sitting in dusty warehouses. The two - Iger and Jobs - didn't just sit down to make a minor news event splash. They developed a scheme, a plan, a program that could prod the entertainment change. But they didn't play small by rolling out some old tired movies or TV series for people to buy/download onto their video iPods. Iger lead with his best cards, the network's leading TV series - Desperate Housewives and Lost - to produce audience appeal and jump-start a lifestyle change. In return Iger received? A little bit of incremental TV series content sales. Of course he did! A renewed relationship with Pixar and Disney for future movie, entertainment content. Certainly he did! Jobs has already proven his company/people can control content and attract an audience with huge music downloads. Ok so the Rokr phone didn't rock the world but it wasn't a new announcement rather a somewhat weak product extension that will certainly be enhanced in its future generations. It didn't succeed wildly but it also didn't eat into the iPod/iTunes market. The joint announcement showed that Apple can now become a content delivery mechanism for video entertainment management, control and distribution. Even if the relationship with Disney's ABC TV is to provide them with an "unfair share" of the download sale profits on the first offering, he wins because he has established the benchmark offering for the future. Want to play in tomorrow's video-my-way, my-time future? Let's talk. Why should consumers struggle with an on-going payment to TiVo and be concerned that the company is tracking their viewing habits just so they can watch their favorite TV show when they want? Why should they bother with a TiVo or a PVR to time shift and delete the ads? Cripes for $2, less than a latte they can download the show they forgot to record last night and watch tonight, tomorrow night, this weekend…whenever, wherever! <PAGEBREAK> Disney has already seen Apple's track record on handling digital rights management when it comes to music and tens of millions of people around the globe are "ok" with it - not completely happy but ok. Microsoft looks with lust at the music control/management that Apple has nurtured and grown. RIAA and music studio executives spend sleepless nights trying to determine the long-term impact of the iTunes/iPod phenomenon and how they can protect their livelihood, their futures. MP3 player producers join forces with Real, Napster, Amazon and the others in an attempt to eat from the same trough. It's a tough, expensive uphill battle but a little progress has been made. Suddenly though Iger and Jobs have moved to new more expensive, more profitable hills and for the time being…the big dogs rule. But hey…it's only a video "experiment." There is certainly nothing to be concerned about unless…Of course tens of millions of people could rush to Apple stores to purchase their video iPods in the months ahead. Desperate Housewives and Lost could become even bigger hits as ordinary folks download the shows to view on the train to the office the next morning or enjoy on their cross-country flights. Or even just show to envious friends/neighbors to show how with-it, how leading edge, how in-control they are with their entertainment lifestyle. The minor ripple in the pond could become a huge set of rogue waves that will upset MPAA's, Hollywood's and the network/cable service's rowboat. Don't even think about the advertising industry's boat which is also on the pond. Ironically Wall Street is a 20th Century Fox (CBS) film but Douglas as Gekko best explained the Apple/Disney relationship and announcement when he said, "The richest one- percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's bull****. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own." The two firms and their executives don't have souls that black but their announcement could very well be the creation of tomorrow's entertainment relationship between content developer, content owner, content manager/deliverer and content user. It's not the magnitude or the importance of the lowly video iPod's announcement or the meager launching of the video download service offering. But it does mark the beginning of tomorrow for the two disparate organizations, the two executives and the industries. Wednesday, October 13, 2005 could mark the beginning of the change in relationships between PC/CE firms and content developers/owners. The announcements were nice but not earth shattering. And they are not without their obstacles. Sony still has the PS3 and MS has the Xbox that have a strong potential for becoming the media/content controls for the home. While IPTV is making some gains into the home, cable companies still pipe much of the content to your house. At the same time there is an overwhelming demand by people, individuals everywhere to have their own content, their own information, their own entertainment with them and their way. The simplicity and elegance of the Disney/Apple announcement could mark the way we access, save, share and use our video entertainment in the future. The announcement clearly establishes Iger as the head of Disney and a major player in the content industry going forward. The announcement can strengthen Jobs and Apple as significant forces in the new entertainment arena. The two executives and two companies may not be 100 percent right but they have set the stage with the art of the deal. Now the industries have to determine how and where they can participate in the new arena. It is an announcement and market shift that organizations are going to have to analyze, dissect, interpret and deal with. If they don't we can only remind them what Charlie Sheen as Bud Fox said in Wall Street, "If you step out that door, I'm changing the locks."