Analysts: iTunes, iTV form complete package

In the span of an hour-long Steve Jobs presentation Tuesday, Apple gave its customers a new way to buy full-length movies online and, through a device the company expects to ship early next year, a way to watch those movies on their TV screen.

The combination of iTunes movie downloads and the iTV set-top box delivers iTunes video to the living room through a dedicated Apple hardware device. More important, analysts say, it solves a problem that has dogged other technology companies that have eyed the home-entertainment market.

“An end-to-end solution, that’s what it’s all about,” Michael Gartenberg, JupiterResearch vice president and research director, told Macworld . “It’s not enough to just have movies on your computer and your iPod, you also have to be able to watch them on your television and get them there easily.”

For that reason, the iTV, which will use 802.11 wireless networking technology to stream movies from a computer to a television, was the hit of Tuesday’s spate of product announcements from Apple.

“Most of the stuff was expected, but that little set-top box is going to be a big hit,” said Roger Kay, president of market research firm Endpoint Technologies Associates. “[Apple] hit the design and the price point right on with that one.”

The $299 iTV relies a connection to iTunes to stream its content and doesn’t have any interaction with the iPod—one of the first media offerings for Apple that doesn’t heavily feature the popular music player. Apple said that decision did not reflect a strategic move away from the iPod, but rather a way to complete the company’s digital offerings.

“You can have your music and video in your pocket, on your computer and now on your television,” said Greg Joswiak, Apple’s vice president of Worldwide iPod Product Marketing.

As Apple tries to woo home users with a way to play digital content on their home entertainment systems, the company faces some stiff competition—mainly from its old sparring partner (and major Mac software developer) Microsoft.

“This is not Apple knocking an MP3 player-maker out of the way,” Kay said. “Microsoft is an established competitor in this market.”

Microsoft and Apple have completely different strategies when it comes to their media center outlooks. Microsoft’s offering enables people to capture television shows, much like a TiVo does, while Apple’s strategy is to give users an easy way to access content purchased from iTunes.

“Putting your computer next to your entertainment system is not the way to go,” Apple’s Joswiak said. “We try to match the behavior that people already know — if you want to play a DVD, you need a DVD player; if you want to play iTunes content, you need an iTunes player. It’s simple for users.”

While users have waited impatiently for Apple to deliver a device to seamlessly stream their content to the television, Endpoint’s Kay thinks that the wait was worth it.

“This is going to be the frontier of video in the home,” he said. “Apple waited to participate in this market until the technology matured—the infrastructure is stressed by video, and Apple wanted to deliver a good user experience. However, they are not going to walk away with video like they did with audio.”

With movies now available at the iTunes Store, Apple is positioning itself to dominate that market as it has with the MP3 players, online music downloads and television show downloads.

However, Apple entered the movie market with a big-name competitor already open for business. Last week Amazon launched Unbox, the online retailer’s movie download service. However, JupiterResearch analyst Gartenberg doesn’t think Apple has much to worry about with Amazon.

“The [Unbox] technology doesn’t work very well,” Gartenberg said. “Most consumers are not going to go through that to download a movie.”

In delivering the products and iTV sneak peek, Apple said it focused on what it always focuses on—the customer and the user experience.

“I think we are innovating and coming up with new ways of doing things,” said Eddy Cue, Apple’s vice president of iTunes. “We focus on our customer. We want it to be easy to use and we want to offer quality content at the right price.”

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