Cringely: How Apple plans to own your living room

20 years ago

“As anticipated in last week’s column, Apple’s special event came and went this Tuesday and with the exception of the two HDTV models I predicted, it went the way I said it would. And those big screens are likely still coming before the Christmas season, just as Apple launched three new iMacs last week without putting Steve Jobs onstage,” Robert X. Cringely writes for PBS.

“But now let’s put this week’s Apple event in some context and understand what it is and isn’t, because there is a lot happening here. It generally comes down to a word we used to use all the time but haven’t much since the Internet crash of 2001 — disintermediation … [which means] cutting out the middlemen and splitting with the consumer what would otherwise have been the revenue of those disintermediated sales organizations,” Cringely writes.

“What I want to do here is to compare Apple’s position with Microsoft’s and Google’s or Yahoo’s. Microsoft, with its Media Center PC, isn’t ‘disintermediating’ anyone. Now in its third unsuccessful generation, the Media Center PC is a $1,000 TiVo box intended mainly to capture, store, and replay broadcast and cable TV. Microsoft has been unwilling to take the side of either the producer or distributor, and that very unwillingness has been its undoing,” Cringely writes.

Cringely writes, “Notice that the Apple announcement said nothing, really, about broadcast or cable TV. iTunes carries 220 TV series from 40 networks, Steve Jobs said repeatedly, but the actual television experience — commercials and all — isn’t replicated in any sense by the shows that are downloaded from Apple. It is a strictly retail experience: you pays your money and you takes your choice. We’re not bending the cable operators to our will, we are simply ignoring them. But what might have been the cable company’s piece of the action can now be shared between the producer and the viewer, with a cut for Apple of course. Apple has taken a side and that’s the side of the producers, not the historic distributors.”

“Contrast this with Google or Yahoo and even with Microsoft in recent years when everything seemed to be moving to being ad-supported. Where is advertising in Apple’s strategy? It is nowhere to be found,” Cringely writes. “By selling outright, Apple doesn’t need ad sales to succeed, reducing its risk. It also reduces downloads, I am sure, but that’s not all bad… Just as Apple isn’t Microsoft relying on working with the TV networks and cable channels, Apple isn’t dependent on advertising, either. PVR (personal video recorder) functionality and advertising can easily be added at a later date if that is justified by market conditions or revenue expectations. Yet for Microsoft or Google going the other way — from free with ads to paid — it is that much harder a task… When Apple needs more revenue from its hardware products, it can always sell a PVR upgrade for $99. The ongoing profit potential is immense”

Cringely writes, “Whatever happened to the Year of HD that Apple declared at MacWorld in January 2005? In reviewing this week’s webcast, I don’t recall once hearing the terms ‘HDTV’ or ‘High Definition.’ What changed? Apple deliberately repositioned its movie offerings to be better than broadcast quality but less than DVD quality and quite a bit less than HD-quality. Doing so saves on bandwidth (though less than you’d guess — moving NerdTV from 320-by-240 MPEG-4 to 720-by-480 H.264 increases the required bandwidth by only about a factor of two, the new codec is so much more efficient), but it is also politically expedient when thinking about Wal-Mart, Best Buy, and Target — the three largest sellers of DVDs and, not at all coincidentally, the three largest sellers of iPods, too.”

“It is a brilliant and finely honed strategy that first targets the cable companies everyone loves to hate, identifies with the studios and calms them, calms Wal-Mart and Target, too, then eventually offers in the iPod an ultimate video container that can be filled over the Net or at a store,” Cringely writes. And what about the iTV? “Apple will sell a ton of these and then will build this functionality into their HDTVs, which will be what differentiates them from the other guys.”

Full article with much more – highly recommended – here.