Parks Associates & The Entertainment Technology Center at USC have published a whitepaper, “How Hollywood Can Out-Apple Apple,” which reads in part:

Ninety percent of all broadband users have a mobile phone, but only 10% regularly use it to watch video; just 6% regularly use it to watch live TV. Similarly, one-half of all broadband users have a portable MP3 player but only 10% regularly use it to watch video; roughly one-half the number that have a video-enabled player. Why have consumers not been more receptive to portable video platforms? The answer lies in a mixture of technological and business challenges plaguing the industry.

For years, big-box retailers have used music and movies as a loss-leading lure for store traffic. Apple adapted this strategy to the digital age by offering content as a low-margin lure for hardware. The company gave away millions of free music tracks in order to prime the market for iPod sales. It likewise offered low-cost price points on movie and TV titles in order to promote ‘video’ iPods. The strategy has been a great success for Apple, but content producers have been less enthusiastic. The content sold by itself does not generate substantial amounts of revenue.

MacDailyNews Take: Giving away free music tracks did not “prime the market for iPod sales.” (See: Pepsi’s Apple iTunes promo nightmare, only 5 million songs redeemed.) The ability to rip our already-purchased CD libraries are what sold iPods initially and still sells iPods to new customers today. Anyone who tells you differently doesn’t know what the heck they are talking about. Furthermore, the lack of the ability to easily rip already-purchased DVD libraries via iTunes is the number one reason why consumers not been as receptive to portable video platforms as they have those that play music. (Yes, we know about HandBrake, but until it’s a feature in iTunes, it’s not mainstream.)

More from the “How Hollywood Can Out-Apple Apple” white paper:

Hollywood need not let Apple make all of the profit. If Apple is effectively using content as a loss-leader (or at least break-even leader), then Hollywood should similarly leverage content to promote sales of its flagship products. The latter must simply employ a different strategy.

Rather than asking “How much money can we make on portable content?”, the question should be “How can portable content help me make money?”

The full free white paper is available (pdf) here.

[Thanks to MacDailyNews Reader “Brawndo Drinker” for the heads up.]

If Hollywood really wants to make money, they should simply drop the senseless DRM they insist upon as it only punishes paying customers while generating laughter from pirates.

No white paper is necessary: Sell us good content that’s free of draconian restrictions at a reasonable price and we’ll make you rich beyond your wildest dreams.

Interestingly, Disney is listed as one of the The Entertainment Technology Center at USC’s “executive sponsors.” We’ll see how long that funding lasts.