Jobs may have it wrong on iTunes movies

Stan Beer
Tuesday, 20 June 2006 13:57

IT Industry - Strategy

Apple computer is getting ready to enter the movie downloads business in 2007. However, if the reports about its intended pricing model are correct, then CEO Steve Jobs may have bitten more than he can chew.

A report from entertainment site variety.com says that Jobs intends to apply the same pricing model for movie downloads as Apple currently has in place for music tracks, except 99c per track becomes US$9.99 per movie. The price point was apparently chosen for no better reason than it is easy to remember and, as is the case with music tracks, Jobs refuses to accept multiple price points. The naivety and simplicity of the
logic is breath taking but Jobs reportedly is taking the same take it or leave it tack with Hollywood that worked so successfully with the music business.

There is only one problem. Movies are not music tracks and movie consumers are not music consumers. People buy music and rent movies. Yes some people will buy a DVD of a movie classic or of a movie they particularly like. However, it is the exception rather than the rule. Very few consumers, other than fanatical movie buffs keep vast collections of DVDs loaded with their favourite movies. Perhaps Jobs thinks he can turn movie renters into movie buyers simply by offering downloads on iTunes but it's a pipe dream. There's only so many times you can watch Spiderman and, if it's not on cable this month, you can rent it from Blockbuster.

There's another issue that Jobs for some reason refuses to acknowledge. The release cycle of music and movies are not similar. New music is released straight to the music store or iTunes. New movies go to the big screen cinema first. Then they go to DVD. It would be very surprising if Hollywood messed around with that sales model.

In the video store, the older a movie gets, the cheaper it becomes to rent. Music keeps its value for as long as the recording artists keep theirs. An old Stones song costs the same as a new Stones song and no-one complains. Movies on the other hand as a general rule get less popular and cheaper to rent the older they get.

The other thing about movie downloads is that they going to take a long time even with a very fast internet connection. For many consumers, a movie download just won't be worth the trouble. However, if you're going to watch them it's certainly not going to be on an iPod so exactly how Apple intends to make money is not exactly clear. Any attempt to restrict movie downloads to exclusively Apple hardware in the same way as music downloads are restricted to iPods would be madness.

All that said, however, when he does something Jobs usually has something up his sleeve. If he does in this case, it defies the imagination of the rest of us.