Does Apple's Streaming Movie Rental Service Make Sense?

from the not-as-much-as-you-might-think dept

While most of the discussion following Steve Jobs Macworld keynote this morning was targeted on the Macbook Air superthin notebook (which does look pretty cool), some of the other announcements coming out of the keynote were potentially a lot more interesting. The first was Apple’s Time Capsule offering, which seems to have gotten lost in the hype around the other announcements. Sticking a big (500GB or 1TB) hard drive on a wireless access point may not seem like a huge deal at first, but it is an indication of how increasingly everything that we do is networked. Being able to separate storage from your computer makes for some interesting possibilities. Combined with the Macbook Air solution to do CD installs (mount a different drive on the network, basically), and you begin to see how Apple is making it easier to separate out the components of what used to be considered a computer, and make them all accessible via the cloud. That doesn’t mean that any individual solution will necessarily be successful, but it does indicate the direction things are heading in.

The other announcement that did get quite a bit of buzz was the very much expected announcement that Apple will begin renting films via iTunes. It appears the company has done a lot of smart moves here (many of which it probably learned after seeing what legions of earlier attempts in this space got wrong). It signed deals with all the major studios. It got agreements to allow online rentals soon after the DVD was released (1 month later, which is still too late). You can easily watch the movies via your TV if you have an Apple TV (perhaps a big if). You can transfer the movies to other (Apple) devices. They can start playing soon after you start downloading. They’re offering high definition movies, which will certainly appeal to some people (and should be extra worrisome for the folks betting on the success of next generation DVD systems).

However, it’s still based on a one-off rental model, with similar prices to what’s been tried before. Time and time again, we’ve seen that models like that later get trumped by subscription services — which is why it’s not surprising to see Netflix beefing up its own service by making it an “all you can eat” plan combined with efforts to get those movies on to television sets. And, of course, a rental model is fundamentally based on DRM systems to make the movie go away at the end of a “rental” period. Rentals make sense for physical goods, when you are returning the good at the end so it can be rented out again, but they’re an artificial construct in a world of digital goods. It may work initially, but it leaves Apple wide open to challenges from others down the road. On top of that, it shows Jobs’ rather conflicted stance on DRM: he’s against it for music, but for it when it comes to video. It’s also a bit surprising that the major studios all bought into this, as they’ve seen how Apple’s DRM system in the music world made it much more powerful, leading to the current backlash from the recording industry. So, it’s a good start, but it falls back on the wrong business model for long term success.

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Comments on “Does Apple's Streaming Movie Rental Service Make Sense?”

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44 Comments
Brad says:

It's just XBOX360 - with fewer users

When you look at what AppleTV is offering now (having lost nearly all their television show content) they’re basically offering a small portion of what the Xbox Live Marketplace can do. HD out of the box? Xbox does it. Rentals and purchases, both? XBOX does it.

Server-side memory of content, to recover in the event the local copy is lost? Well, iTunes still doesn’t do that, but XBOX does. And the XBOX has a larger installed base than AppleTV – by at least an order of magnitude.

Point is? They don’t offer anything new with this service, they make the same errors as their predecessors, and they don’t offer anything compelling in the service.

G says:

Re: It's just XBOX360 - with fewer users

I suppose you could make the same argument with the PS3, since it also does movies, music, pictures etc. But honestly, I can’t stand using the PS3 or the XBox for these things. The menus and navigation are too convoluted and the AppleTV is just so much easier, nicer, and more logical that, personally, I wouldn’t care to use either gaming system to watch a movie or listen to music.
I love the idea of renting, even if the movie is only 720P instead of 1080i (for my TV anyway) with Blu-Ray or HDDVD on the PS3 or XBox, respectively.
So it’s not, in my opinion, just like a gaming system without the games – the AppleTV really excels at what it’s supposed to do.

MS/Nintendo employee of the month says:

Re: Re: It's just XBOX360 - with fewer users

My XBOX360 is pretty quite when it’s just working off the hard drive, the DVD drive is what causes all the noise. So watching downloaded content is actually quieter than using watching a physical disk.
My system is right out in the open and the fan noise isn’t an issue.
I actually agree with the first post, between the Wii and XBOX360, I really have little need for the Apple TV. And if I didn’t have those I’d probably just be waiting (and hoping) for a Netflix set top box.

Teilo says:

As opposed to what?

Just distributing DRM free movies, and calling them “rentals”? I’m sorry, Mike, but I can’t agree on this one.

If they don’t “go away” after the rental period, than they aren’t renting movies, but selling them. The studio’s will never get behind selling all their movies for $5 a pop (HD version).

Most people don’t want to buy the movies they rent. They want them for 24 hours, and then they return them. I would buy an Apple TV to be able to do this.

This does for rentals what iTunes did for music in general. It mainstreames the digital distribution of rentals.

However, one thing you have absolutely right. The Apple TV release should happen simultaneously with the rental DVD release.

Mike (profile) says:

Re: As opposed to what?

Just distributing DRM free movies, and calling them “rentals”? I’m sorry, Mike, but I can’t agree on this one.

No, not renting them at all. There’s no reason to rent them.


If they don’t “go away” after the rental period, than they aren’t renting movies, but selling them. The studio’s will never get behind selling all their movies for $5 a pop (HD version).

The studios will get behind it eventually, because others will figure out how to make money doing other things (even giving the movies away for free), and that will force the studios to give up this idea of renting movies.

Most people don’t want to buy the movies they rent. They want them for 24 hours, and then they return them. I would buy an Apple TV to be able to do this.

That’s fine, but the “return” part is useless. If you only want a movie for 24 hours, get it and delete it.

This does for rentals what iTunes did for music in general. It mainstreames the digital distribution of rentals.

Sure, but you’re assuming that a rental model makes sense. It does not. And it’s merely an opportunity for another company to offer a service that works better that isn’t based on false scarcity.

However, one thing you have absolutely right. The Apple TV release should happen simultaneously with the rental DVD release.

Well, I also think that the DVD release should come out at the same time the movie itself is released, but that’s an entirely different debate.

ChurchHatesTucker (user link) says:

Re: Re: As opposed to what?

No, not renting them at all. There’s no reason to rent them.

Bingo. This is the problem with all these models. They’re trying to mimic how things work in the physical world, when things actually operate much differently in the digital realm.

The entire concept of a “Digital Rental” is stupid. They’re not going to get their bits back. They never loaned them to begin with. Everything on the internet is a copy. That’s what the internet is. That’s all it is.

G says:

Re: Re: As opposed to what?

Mike,
Can you elaborate on why you think the rental model is flawed and what the significance of scarcity is when it comes to renting?

My personal reasons for wanting to rent an HD movie are: 1. it’s about 1/5th the cost of purchasing a BluRay or HDDVD. 2. I watch most movies only once, then they sit there taking up space (I have three storage boxes of DVDs I’ve purchased over the years just taking up space.) 3. the online rental is even more convenient that the local rental place – the movie is always available, I can order it and watch it immediately, I don’t need to return it, there’s no late fee. 4. I don’t have to rip the DVD I bought and store it on yet another network drive along with the movies purchased online.

I see positive reasons for renting, and don’t quite understand why the model wouldn’t work.

Danno says:

Think about it from a historical perspective: Apple gains stranglehold over video market, Movie companies start getting concerned that they’ve fallen into a trap, everyone uses Apple product to watch media, only way to retain profits and not be beholden to Apple is to start selling media without DRM.

I see this as the Jobs maneuver: Casually crush the concept of DRM while reaping maximum profits.

For what it’s worth, I have to say, I’m more comfortable with paying for a DRM’d rental than buying a DRM’d video. Presuming there’s some movies I want to watch on this… I’m probably going to buy a couple of iTunes rentals in HD.

Joe says:

24 hours sucks

I don’t understand the 24 hour period part. The reason I like netflix is if I get interrupted during a movie and don’t get the chance to watch it again until the weekend I can. When you have kids and work at a job that requires you to be on call this happens all to often. Why can’t I just keep the movie on the hard drive until I’m done with it? Once I delete it I can get my next movie.

Fritz (user link) says:

I think it is important to note that Jobs doesn’t necessarily support DRM as much as he is forced to support it. RIAA and Movie Industry have forced Jobs in to using DRM, but every chance Jobs has had an opportunity to nudge the industry, he has. I know from read about it, that Jobs has been in negotiations with the movie industry for month (really years), trying to talk the executives down in price and restrictions. We all know now that they don’t budge very much. Jobs is no friend but I don’t consider him an enemy either.

Anonymous Coward says:

Why pay $4 when you can pay $1

I can go to the grocery store and get a $1 DVD rental from the REDBOX. They have all the new releases (when they come out) and it only takes ten minutes for me to get the movie (how long do you you need to wait for the download to buffer enough to play?)

From a cost benefit standpoint, there is no real added value to the streaming video, why would I pay 4 times as much for it?

RJ says:

Re: Why pay $4 when you can pay $1

I agree I think this is like everything else Apple the only reason anyone would want to do that is so the next day at the water cooler they can show how “hip” and tech savy they are. “Yeah, yesterday I watched that new movie on Itunes”, I’ve never bought into the tech version of keeping up with the Joneses,next week they’ll have something new and supposedly more convenient. Unfortunately this seems to be the way the industry is headed, lower overhead cost and assumed added security some hacker will figure or has figured out how to never “return” those movies anyway so good luck Apple.

Michael Long (user link) says:

So don't think of it as rentals.

You seem to be hung up on the terminology, so don’t think of them as rentals. Instead of buying a movie to own and watch again and again, think of it as a ticket you’re paying to watch a film once (or twice) in your own home theater.

Actually, with streaming it’s really an “on-demand” service anyway. One that can take a minute or three to start up. And if you have a slow DSL connection such that streaming may not be practical, you can queue up a couple of movies in the morning to watch that evening… or next week.

Colin Stewart (user link) says:

Apple movie rental plan is far from the cutting-ed

Apple’s stuck in the world of downloads, which work well for audio but not for video. So the competition isn’t just Apple vs. Netflix; it’s also downloads vs. Flash.

For more on this, you can check out a post in my blog, “Inside Innovation” [at innovation (dot) freedomblogging (dot) com], which quotes from this Techdirt post.

JAppFan says:

Better than Blockbuster

I rent movies on Comcast OnDemand all the time and they are $5 a pop and I can’t take them with on my iPhone, so I am all for the $3 (library price) up to $5 (HD price) which is the same price, and I don’t have to drive all the way to Blockbuster once a damn week and waste my time and gas.

Apple Rocks! and I am going to purchase my newly reduced Apple TV for $229 this weekend.

Can’t wait!

Freedom says:

Consumers need a Bill of Media Rights!

The only thing DRM does is encourage people to steal content as it makes it seem valuable to have something that you shouldn’t.

Take the flip approach and sell the movies for cheap via a monthly subscription (i.e. something like Netflix but without the DRM/protections in place). Once you download the movie it is yours to use for personal use and personal use only for as long as you’d like. Allow copying to whatever device as well – no DRM – period!

The consumer will always go with the easiest route IF there aren’t a ton of restrictions and expense in doing so. Despite the fact that you can download music for free, there are tons of folks that pay for music (especially DRM-free music) by using a service because it is EASIER and SAFER. There are also a ton of folks that will happily sit thru commericials if it means there content is free as well.

I personally think all DRM does is sell hard drives as it encourages people to horde any content that they have access to. I also think it is a huge negative for productivity as we end up spending a huge amount of time breaking DRM, finding the latest program, and keeping our media catalogs up to date – what a waste of personal time and resources.

I’d much rather just pay a monthly fee and have access to all the movies and let someone else deal with the time consuming process of managing all my media. In my perfect world, I have access to all the content, pay a monthly fee and download and watch whatever I want on that particular day. In turn, each time I downloaded something new a fee is paid to the movie company.

Shun says:

#15: Better than Blockbuster?

That’s nice, but the real competition here is NetFlix (and to an extent, XBox). The problem with the pricing models promulgated by Apple is that they’ll fail to catch on, especially if NetFlix aggressively markets their all-you-can-eat streaming service. And $20 to do on an iPod touch what comes standard on an iPhone? Pu-leez.

I wonder if Comcast will block Netflix downloads, since they will be using quite a bit of bandwidth to stream movies? Also, will NetFlix be forced to pay more for bandwidth, since they will be streaming videos to subscribers? Now, I’m just crying wolf, but think about this for a minute. The ISP’s are complaining about congestion now. If streams become a regular way to distribute movies, won’t the companies start screaming? Maybe these legitimate download services will give them the impetus to upgrade their networks. Maybe not.

The point of all this hub-ub is that this was the best deal Steve Jobs could get out of the studios. It really is an example of dealer discrimination. The MPAA doesn’t want Apple to dominate the media download market. They’ll cripple AppleTV and video “rental” just to keep Apple from becoming the dominant player.

This won’t stop the media pirates because they won’t perceive Apple as supplying a superior product. They want to be able to time/space/format shift their content in any way they see fit. Because Apple offers a crippled service, they won’t get much “buy in”. Besides, it will only be a matter of time before someone breaks the DRM and figures out a way to capture the stream.

Nice try MPAA. Too bad Apple had to suffer. At least they have the Mac Book Air to fall back on. I’ll never get an Apple TV. I’d rather build my own STB. Besides, a machine that can neither do Linux nor Doom isn’t that useful to me.

whit says:

nice product

Possibly a breakthrough product depending on how long the download time is and the quality of video during playback.

My habits may be different than some but I currently pay $2-4 dollars per movie, physically rented. I tried Netflix but never got my $16 worth on avg per month. Also having to not return the package and wait a week is a small but valuable benefit.

If Apple TV can let me choose what movie I want while at home, watch within 30 mins, and have it streamed without interruption, then it offers a substantial enough benefit for me to buy. Plus it offers viewing of pictures, YouTube…etc.

The ultimate product would be to combine the Time Capsule with Apple TV. Hell going a step further would be to add in a Mac Mini with a bluetooth keyboard mouse combo. 🙂

whit says:

nice product

Possibly a breakthrough product depending on how long the download time is and the quality of video during playback.

My habits may be different than some but I currently pay $2-4 dollars per movie, physically rented. I tried Netflix but never got my $16 worth on avg per month. Also having to not return the package and wait a week is a small but valuable benefit.

If Apple TV can let me choose what movie I want while at home, watch within 30 mins, and have it streamed without interruption, then it offers a substantial enough benefit for me to buy. Plus it offers viewing of pictures, YouTube…etc.

The ultimate product would be to combine the Time Capsule with Apple TV. Hell going a step further would be to add in a Mac Mini with a bluetooth keyboard mouse combo. 🙂

dstickst says:

Does ANYONE really pay attention to anything anymore? AppleTV/iTunes does not deliver full 1080p HD content. In fact, there is no indication the AppleTV can even output 1080p. All “HD” iTunes content is at 720p. Hence, said box is no challenge to next gen video formats (or should I say “format,” i.e. Blu-Ray).

If the hardware is full HD capable, then fine, I’ll agree it’s a good product. I’d be willing to rent 720p movies in lieu of physical DVDs or OnDemand titles. However, I will do this only with the assumption that once Blu-Ray becomes the defacto standard, iTunes will start offering their content in 1080p.

Otherwise you can count me out.

4-80-sicks says:

Re: Re:

Maybe people don’t pay attention, maybe they don’t have the same requirements as you. Who knows? Nobody ever said Apple tv does “full 1080p.” Guess what? 720 is in fact considered “high definition.” It may not be highEST definition, but the resolution is higher than standard def. Perhaps it’s a compromise to ensure that even people whose internet connection is less than 6MB/down will be able to use this service conveniently.

As for “next gen video format/s” I hope this is a serious challenge regardless of resolution. I’m really tired of discs, and they are getting less and less necessary.

RJ says:

Re: Re:

If I remember right it is only 720p at least it was when I sold them, I do think its a cool product and wish other companies would get on board with this. 1080P is going to be hard to find anywhere but on a physical disc cause of the bandwidth required that’s why Comcast and the satelite companies have had only 720P for so long, and I don’t quite trust the ones who claim 1080P. You know with all the new TVs being made now geared toward Blu Ray graphic quality either the internet networks are going to have to be changed or customers who are unsatisfied with pic quality are going to sink Apples and other similar streaming services ship. You can tell the difference between regular HD and Blu Ray on a decent quality tv so we’ll see.

Less frequent renter (profile) says:

One-off Rentals

I like the fact that Apples plan is a one-off rather than subscription. I stopped using Netflix when they went to the subscription service. If I consistantly rented 2 or 3 movies a week a subscription service would make sense. I don’t however want to pay a recuring fee when in some months I only watch 0 or 1 rental.

I know the subscription services are all the rage, but I think that is because they are best for the rental companies, not neccesarily for the customer.

hank says:

3.99 disks is the magic bullet

hey movie studios – lower the price of new movies to 3.99 and put them in supermarket checkout lines – the profit per sold will plummet but sales will go up 20x. Stop letting these rental scheme companies eat your lunch! wAKE UP AND REALIZE THAT EVEN THOUGH YOU SPENT 300 million to make the movie — it’s actual value to people is quite low. You have an opportunnity here if you would just realize movies are actually less valuable than audio CDs .

Alan says:

iPod as AppleTV

These movies could also be played on a TV using just an iPod, not an AppleTV. It requires buying the video ouput cable for the iPod and is limited to 480p or 480i depending on the iPod model and cable but it will allow a lot of people to try out the service. I plan to try it out w/ my iPod nano soon.
The downside is you would have to download the whole movie and transfer it rather than streaming it.
They are advertising the iPod capability for movies on the go but not for using iPod on your tv.

David Paxton (user link) says:

Is it really worth it?

For the cost of the itunes movie rental, the downloading time, the restrictive access times (30 days to start the movie or it expires and 24 hours to watch once started), and limited viewing options for most people…… I wish them luck. However, their promotional and brand weight in teh market may just pull this off. But I would expect the rental price would need to drop a buck or two.

General Ludd says:

Do any of these commenters actually try to downloa

I have a new MacMini with 2GHZ RAM and a large harddrive. OS is Leapard. Browser is Firefox, Safari, or Opera (i prefer Opera for its mail integration, but has problems with some web content). I have a wireless connection (768Kb). I have to use Flip4Mac.wmv to watch anything streaming on the Internet that would use Windows Media Player. (It is still unfortunately a windows world).

Unless they are doing some extreme compression, a typical movie to downstream and watch later is around 3 – 6 GB. At 768Kb or even 1.5Mb that’s a long time to wait (assuming the connection speed is constant, which it seldom is).I don’t want to have to suspend all other Internet activities for this.

I have been trying to watch a rerun of Comanche Moon on TV from the local CBS (KPHO) outlet. The picture is clear and the sound good but it stops every few seconds for as long as a minute before resuming. On the other hand i watched a rerun of the show Jericho and it seldom stopped. Also i could get a full screen presentation of the latter, while the Comanche moon could only show a small window and maddeningly would go to clips rather than the feature.

There appears to be no consistency in the way they use theå technology. I will stick to renting a DVD or (gasp) VHS Tape (which still has some advantages) to watch old movies/TV.I can run to the corner video store in less time than trying to pick through a cluttered web page to see something.

I also looked at the buy TV part of the Apple iTUNES store and most of the movies offered were nothing i was interested in. Apple isn’t alone; most sites seem to be more interested in spraying clips and scenes from movies (the equivalent of lurid billboards outside movie theatres that promise more than ever appears on the screen) over their pages. A simple, linear, alphabetical list of available offerings seems beyond their designers, or it is buried under “you might be interested in other similar offerings”.

Sincerely: The General

AdverseE says:

iTunes Movie Rentals will make no impact whatsoeve

Theres a very simple reason why iTunes has been so successful thus far. Easy and cheap. Anyone can spare a $1 for an mp3 and with the RIAA running around like cops on angeldust, people see downloading illegally as a real risk. In addition, the music comes out same day as the physical release (sometimes before), there is unique content available like the Itunes only artist sessions as well as free content.

iTunes movie rentals, well, thats a different story alltogether.

First of all, $4. $4? Even bypassing the fact that trying to create a physical world situation with ‘rentals’ in the digital world is ridiculous, I can rent a video for $4 at a Blockbuster! Or rent On Demand for $5. Why download a movie with a 24 hour restriction on it at the same price?

Secondly, the movies won’t be available until 1 month after their release? Really? I haven’t seen the contract that the major movie studios signed with Apple but they should have called this stipulation the “Certain Failure” clause. By the time 1 month goes by, everyone will have seen the movie that really wanted to (Via Netflix, Blockbuster, Redbox, bittorrent, etc…) Apple will be left scrounging for the people who are bored out of their minds on a Sunday night, homebound for some reason, that just have to see ‘Zoolander’ for the seventh time that second.

Apple should have held off starting this service until the movie companies agreed to a $2 rental price or a $4 sell price. That’s what it comes down to. But the movie industry is scared shitless watching the music industry slowly crumble (as it should.) They know they’re next and they are trying their damndest to keep their eyes closed and their fingers in their ears.

Realist says:

Honestly, just like one of the guys posted above… why pay $4+ to rent when you can rent at the grocery store kiosk for $1.50? If Apple really wants to succeed, they need to rent standard def movies for $1.50 and HD movies for $2.50. They don’t have to maintain brick and mortar stores and purhcase physical media(DVDs) to keep in stock like Blockbuster, so why are they charging the same prices for rentals? If they lowered the prices to $1.50 and $2.50 I’d have an Apple TV in hand at the checkout line right now and Apple would be the complete home entertainment solution for everyone – music from ipod and movies/TV shows from apple TV.

daisy says:

I’d much rather just pay a monthly fee and have access to all the movies and let someone else deal with the time consuming process of managing all my media. In my perfect world, I have access to all the content, pay a monthly fee and download and watch whatever I want on that particular day. In turn, each time I downloaded something new a fee is paid to the movie company.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
daisy
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