Portable music players were around before Apple Computer Inc. Chief Executive Officer Steve Jobs got involved in digital music, but four years after the launch of the first iPod, Apple now owns 75 percent of the MP3 player market. Now that Apple has staked a claim to the portable video market, can the company duplicate its success with music in the vast wasteland of television?

Apple has several things working in its favor, according to analysts interviewed after Apple's big television announcement Wednesday. Users of Apple's iTunes music software will now be able to download episodes from five ABC Inc. television shows, music videos, and short films from Jobs' Pixar Animation Studios on their PCs or Macs, and transfer them to a new generation of iPods, Jobs said at a media event in San Jose, California.

For one thing, Apple hasn't gone off and tried to create a video-only version of the iPod, said Roger Kay, president of Endpoint Technologies Associates Inc. in Wayland, Massachusetts. The new iPods are really just an evolutionary step from the photo iPods introduced last year, he said.

"It looks like a fairly conservative move on Apple's part. They're replacing the existing high-end iPods at the existing price points with bigger capacity and the ability to do video," Kay said. Some iPod users are always going to prefer the high-capacity iPods that can play thousands of songs over the smaller iPod nano and iPod Shuffle models, and Apple has just decided to build video capabilities into those handhelds for no extra charge, he said.

And Apple has also overcome what analysts saw as the most difficult roadblock -- a content relationship with a major production company in ABC, said Richard Doherty, principal analyst with The Envisioneering Group in Seaford, New York.

Other companies, such as Creative Technology Ltd., Handheld Entertainment Inc. and Archos Inc., have developed portable video players that can play video recorded from a television or downloaded from the Internet. And fledgling services such as Movielink LLC and others allow users to download movies and television programs to their PCs or Macs.

But iTunes has around 200 million users, mainstream users who have already gotten used to Apple's music download model, said Sam Bhavnani, senior analyst with Current Analysis Inc. in San Diego. "That's a very big audience they can go after," he said.

The iTunes television shows, such as the popular hits "Desperate Housewives" and "That's So Raven," can also be watched on PCs or Macs, which might be more appealing to many users, Bhavnani said. Other users, such as teenagers, might prefer the portability of an iPod, he said.

Apple will probably have more announcements linking iTunes to other networks or cable channels before the end of the year, Doherty said. Video professionals across the industry prefer Apple's Quicktime video format when creating and editing shows, he said.

The new video services from iTunes will be an important early test of the mass market's willingness to download video content, analysts said. The other early download services have not captured the attention of most PC users, and portable video devices aren't exactly flying off the shelves. Apple has a proven brand and distribution method that could help it establish a foothold in what most believe will eventually be a healthy video download market, they said.

The real payoff could come later, when movie studios get on board, Kay said.

"What's more interesting, ultimately, is the premium content from Hollywood. Who gets the first-run movies over a computer?" Kay said. Movie studios will watch Apple and ABC's performance carefully as they attempt to figure out their own digital distribution models, he said.

Should Apple enjoy the same success in television that it did in music, it will have the inside track at movies, Kay said.

» posted by abennett

IDG News Service

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