All Things Digital

Steve Jobs has apparently accepted the unacceptable: Things don’t always go Steve’s way. The mercurial Apple (AAPL) CEO has been notoriously intransigent when it comes to matters of variable pricing on iTunes, arguing that charging higher prices for more popular content might backfire, sending customers off to the file-sharing networks. Now, as predicted yesterday, he appears to have reconsidered that stance, at least when it comes to HBO’s Emmy Award-winning programming.

This morning, Apple’s U.S. iTunes Store began offering six HBO series: “The Wire,” “Flight of the Conchords,” “Sex and the City,” “The Sopranos,” “Rome” and “Deadwood.” The first three are priced at iTunes’ standard rate of $1.99 per episode. The second three are $2.99 each, marking the first time Apple has allowed variable pricing for TV shows in the U.S.

Quite a coup for HBO (TWX), especially given some of the other concessions it was able to win from Apple: HBO programs won’t be offered for purchase on iTunes until they hit the DVD window, and new episodes of series won’t be available until months after their TV premiere.

HBO (TWX) has reportedly managed to do what NBC Universal (GE) failed so miserably at last year: convince Apple (AAPL) to adopt variable pricing at its iTunes digital media storefront.

Sources close to the network tell Portfolio.com that Apple will soon bring its programming to iTunes along with a separate and distinct pricing structure. No word yet on what that pricing structure is, but presumably it’s a lot more favorable than the one NBC Universal had.

An interesting move for Apple, and one that marks a shift in the company’s hard-line views of pricing. Perhaps the HBO arrangement is unique, perhaps not. But even if it is, it won’t be long before the entire content industry begins demanding similar deals.

With its curvier edges, stylish silver trim, half-VGA 480-by-320 pixel screen and improved iTunes compatibility, Research in Motion’s (RIMM) new BlackBerry Bold should be a big hit with IT operations professionals convinced the iPhone isn’t an enterprise-class mobile device but driven to near-aneurysm by discontented employees demanding them.

The device is largely as expected–an iPhonish-looking thing with both GPS and Wi-Fi, 1GB of permanent flash memory, a 2-megapixel camera, full HTML browsing, 3G support on GSM networks with HSDPA access and, of course, the BlackBerry’s one-trick killer app: instant, secure email. That’s a compelling combination for business users and casual ones not easily swayed by the iPhone’s hype juggernaut as well. Indeed, Citigroup analyst Jim Suva says it could boost RIM’s quarterly shipments by 200,000 to 400,000.

But perhaps not without a bit of struggle. The BlackBerry Bold won’t ship until as late as August, which means Apple (AAPL) could beat it to market with the enterprise-friendly 3G iPhone it’s rumored to be uncrating at its Worldwide Developer’s Conference in June. Which has got to worry RIM. After all, the first-generation iPhone had claimed a 28% market share by the fourth quarter of 2007. That’s still less than the BlackBerry, which holds about a 41% market share, but the iPhone hasn’t even been on the market a year.

Was he inebriated? Do you even know anyone who owns a Zune?”

–-Apple CEO Steve Jobs on Microsoft’s claim that the Zune is now a worthy alternative to the iPod.

Despite its feature differentiations and, er, “distinctive” color palette, Microsoft’s (MSFT) Zune has yet to prove itself the iPod killer it was once touted as. Since its launch in November of 2006, the Zune has sold 2 million units. In comparison, Apple (AAPL) in its last quarter sold 10.6 million iPods–quintuple Microsoft’s cumulative sales to date. Zune’s market share in this space during the first quarter: 4%. Apple’s share: 71%.

Clearly, the only thing being killed by Microsoft’s iPod killer are Microsoft’s chances for unseating Apple in a market that would seem–according to relatively flat year-over-year iPod sales–to have peaked without it.

Hollywood is finally embracing day-and-date film releases.

Yesterday, Time Warner (TWX) CEO Jeffrey Bewkes said that Warner Bros. plans to experiment with VOD releases day-and-date with DVD later this year. And now this morning, Apple (AAPL) announced that a number of major and independent movie studios have agreed to make their films available on iTunes day-and-date with DVD–$9.99 for library title purchases and $14.99 for new release purchases. Among the studios participating in the deal: 20th Century Fox (NWS), Walt Disney Studios (DIS), Warner Bros., Paramount Pictures (VIA), Universal Studios Home Entertainment (GE), Sony Pictures Entertainment (SNE), Lionsgate (LGF), Image Entertainment (DISK) and First Look Studios (FRST.PK).

An impressive lineup and one that clearly heralds a shift in the movie industry’s view of digital distribution. A shift in iTunes movie purchases as well–upward. The removal of Hollywood’s typical 30-day lead time on DVD releases will no doubt boost new-release sales on iTunes, assuming customers don’t mind paying $14.99 for films that lack the extra features and picture quality of their DVD counterparts. It will boost movie studio revenues as well. With no manufacturing and reproduction costs to speak of, margins from day-and-date download releases are presumably quite high.

So much for that hard-fought DVD format war …

It’s likely an anomaly inspired by iTunes gift cards doled out over the holidays, but according to a Jan. 8, 2008 NPD Group Music Survey leaked to Ars Technica, Apple (AAPL) surpassed Wal-Mart to become the number one retailer of music in the the US. Quite an achievement. A short-lived one, though. Let’s not forget that Apple was the number 2 music retailer in the US as of Feb. 26, 2008.

UPDATE: Well, what do you know. Apple was the number one music retailer in the US in January. And it was the number one music retailer in February as well, despite its “we’re #2 proclamations. This according to a press release issued by the company this afteroon, in which Apple said it has bested Wal-Mart for the top music retailer spot, based on the latest data from the NPD Group.

Apple offered the news with a bit of a reality-distorted caveat, though. The latest NPD Group data to which it refers was culled from the research outfit’s MusicWatch survey which “captures consumer reported past week unit purchases and counts one CD representing 12 tracks, excluding wireless transactions.”

As of this writing 8 of Wal-Mart’s 10 top-selling CDs contain more than 12 tracks, including one that boasts 22.

Back in 2000-2001, when the Recording Industry Association of America was still trying to recover from its CD price-fixing scheme with poorly reasoned justifications for CD price inflation (”Listen, if CD prices were governed by the Consumer Price Index, you’d be paying $33.86 for them instead of $12.75!”), a little company called Napster came calling. Napster had pioneered a new Internet distribution model for digital media that was revolutionizing the music industry, and it hoped to partner with RIAA member labels to create a subscription-based service.

At the time, Napster had some 20 million users worldwide and was essentially the de-facto file-sharing standard. Had the RIAA labels agreed to the alliance, they might have turned peer-to-peer distribution into a new and powerful business model, one with low distribution and marketing costs and a fast developing user base. But they didn’t. They chose another route.

Big mistake. Along came Gnutella. And increased broadband penetration and cheaper storage. Along came Kazaa. And then came BitTorrent. And, well, look at the industry now.

Given such history, it’s difficult to look at the recording industry’s plan to have a monthly fee added to consumers’ internet-service bills and not shake your head in wonderment.

Portfolio.com reports that Edgar Bronfman Jr.’s Warner Music Group (TWX) has indeed hired veteran industry consultant Jim Griffin (no relation to Peter, right?) to quarterback a plan under which consumers pay an Internet-access surcharge of $5 a month for the collective right to freely share music. Those fees would be pooled and divvied up among artists and their labels.

“Ideally, music will feel free,” says Griffin. “Even if you pay a flat fee for it, at the moment you use it there are no financial considerations. It’s already been paid for.”

Ah- charge everyone for all music. So it is Monetization Without Representation. OK. But what gives the music industry the right to tax all broadband users because it suspects some of them might illegally share its content? And if the music industry deserves that right, then doesn’t the film industry deserve it as well? And the publishing industry? And any other industry that might benefit from such a tax?

As David Barrett, engineering manager for peer-to-peer networks at Web content-delivery giant Akamai (AKAM), notes Griffin’s plan is problematic. And desperate.

Said Barrett:, “It’s too late to charge people for what they’re already getting for free. This is just taxation of a basic, universal service that already exists, for the benefit a distant power that actively harasses the people being taxed without offering them any meaningful representation.”

Lest there be any doubt that DVR functionality was purposefully left out of Apple TV, consider this patent recently unearthed by AppleInsider. Filed in October of 2006, the patent describes not just a version of Apple TV capable of browsing and recording live TV programming, but a touch-based remote that could be preloaded with upcoming TV listings to facilitate it. From the patent:

For example, program data for upcoming programs, e.g., for the next month, can be downloaded and stored on the remote control device. Thereafter, a user of the remote control device can search programs that are to be broadcast and determine which programs to record. The recording settings can be programmed onto the remote control device, and then be provided to the video device when a data communication is established between the remote control device and the video device.”

Pretty slick, eh? Lots of additional possibilities here as well. One could easily imagine the iPod Touch and iPhone serving as the remote the patent describes. And if this next-generation Apple TV is capable of recording TV programming, why not make it the gateway through which such programming is delivered? How nice would it be to subscribe to HBO–and HBO alone–via iTunes? How nice would it be to subscribe to a season of “Weeds”? Or to a commercial-free season of “The Office” and skip everything else NBC has to offer? How nice would it be if the latest unwatched episode of “Weeds” on your Apple TV was automatically synced to your iPhone for later viewing? How nice would it be if new films opened on iTunes the same day they opened in theaters?

Pipe dream? Perhaps. Certainly, these scenarios would require Apple (AAPL) to ink some fantastical new licensing deals with Hollywood. And the two aren’t exactly seeing eye-to-eye all the time these days. Still, you never know. Stranger things have happened.

Looks like the long and winding road that leads to the iTunes Store may disappear after all.

With their trademark dispute over the “Apple” brand finally settled and the solo work of Beatles John Lennon and Paul McCartney already for sale on iTunes, Apple (AAPL) and the Beatles’ Apple Corps. are rumored to be negotiating a business alliance that will bring the Fab Four’s remastered back catalog to the digital music store–for a sum of as much as $600 million.

Reports of the deal have the Beatles’ back catalog arriving on iTunes “within months,” perhaps even accompanied by a special edition “Yellow Submarine” iPod. That said, they should all be taken with a grain of salt–if not an entire salt flat. Apple has already dismissed them as “unsubstantiated speculation.” “This is not news, nor is it a scoop,” an Apple spokesman told Billboard.

Perhaps. Perhaps not. Discussing a potential iTunes deal with Billboard.com last November, McCartney said “it’s down to fine-tuning, but I’m pretty sure it’ll be happening next year, 2008.”

With the Apple TV Take Two, we think we have it right this time. I think we have a great product.”

–Apple Chief Operating Officer Tim Cook, Jan. 23

Promises, promises, promises … When Apple (AAPL) debuted iTunes Movie Rentals this past January, the company pledged to offer “over 1,000 titles by the end of February, including over 100 titles in stunning high-definition video with 5.1 Dolby Digital surround sound.” Well, today’s March 4 and, as best I can tell, Apple hasn’t kept its promise. Browse iTunes this morning with the software’s “Power Search,” and you’ll find just 411 films for rent–91 of them available in high definition. That’s 589 short of the promised 1,000–a discrepancy of nearly 60%.

Seems Apple may not have Apple TV quite right yet after all–the Hollywood licensing part of it, anyway.

UPDATE: At the Apple shareholder meeting yesterday, CEO Steve Jobs confirmed the discrepancy, saying the company’s goal of 1,000 rental titles on iTunes was short by around 600.