Why Apple is all sound, no vision

11 Oct 2007

iTunes is offering movie and TV downloads — but why aren’t they available to customers outside the US and UK?

As you take your shiny new iPod media player out of its box and marvel at the shimmering thing of beauty you are holding up to the light, don’t be too dismayed to learn the one thing you won’t be doing is watching movies downloaded from Apple’s iTunes store on it. At least not any time soon.

This is not because the popular music and video-playing device isn’t working properly. It’s because outside of the US and the UK no one at present can buy the latest movie and TV show collections.

On the Irish iTunes store, you can can access a phenomenal library of three million songs, but the only visual content available to Irish buyers at present are 48 music videos, six Pixar cartoons and a handful of games and podcasts.

On the US iTunes store, however, buyers can access the latest movie video releases and entire seasons of popular shows like South Park and Grey’s Anatomy.

For Irish iPod owners and digital media enthusiasts this must be frustrating, not to mention reminiscent of the delay in the opening of the iTunes store, which opened here in early 2005, almost a year after the US and several months behind the rest of Europe.

This was due to legal wrangling over licensing with record labels. Similar issues regarding rights with major studios are believed by many to be responsible for the delay in offering video content.

For independent film producers based in Ireland, iTunes could represent a major avenue for future revenues, says Stephen McCormack, chief executive of Wildwave, a company specialising in packaging Irish and international content for new platforms such as Vodafone 3G, Joost and Google Video.

“While we look forward to being able to sell content on iTunes, we know why there’s a hold-up. It takes a lot of resources to manage video rights and everything on TV is sold on a territorial basis,” says McCormack. “Negotiating video rights in 50 different countries is not easy.”

McCormack says he has been in touch with contacts in the US working “feverishly” to launch iTunes on a country-by-country basis worldwide. “But it’s hugely unlikely we’ll see a launch before Christmas. Indeed, whether we’ll see a commercial launch of the iPhone in Ireland before Christmas is unlikely too.”

Apple was asked about the likely launch of an iTunes video store in Ireland but the firm declined to comment on a launch date for Ireland.

A spokesman confirmed that in the US an iTunes catalogue of 550 TV shows and over 500 movies has resulted in sales of over 100 million TV shows and over two million movies.

“The UK iTunes Store launched in August with 28 TV shows and a commitment from Eddy Cue (Apple’s vice-president of internet services) to add more programming. South Park currently dominates the UK sales chart with the top four episodes,” the spokesman says.

McCormack believes that Apple may try to tie in the launch of video on iTunes with the launch of the much-hyped iPhone device, for which O2 in the UK recently achieved exclusive distribution rights.

“We all moaned about the launch of the music store and eventually it came,” says McCormack. “Any store that opens up should have a good selection of local content such as local TV and film products.”

However, he adds that the longer it takes for Apple the more chance it may lose competitive advantage to players like Amazon.com and emerging platforms like Joost. “But Apple’s advantage is that it has an entire device network out there — the thousands of people who own iPods — that it can sell content to.”

One Irish company already selling content in the form of video podcasts on iTunes is Dublin-based video production company Mercury Boy, headed by Tim Duggan (pictured). The company creates viral podcasts and short films for companies like Ben & Jerrys, 3 Mobile and Energy Efficiency Ireland as well as video jockey and music video services.

“iTunes right now would be a small part of our overall distribution network as we distribute short films and podcasts in other places like YouTube and Joost. But we are selling across iTunes internationally.

“At the moment we’re not too concerned about the higher end of the market such as the US where big studio producers like HBO would dominate.

“However, we are concerned about when it is likely to come here as we’re in talks with financiers who may back future content that we create.”

Duggan believes one reason for the delay of the iTunes video store in markets other than the US or UK could be a design on Apple’s part to play ball with the major studios like Warner and Universal.

“Steve Jobs had to jump through hoops and eventually had to sign up to rigid DRM (digital rights management) contracts with record labels and may be trying to avoid the same situation with the movie studios. He wants to offer content at attractive prices but may only do so when the
studios agree.

“Christmas is a great time for DVD sales but why give people DVDs when you can email them vouchers? iTunes could have a major effect on the European DVD market and it might be too much to ask the studios. But once we see the dust settle on Christmas DVD sales we may see the onset of Irish and pan-European iTunes video stores offering premium content.”

Duggan agrees with McCormack’s assertion that Apple has cleverly created its own closed loop content market. “There are more than one billion video iPods out there and Apple has already sold one million iPhones in the US. It’s not a case of Apple muscling in on anyone else’s market because it already owns the market.”

Karen Fennell, marketing manager of the 3G chain of technology stores around Ireland, says Ireland has a loyal, even zealous, Apple customer base and that the current lack of video content on the local iTunes store is not slowing sales.

“Many iPod buyers are buying the devices for future content. Our first batch of iTouch iPod devices sold out last week and we’ve a list of customers waiting to buy them.”

3G operates Ireland’s only dedicated Apple Store in Galway as a premium reseller for the company. “Irish Mac lovers are zealously loyal to Apple but it’s not quite as cult as it used to be when it was the domain of designers and ad agencies — but a lot more consumers are using Apple to manage their digital lifestyle of movies and photographs.”

Returning to the issue of the iTunes video store, she says: “We believe the situation will definitely right itself. It’s really a matter of ironing out rights issues.

“Consumers can still enjoy the capability of transferring video to their iPods. The Irish market predominantly is still focused on music.

“However, it will be the early adopters who will demand to download video,” Fennell concludes.

Capturing the next wave in digital movie-making

Stephen McCormack’s Wildwave Technologies has worked with the local mobile industry to repackage Irish film products for consumption over 3G networks and lately has branched into Asia and North America to offer online TV services.

The company has been at the spearhead of putting products on the Joost internet TV platform, launched earlier this year by the founders of Skype and Kazaa.

The first league to be carried in season on internet TV service Joost will be the Canadian Football League (CFL) and is being brought on board by Wildwave.

Wildcard Sports is one of four channels that the company has on Joost,
the others (IamTV, Wildlight Channel and Havoc Television) are focused mostly on independent film and music.

McCormack believes that when Apple’s iTunes store begins selling movies and TV drama to the Irish market, his company will be in the first wave.
He claims that exposure to negotiating rights and licences gives him an understanding of the complexity facing Apple as it rolls out digital video services.

McCormack is optimistic: “We have worked with Apple and iTunes before. When it opens the store in Ireland we will want to be a partner.

“Our feeling, since the UK store opened in recent months, is that Apple is fast-tracking iTunes’ video store capability for countries that will get the forthcoming iPhone first.”

By John Kennedy