iTV set to battle DVD

Apple logo on a store window

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MARK AUSTIN THOMAS: Today Apple CEO Steve Jobs will address the faithful at the MacWorld Conference in San Francisco. It's become a tradition that Jobs takes the wraps off a new Apple product at the annual meeting. Marketplace's Lisa Napoli says you don't have to have a front seat at the convention to know what will be unveiled today.

LISA NAPOLI: This is the worst-kept secret in the technology industry. I mean the Wall Street Journal's confirming something everybody who follows technology's been expecting would happen, and that's the debut of this iPod phone. The Journal's saying it's gonna be tied to the mobile phone carrier Cingular. There are more than 70 million iPods that have been sold so far. The mobile biz is something like $130 billion a year. So you can tell that this is potentially big news for Apple.

Apple may also have more information on an interactive television device known as iTV. It's a box that would, among other things, let users watch their downloaded movies on TV, but some DVD retailers may have a problem with that. Janet Babin reports from the Marketplace Innovations Desk at North Carolina Public Radio.


JANET BABIN: When considering Apple's foray into downloaded movies sales, it helps to recall the company's meteoric rise as a digital music retailer.

After just a few years, iTunes trails only Wal-Mart, Best Buy and Amazon in music sales.

The company's position is so powerful, it was able to force the major music labels to accept its pricing structure. Most songs at iTunes cost 99 cents.

Many analysts say Apple will soon dominate sales of movie downloads as well.

iTunes began offering limited movie downloads in September for up to $15. That's less than most DVDs at big box stores like Target.

Piper Jaffray analyst Gene Munster says the price differential has created a battle between Apple, the retailers and the movie studios.

GENE MUNSTER: And the retailers feel that they're being cut out of this equation, so they have, retaliation is the word for it, that people like Target are using, and Wal-Mart, to basically try to force the movie studios not to give Apple content.

Big box retailers do have some power in this epic drama. They're the largest sellers of DVD products and these sales can account for a significant percentage of movie studio revenues.

But DVD sales have begun to lag and online transactions are cheaper for the studios — no package or transport costs.

Hal Vogel covers media at Vogel Capital Management:

HAL VOGEL: The Hollywood Studios really don't have an alternative. They have to move into this digital age and you'll see more of that as time goes on.

But Hollywood may have to cope with another transformative influence. Analyst Steve Arnold with Arnold IT says it's losing control of its audience:

STEVE ARNOLD: Young children no longer feel compelled to sit down at 8 to watch a television show.

Instead, they download content onto cell phones, handhelds or video iPods and watch it whenever they want.

Apple is expected to make even more downloadable content available this year.

Piper Jaffray predicts Steve Jobs will announce another movie studio deal at the Macworld conference this week, with all six major studios selling content on iTunes by the end of the year.

I'm Janet Babin for Marketplace.

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