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Net Gains and Losses

Little screens, big potential

October 15, 2005

WHEN APPLE CEO STEVE JOBS unveiled a new iPod on Wednesday, it wasn't surprising that the gleaming little music-toting device could also play video. Apple watchers had been predicting such an innovation for months, despite Jobs' frequent denials.

The surprise, which Jobs announced with Disney CEO Robert Iger, was that Apple would be selling downloadable versions of several popular Disney-owned TV shows for viewing on the new gadget. Included were episodes of two hit shows on ABC, "Lost" and "Desperate Housewives," which will be available for $1.99 the day after they're broadcast.

The announcement drew the customary round of star-struck applause from the Apple faithful, but soon observers began to wonder about the wisdom of the deal. Just how many people really want to watch TV on an iPod's 2.5-inch screen?

That skepticism is one reason Hollywood and network executives have shunned making TV programs available through the Internet. Other reasons include a compulsion to protect existing businesses, such as TV advertising and the sale of DVD boxed sets, and complex copyrights and contracts.

Excuses, excuses.

The studios avoid the Internet at their peril. Granted, Apple's not going to sell 500 million TV shows over the next 2 1/2 years, as it has with songs (which go for 99 cents a tune). But Apple will sell millions of video iPods, and their owners are going to fill them with something.

The overall trend in entertainment is clear, and has been since the dawn of the home video industry in the early 1980s: People want more flexibility and control over what they watch. The VCR allowed them to shift programs from the networks' schedule to their own, and movies from the theater to their home. Today, portable DVD players are hot sellers, and the 2.2 million North Americans who own Sony's new portable game console are buying significantly more movies for the device than anybody predicted.

Further, the studios are in danger of making the same mistake the music labels did: If they don't make TV shows legally available, people will resort to illegal ways to get them. According to BayTSP, which tracks Internet piracy, bootlegged TV shows are among the most popular items for illegal downloaders.

It's laughable to think downloadable shows could threaten Disney's existing businesses. The service's most obvious appeal is to fans who miss an episode on TV and are so eager to fill in the blank that they'll pay $2 for a downsized version. This is much the same crowd that will watch every episode when it airs, then buy the entire season's programs on DVD.

The video iPod may not be the right device for watching TV shows, but at least Disney is in a position to learn something. The other studios should join in too. They're running out of excuses.

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