This is not about how *you* like to watch movies, and that is the crux of the problem with your analysis.

I can appreciate that my own biases could be a problem here, but that’s why I went through the exercise of pointing out that the teens you mentioned (and college students too) couldn’t generally afford the $3000+ pricetag of the Macbook Air. Other, less expensive laptops, sure, but not the Air. Subnotebooks are really bloody expensive….

I live in the Denver metro area and my extended family is on both coasts. As such, I fly a decent amount, so I understand that market might be better served by an iTunes rental program than by a DVD rental. I’m not sure about that, personally, because airplanes are a great place for me to watch my languishing Netflix disks, but I do understand your point. I’m just not convinced that it’s the huge market discriminator that I think you’re implying.

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From Linuxfan:
Brian —

No, I’m not kidding. This is not about how *you* like to watch movies, and that is the crux of the problem with your analysis. Don’t think about you sitting in your home office in front of your laptop/desktop/whatever, hunched over and uncomfortable. (And yes, I agree given the choice I’ll watch my movies on my TV.)

Think about the computer consultant or tired executive who has to fly back and forth across the country and want something to do on the plane. Think about the college student who doesn’t have room for 38″ TV with 5.1 surround sound. Think about…

You get the point, there are plenty of markets where this move makes sense for Apple, and since it is such a dominate force in the digital download of music, TV and films already… it is reasonable to think that when these roadwarriors, students or whatever think “Hey, I want to rent…” a goodly portion of them are going to turn to iTunes first. (Well, the small minority that aren’t going to just pirate the movie off of bittorrent…)

BTW, I’m not sure why you imply that I said the macbook air was anything more or less than a laptop. I didn’t. I pointed out that the major flaw with that model of laptop was addressed by the iTunes rental.

As someone who occasionally watches movies on my computer, I focused on AppleTV for a reason – watching movies on a computer sucks, and laptops are the worst. You can’t get the audio or visual experience from tiny, tinny speakers and a small screen that you can from my decade-old 38 inch CRT TV, never mind a newer 16:9 large screen with 5.1 audio. Apple will get the most eyeballs for their streaming via people who have disposable income, and those people will not generally be watching their movies on a computer unless there is no other choice. And most of those people are not teens – they can’t afford the price of entry ($3k+ for the Air), they generally choose not to afford the price of the movie (BitTorrent), and so Apple will not get a significant economic boost from them.

Unless Apple is making a 5-10 play here and is willing to lose money or break even for at least 3-5 years, they’ve made a bad decision – unless they’re targeting their AppleTV box or are willing to permit Tivo or Dish DVRs to access iTunes rented movies.

Apple is a very savvy company, and I think you are seriously underestimating their strategy by ignoring the macbook air as part of this. Concentrating on the Apple TV (which I find it hard to believe anyone watching the market hasn’t heard of…but whatever) is a mistake. Jobs himself said that ATV was a “hobby” and not their part of their main business strategy.

Instead, they are using the same strategy they used when they introduce the iMac in the late ’90′s.. a move that credited with saving Apple’s bacon.

Back then they introduced a computer with no floopy drive and no serial ports. A the same time they started offering their .mac service that let you upload files and transfer them to a local computer. Basically fulfilling the role of what floppy disks or zip drives were used for at the time… file transfer. And despite what many analysts and tech-heads said at the time, the iMac was and continues to be a wild success.

So, this week apple introduced a laptop with no optical drive. The rentals are meant to make up for the loss of being able to pop a DVD in the drive while pointing more coin in Apple’s pocket. The iTunes rentals may APPEAR to be about the Apple TV, but they are all about about the star of MacWorld ’08… the Macbook Air… the worlds thinnest laptop, no optical drive, made as green as apple has ever tried… and made even greener by the fact that you don’t by dvd’s (and the associated packaging) for it, instead you stream it.

This is a brillant strategy aimed at teens and affluent hipsters who are worried about more then the tech side of things.

Engadget notes an article in the New York Times discussing the substantially different markets that Netflix and Apple’s movie rentals are aiming for. The site views the loosening of Netflix streaming restrictions as a reaction motivated entirely by the iTunes movie rental announcement, but beyond that the two services seem to have little connection. From Engadget’s observations: “After speaking with Netflix’s Reed Hastings, it was found that the vast majority of its streamable content was ‘older,’ and considering that users of this service can never look forward to brand new releases being available, the cost (i.e. free to most mail-in subscribers) makes sense. As for Apple, it’s able to focus on crowds who are looking for a more robust, generally fresher selection, but of course, you’ll pay the premium each time you indulge. Furthermore, Netflix has yet to make transferring video to any display / device other than your monitor easy, and while an LG set top box is indeed on the horizon, the differences in content selection are still likely to lure separate eyes.”

I don’t think the film industry will make the same mistake the music industry has. I think they realize that prosecuting their user base is not in their best interests. Plus, films tend to be a “view once” or “view once in a while” medium, unlike a good song or album, where you listen over and over until you get sick of it. It makes it a very easy buy-or-rent decision for consumers, which in turn, makes it easier to price your hardcore vs. casual market.

I don’t think Apple will have much of an impact though. Movies are typically a sit-at-home or sit-in-a-theatre, intimate experience. You don’t like to be interrupted. You plan your 1 1/2 to 2 hour time sink and you indulge in it. Their service will be good for shorts and TV shows … You Tube fodder. Mobile devices tend to only do well with casual gamers or viewers.

I have been impressed with Microsoft’s Xbox Live network though. You can rent movies in standard or HD for a reasonable price. It streams quickly and looks nice. Other networks are popping up to tap into the same market.

However, it’ll be interesting if ISPs intervene to ruin it. According to MSNBC, Time Warner is planning to test market a pay-for-your-usage high speed internet plan in Beaumont, Texas (http://www.msnbc.msn.com/id/22707271/). I expect consumers of movie and music downloads, iTunes, MMO games, and pirated software will hate it. It remains to be seen if the advertisers for firms that own these services will sting Time Warner for trying to devalue their interests.