Analysis: Apple and the video iPod

IDG News Service - Portable music players were around before Apple Computer Inc. CEO Steve Jobs got involved in digital music. But four years after the launch of the first iPod, Apple now owns 75% of the MP3 player market. Now that Apple has staked a claim to the portable video market (see "Apple unveils video iPod, strikes deal with ABC"), can the company duplicate its success with music in the vast wasteland of television?

Apple has several things working in its favor, according to analysts interviewed after Apple's big video iPod announcement yesterday. Users of Apple's iTunes music software will now be able to download episodes from five ABC television shows, music videos and short films from Jobs' Pixar Animation Studios on their PCs or Macs and transfer them to a new generation of iPods, Jobs said at a media event in San Jose.

For one thing, Apple hasn't gone off and tried to create a video-only version of the iPod, said Roger Kay, president of Endpoint Technologies Associates Inc. in Wayland, Mass. The new iPods are really just an evolutionary step from the photo iPods introduced last year, he said.

"It looks like a fairly conservative move on Apple's part. They're replacing the existing high-end iPods at the existing price points with bigger capacity and the ability to do video," Kay said. Some iPod users are always going to prefer the high-capacity iPods that can play thousands of songs over the smaller iPod Nano and iPod Shuffle models, and Apple has just decided to build video capabilities into those handhelds for no extra charge, he said.

And Apple has also overcome what analysts saw as the most difficult roadblock -- a content relationship with a major production company in ABC, said Richard Doherty, principal analyst at The Envisioneering Group in Seaford, N.Y.

Other companies, such as Creative Technology Ltd., Handheld Entertainment Inc. and Archos Inc., have developed portable video players that can play video recorded from a television or downloaded from the Internet. And fledgling services such as Movielink LLC and others allow users to download movies and television programs to their PCs or Macs.

But iTunes has around 200 million users -- mainstream users who have already gotten used to Apple's music download model, said Sam Bhavnani, a senior analyst at Current Analysis Inc. in San Diego. "That's a very big audience they can go after," he said.

The iTunes television shows, such as popular hits Desperate Housewives and That's So Raven, can also be watched on PCs or Macs, which