Blog Post

New Apple TV Will Push 99 Cent Streaming TV Rentals

Apple (s AAPL) is about to get a lot more serious about its “hobby” with the next release of its Apple TV set-top box, as sources say that the software company will look to push a new streaming rental service that will offer up individual TV episodes for 99 cents.

According to sources, Apple is trying to get TV programmers to let it rent individual TV shows for 99 cents each, as opposed to the $1.99 it receives for sales of standard-definition episodes and the $2.99 it gets for selling HD episodes. The TV rental program would work in much the same way that movie rentals now work through iTunes; once an episode is purchased, the consumer will have 30 days to start watching the video. And once started, the TV rental will be available for 24 hours before it expires.

Unlike its current TV and movie sales through iTunes, the new service will move content into the cloud and stream it to users, rather than having them download videos. By doing so, Apple will merely be following a broader industry trend. After all, almost all web video providers today — including industry heavyweights like YouTube (s GOOG), Netflix (s NFLX), and Hulu — use streaming technologies rather than downloads for video delivery.

And there are indications that Apple might be forced to start streaming, based on reports about the technology specs of the next Apple TV set-top box. Earlier this year, Engadget reported that the next-generation Apple TV will use iOS, the same operating system used by the iPhone and iPad, and Flash memory, as opposed to a hard drive for storage. Due to a massive reduction in storage capability, it shouldn’t be a surprising move for Apple to launch a streaming service in place of its current download service.

If it can get content providers to allow it to rent episodes for half the price that they’re getting for consumers to own those shows, Apple is hoping that it can increase the volume of TV shows that are watched through iTunes. But is it already too late?

Apple’s foray into the low-price TV rental market is coming not long after Hulu announced its paid subscription service Hulu Plus, which gives users access to full seasons of many broadcast TV shows for just $9.99 a month. But Apple TV will have access to a lot of cable network content, like episodes of popular shows like Mad Men and True Blood that won’t be available through the Hulu Plus offering.

Even so, Hulu Plus will be available on multiple consumer electronics devices and platforms, such as Samsung, Sony and Vizio connected TVs and Blu-ray players, the Microsoft (s MSFT) Xbox 360 and Sony (s SNE) PlayStation 3 gaming consoles and even Apple’s iPad and iPhone. Meanwhile, iTunes TV rentals will only be available on Apple TV and other associated Apple products.

Based on the massive growth of Netflix and its Watch Instantly streaming service, consumers have shown that they are drawn to the convenience of a subscription online video service they can watch on their TV for a low monthly fee. But Apple TV rentals could be instrumental for users that want to watch content they can’t get through Netflix, Hulu or other subscription services.

Related content on GigaOM Pro: The Case For Removable Media on the iPad (subscription required)

155 Responses to “New Apple TV Will Push 99 Cent Streaming TV Rentals”

  1. Hope then that the cloud systems of purchase take hold.
    I would be fine purchasing the permanent right to play something from storage somewhere to my device.
    PS: I have some other good APPS from aneesoft want to recommend. Maybe someone will like it.

  2. Could you convert a rented movie to other devices not apple tv not apple supported as many youtube users do with the help of ifunia youtube video converter? Would you purchase a video converter or dvd ripper with the 99-Cent TV Rental Service?

  3. I love my AppleTV, especially the way it syncs with my PC’s iTunes library. My movies and videos, formatted for my small screen iPod Touch, look great on my 53″ plasma TV. The interface is a bit clunky but the performance is trouble free. I honestly don’t think most people know what the AppleTV is for. Mine was a gift and I left it in it’s box for a month before I decided to figure out exactly what it was for and now I can’t imagine life without it. I hope Apple doesn’t ruin the next version.

    • John Sawyer

      Exactly. I see no reason why the time to finish viewing shouldn’t be extended to the full 30 days that one is given to start viewing. Maybe some paranoid content providers think that a 30-day window would encourage people to invite their neighborhood into their living rooms to watch a TV show together, using just one rental fee. If so, I wonder where they got that idea–I can’t think of a precedent of any scale that they’d have to worry about.

  4. Keith

    Apple is all about what it can sell you. I would not take this garbage if it was a gift. I have an iPod Touch that that was given to me and iTunes being such a hassle i rarely use the the thing. Beautiful device though. .Drag and drop is the way to go. I would rather use my Blackberry and the Sandisk Sansa for multimedia.

  5. This is not about competing with existing on-demand service as one commenter noted, but about serving people who don’t subscribe to a pay TV service. It’s for the readers like “hortron” below who are willing to pay for a few programs a la carte rather than an all you can eat bundled TV service.

    There would be a strong appetite for a screen-less iOS device -as a complement or a replacement for pay TV for some users. It would bring a new breed of lean-back, 10-ft apps into the living room. This would be a great platform for Facetime, for example.

    Apple has to make a move here soon because of the activity we are seeing from several segments –

    So-called “Over the Top (OTT)” services like Netflix and Hulu Plus
    Incumbent Pay TV services and their TV Everywhere initiatives
    Android/Google TV – apps on the TV
    CE manufacturers and their new service offerings

    One thing that people can’t overlook is the economics at play here. You aren’t going to get a $9.95 subscription service, as Stencil mentions, that includes everything you can get on cable or satellite. The economics won’t allow for it. The reason Hulu Plus is broadcast centric is because it’s repurposed free broadcast TV that doesn’t disrupt existing pay TV models.

    What’s interesting to me is if a new aggregator or service provider were to offer pay-TV programmers enough up-front guaranteed cash to disrupt their existing relationships with their affiliates. The money we are talking about now from ancillary online sales and rentals doesn’t make it worthwhile to plop Entourage onto iTunes when it originally airs.

    • John Sawyer

      “There would be a strong appetite for a screen-less iOS device -as a complement or a replacement for pay TV for some users. It would bring a new breed of lean-back, 10-ft apps into the living room. This would be a great platform for Facetime, for example.”

      Sounds like another approach to try to reach that valhalla of the blending of one’s computer and one’s TV, along with one’s phone, using an OS that’s simpler than one’s full-fledged desktop or laptop computer.

  6. Don Taylor

    Interesting. The new Apple TV is rumored to be running IOS 4, no? Streaming content? No hard drive? At this point hopefully everyone can see Apple TV is a ruse – this is for the iPad – and Apple just sold millions of them. They just sold a lot of iPhone 4’s too. All running IOS 4, none having hard drives – all would benefit from streaming video.

    Now all Apple has to do to dominate the market is make different pricing plans available. They can start with the 99 cent a la carte model. Would you then be willing to pay $9.99 a month for 15 shows? $19.99 a month for forty? $39.99 a month unlimited? Think where this can go – Apple might be setting things up to make cable operators a thing of the past.

    • John Sawyer

      I’ve read one blogger’s suggestion that maybe the current Apple TV hardware should be retired, and the iPad should be its hardware platform instead, complete with its own built-in display. One problem with that, is that even the lowest-end iPad costs more than Apple sells the Apple TV for (currently $229 retail), and I don’t think Apple will drop Apple TV-specific hardware and sell only Apple TV subscribers a low-end standard iPad at a discount, nor would Apple start charging subscribers the higher, normal cost for such an iPad. Though it’s likely that Apple will allow owners of an iPad, iPhone, or iPod Touch running iOS 4, to subscribe to Apple TV, Apple will still probably have a lower-priced Apple TV-specific piece of hardware for people who want to subscribe, but don’t want to buy an expensive device.

    • Nonchalant

      I think the idea of this as a stepping stone to moving the technology to the iPhone & iPad is interesting. Although I wouldn’t want to pay to rent 1 TV episode, I think it might find a place as a time-killer. It could seem very convenient to iPhone users to buy a TV episode for the measley cost of $0.99 while they wait at an airport or doctor’s office.

      • While the price right now is too high, i imagine that that may change. Given the recent launch of the iOS across all of the platforms and the new creation of iAD, it allows for advertisements to be added to the show. This would help to facilitate a subscription model or just lower prices in general

  7. The pricing model for video content is still completely wrong IMHO.

    Audio pricing at $0.99 would realistically imply TV shows should rent for between $0.01-$0.20, because I “consumer” (listen to) an audio track i purchase many hundreds if not thousands of times during my life, while a video track for a TV show i may watch once or twice (or, if it is truly a unique episode) a few dozen times.

    Once the media companies realize this and price according to true value i think there will be an explosion in TV episode buying/downloading.

    Just my $0.02 – enough to purchase at least two episodes of TJ Hooker based on value.

  8. Hortron

    I just bought season pass for the current Top Chef last night, from the apple store. I have no problem paying $24 for the content. What I do mind is the existential problem of dealing with the media. Now I have 800 MB per episode to manage, I will probably never watch the episodes more than once, and it’s not like I can enjoy lending the files to my friends.

    If this $0.99 comes to fruition, it’s double win (cheaper + no media to manage) for me. And I’m still waiting for a nice HW front end to buy – I’m a cheap-skate (note no cable). But if apple provided a small, slick, front end to interface with the apple store, (and hulu), I’d put down a few hundred dollars.

  9. This is not a rental. To be a rental it would have to be a good that you pay to use for a period of time, after which you return it. There is nothing to return here, it’s just a digital duplication. Nothing at all is being taken from the source company so there’s nothing to return.

    Rather, this is the sale of a broken product. Calling a digital download that self-destructs or “expires” taking with that self-destruction what you’ve purchased, is disingenuous at best. This is unvisionary old-school thinking of the worst kind.

    • John Sawyer

      But it’s pretty close to what actually happens in a true object-rental situation–you pay money to use a product for a limited time, after which you no longer have access to it (the electronic equivalent of returning an object) unless you pay again. I’m not sure I know of an electronic method that’s truer to rental of an actual object, than this approach, or that even if there were, that it would make a substantial difference, but maybe someone knows of an example. In a digital rental (whether an actual download or streaming), you’re not paying to rent a broken product–it works as advertised during the rental period agreed upon. If the rental never expired, then you’d in effect have bought the item, and you’d be required to pay a lot more.

      I think better digital rental terms would be that, not only do you have 30 days after the rental to start playing it, but that after you start playing it, you can stop it at any time for up to 30 days, and still have that 30 days to finish watching it.

  10. In my opinion, the fact Apple is not dominent in the streaming video game is completely intentional by the encumbents.

    Steve/Apple is known to sacrifice one industry (Music) to prop up another (iPods). Steve just happens to own the indutry that thrives by cutting of the head of another.

    I expect the big video owners would prefer to keep the market full of companies and play them off against each other. Apple is too dangerous to let to far in so..

    They will simply price them out of the game, and Steve will not give it his all until he thinks he can dominate. That is why AppleTV is a hobby.

    And really, we are far better of without Apple controlling what we can watch. I am over his arrogance.

    Nice products, pity you have to sell your soul to use them. (But for some, thats completely fine. And thats OK)

    • Far from Apple “sacrificing” the music industry, Apple saved it. Perhaps you’re too young to remember what actually happened?

      Then you wrote, “… we are far better of without Apple controlling what we can watch. I am over his arrogance.” By “his” I assume you’re referring to Steve Jobs. Can you give us some examples of Jobs’ supposed “arrogance,” a word that my dictionary defines as meaning ‘having or revealing an exaggerated sense of one’s own importance or abilities.’

    • John Sawyer

      If by having to “sell your soul” to use an Apple product, you’re referring to the working conditions and suicides at the Foxconn plant in China, then that would mean that buyers of about half the products sold in the world are selling their souls. Maybe we are in some sense, but singling out Apple users is still silly.

      But if you meant it’s due to the various restrictions on Apple products and developers, Jobs’ peccadillos, lawyers running the company, etc., then I still think you’re using hyperbole.

  11. raycote

    Boy this article really lack any kind of vision on Apples modus operandi.

    Think iOS, as in much more than a particular take on how to deliver online video, it is a cheap TV version of the iPad and all the capacities that implies. For many it could meet their complete computing need for very cheap!

  12. Is there any evidence that the new software (assuming it’s real) will run on existing Apple TV boxes? The five or six of us who bought one would probably appreciate it.

    • solid

      Real funny Jim. Apple has sold millions of AppleTv’s. Apple could sell a lot more of them if they would just make them an iPod Touch connection to your HDTV.

      Apple’s iOS software will no doubt run on AppleTV, except the multitouch features, which obviously won’t work with your HDTV.

      • Does anyone have any link to something that shows Apple has said they have sold “5 or 6 million” Apple TVs? I’ve seen a lot of speculation, but I’ve never seen Apple go on record with any actual numbers.

    • Hey, >>I’m<< the one that bought one… My apologies.

      Anyway, the point remains: it would be nice if the new software would run on the old boxes. There’s no question that it would be technically possible to make it run on the original ATV; it’s a matter of whether Apple would choose to do so. But, given that the business model of any new ATV would be to make most of their money from rentals and other forms of service (rather than from the hardware itself), you’d think that they wouldn’t hesitate to start with an installed base of a few million or so. One can hope, anyway.

      • John Sawyer

        I’m not so sure that iOS could run on existing Apple TV devices. These devices contain an Intel processor, but iOS devices use other processors. Because of this, there isn’t a real iOS simulator that runs under OS X–just ones that emulate the iOS interface–so you can’t run iOS apps under OS X. You probably couldn’t even have an Intel-based Mac (or an Apple TV, which is essentially an Intel-based Mac) run just iOS by itself, unless Apple does some real clever stuff and makes it work anyway.

    • Dan Rayburn asked for corroboration on the number of Apple TVs sold. Apple has not released unit sales data for the device but here are a couple of relevant citations:

      From–559416 “Gene Munster of investment banking firm Piper Jaffray now anticipates sales of 6.6 million Apple TVs by the end of this year [ 2009 ].”

      From “On the Apple TV, Cook said that unit sales for the second quarter were up 34% year-over-year, but added that the absolute number of units is still small [ relative to the iPhone, iPod, and Mac markets ].”

  13. stencil

    Apple is behind the curve with Apple TV. The itunes model is isn’t particularly attractive as a video/tv front end. They’re best bet would be to get same content as Hulu, plus whatever premium content they can get rights to, then offer an la carte subscription service for $9.95 p/mnth. For a lot of people they would cut the cable immediately.

  14. Michael

    Netflix’s instant stream service is so good it baffles me why Apple or Google don’t offer a similar, competitively priced service. Netflix’s Achilles heel is the limited number of titles on Instant Watch. If Apple or Google could make headway there, they’d have a winner.