The main reason the video ipod will succeed in creating a mass market for portable video players is of course content. The fact that they hooked up with ABC, which has the highest rated television shows around makes it even sweeter. It's starting as an experiment, just a few shows, but in my opinion, even a moderate success of video sales will allow apple to take the lead in this field, stealing it yet again from a dumbfounded microsoft and sony. (who are fighting the same fight via the xbox and playstation, but that's a different story alltogether, one for companies who enjoy losing money on hardware) The reason even a moderate success will work is simple: the networks have no other option. bittorrents distributed shows and broadband connections for all are a lethal combination that they must answer. And Apple is the only company smart enough to convince them based on their successful itunes music store to take a gamble. However, I also predict wholesale redistribution of video on bittorrent trackers at video ipod specifications. As far as apple goes, this is a good thing (tm) because it will further help to sell video ipods and establish it's own specs as the defacto format for video distribution. Which of course, will fuel a larger cycle of sales of the legit videos on itunes video store, keeping the content companies happy that they won't die. think of it as establishing the MP3 alongside the protected format instead of preceding it.

the videos you buy and download from the store are also for viewing on the computer. It so happens the new imac is the first step in the media center direction, with a remote and new software to control your video and music from afar. Expect college student sales to increase. Expect said students to impress their parents with the new machines, and walk them into an Apple store, which conventiently reminds mom of a coach store and dad of a kohler showroom. Expect those parents to buy a yet to be released mac mini with HD output, which will go so damn well with that new TV they bought. And guess what: they won't find this media center software hard to use, but I challenge anyone to get Pops to use the windows media center software.

The financial fruit from this product release will not be immediate; but it will be much larger and of more consequence than the music store. The main argument that pundits enjoy putting forward is that Apple must license in order to establish the formats, otherwise risk getting their lead eaten up by Microsoft. For starters, that has yet to happen with the music store. It's been 3 years since i first heard that argument, and the windows format has yet to provide a credible threat. Granted it's microsoft and their deal with satan may yet prevail, but for three years of chest thumping I see no results. The release of the ipod nano holds within it a strategic deal with samsung, that effectively locks out all other music player manufacturers from good cheap solid state memory. So those other guys can be more expensive, or walk on thin financial ice for a few years. (or innovate, as the creative inc. CEO vowed to do. Good luck.)

But I agree, Apple must license. However, not when the pundits say, only when they are need to switch their business model. Right now they sell music and video at slim margins, in order to sell ipods which have tremendous profit margins. For proof of that, see their amazingly profitable Q3 2005. for the foreseeable future they have no reason to change that. when they have saturated the market to a tipping point of no return, a point from which no one can doubt they own the formats, they will switch their business model. They will rely less on profits from ipods, although those will still be substantial and instead license out the itunes format and shelf space on the itunes stores at premium prices. the volume of music sales and video sales will be so large that those slim margins that seem like a nuisance now, will make up the keys to the kingdom. What kingdom is that? the godamn executive bathroom in Redmond dammit. You just know the towels in there are killer.

links

gizmodo on the video ipod

Om Malik, tech pundit on the other guys

photo comparison of all the ipods