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Technology: Steve Jobs and the tough sell in Hollywood

October 6, 2011 |  2:50 pm

Steve Jobs at the Academy AwardsLate Apple co-founder Steve Jobs is rightly credited with pushing the major record labels to get serious about downloadable music. Now that he's gone, who from the tech industry is going to persuade Hollywood to make a similar leap?

Studio executives would probably argue that they've already embraced the Internet. Look at Netflix! Look at the iTunes Store! Look at Vudu and Hulu, Amazon and YouTube! Their support for those sites and services is a step in the right direction, but they've not moved away from their analog-era strategy of limiting the availability of their product in order to extract maximum revenue.

Now consider what Jobs persuaded the major record companies to do eight years ago.

The labels' core business was persuading people to spend $15 for a CD that had one or two songs on it that they liked. That business started slipping in 2000, in part because file-sharing networks helped music fans obtain just the hit singles they'd heard, for free (and illegally) online. Nevertheless, afraid of cannibalizing their CD sales, the labels made only a portion of their releases available through online retailers as downloadable singles, and they demanded as much as $2.50 per track.

They reversed course in 2003. Prodded, charmed and cajoled by Jobs, the labels went all-in on downloadable singles, slashing prices to 99 cents and making available every track for which they held the digital rights. Apple then spent heavily on advertising for its new iTunes store, letting the public know that there was a convenient new way to buy music that was more affordable and portable than ever before.

The labels waited too long to make this shift; by the time the iTunes store was established, millions of music fans had become accustomed to illegal downloading. And the industry is still missing some of the opportunities presented by digital distribution. But the labels don't spend a lot of time these days worrying about new products cannibalizing old ones. They're focused on getting more music out to consumers in more ways so that they'll spend more money on it.

Apple laid the groundwork for this shift by creating devices that stoked the demand for downloadable songs. Its iPhones and iPads are now doing the same for music streamed from the Net; Jobs' bet is that people will want to stream just the songs they own, which is where Apple's iCloud and iTunes Match services will come in. Other companies, such as Rhapsody, MOG, Spotify and Rdio, are betting that the public will pay $10 a month to stream songs from a vast online jukebox. Either way, Apple's devices help provide the infrastructure needed to make those business models work.

Jobs tried to set up a similar shift for Hollywood, but the results were incremental, not revolutionary. That's true in part because Apple hasn't enjoyed the kind of success with devices for video and the living room that it has in music and communications. The Apple TV set-top box was designed to make it simple for people to download TV shows and movies from the Internet and play them on a TV. But it has been such an underachiever in comparison to the iPod, Jobs once called it a "hobby" for the company.

But there's a chicken-and-egg issue here. Apple TV would probably be a lot more popular if it could deliver a compelling alternative to cable TV and/or DVDs. But Jobs couldn't persuade studios to cut prices (they didn't want to alienate Wal-Mart and other big DVD retailers), offer TV shows by subscription (which would threaten cable operators) or let people stream from an online locker the movies they'd purchased (which would conflict with the online rights held by HBO, among others).

Another important factor: Having seen Apple's clout in music, the studios were reluctant to give him the same kind of power in their world.

Meanwhile, technological forces continue to bark the shins of the studios' preferred business model. With broadband Internet connections becoming the norm around the globe, just about any movie or TV show can be found online with little effort. Although much of that content is illegal, its availability makes it hard for studios to sustain a model that requires people to wait weeks or months to get a copy of the movies Hollywood promotes so heavily. 

The proliferation of Internet-connected TVs and tablets such as Apple's iPad is also feeding the public's interest in the Internet as a source of on-demand programming. Netflix's growth (that is, its growth prior to slapping customers with a massive price increase) is a testament to the power of making a large amount of content available on demand for a flat fee, with recommendations to help users sort the wheat from the chaff.

You'd think that the time is right for a video counterpart to Rhapsody or Spotify -- a comprehensive library of TV shows and movies online, viewable for a flat monthly fee. That certainly seems to be Netflix's ambition, and possibly Hulu's as well. But doing so would require the studios to stop granting exclusive distribution windows to airlines, cable networks, broadcasters and the like, and to stop worrying about competing with pay-TV operators. That would be a very tough sell indeed.

To their credit, the studios have been quick to adopt the Internet as a promotional tool. But when it comes to distributing digitally, the boldest initiative is the cloud-based Ultraviolet service that's just starting to roll out. Ultraviolet is designed to solve the compatibility problems caused by the technology studios use to deter unauthorized copying of their films. The initiative could make it easier to play the movies you buy on the various devices you own, provided that you own the right devices. But it won't make movies more available or affordable.

I don't know what Jobs had in mind for video, but I have to believe it was something grander than the limited selection of movies and TV shows that iTunes offers today. Who knows, Apple's iCloud service may prove to be revolutionary for video the way iTunes was for music. I'm guessing, though, that it will take some other genius to make Hollywood take a real leap.


R.I.P. Steve Jobs

Apple's evolving stance on subscriptions

The lowdown on movie downloads

-- Jon Healey

Photo: Steve Jobs with wife Laurene Powell at the Academy Awards in 2010. Credit: Reuters / Richard Harbaugh / Academy of Motion Picture Arts and Sciences


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