Why Steve Jobs Pre-announced Apple’s iTV Product

Of all of the product announcements made during today’s Apple event, the most surprising, by far, was the pre-announcement of a new set-top box. Code named iTV, the box will use standard wireless networking to feed iTunes content to any home entertainment center. The device is scheduled to come out in the first quarter of 2007.

Does anyone remember the last time Apple pre-announced a new product this far in advance? What happened to the legendary Apple secrecy? A huge part of Apple’s mystic is built around the intense reaction the press has to the unveiling of unexpected new products. That coverage usually drives customers to jump on the bandwagon and buy the latest Apple products immediately. By previewing iTV this far in advance Apple risks losing both the buzz and consumer interest during the months leading up to its release. Worse yet, iTV won’t be available for the holiday shopping season.

So what’s behind Apple’s strange early product announcement?

Quite few things actually:

• Movies: Today Apple announced it will be selling movies through iTunes. At launch there will only be 75 films available, although presumably that number will increase rapidly. More problematic for Apple is the fact that only Disney, Pixar, Touchstone, and Miramax have signed on to sell films through iTunes. Those are all Disney affiliated studios. Steve Jobs is the single largest shareholder of Disney. See the connection? Unlike, say, Amazon Unbox, Apple has launched it’s movie store without major Hollywood support. I have to assume that Jobs is planning on the store being a huge success and that Hollywood executives will want in once they see how well it’s doing. Those same Hollywood executives might be swayed by a product that delivers their content to consumer’s television sets without first being burned to an optical disk. iTV is a neat end-run around the DVD burning issue.
• Did I mention movies?: While it’s great that consumers can now watch feature films on their iPods, the truth of the matter is that the market for portable video is small, and will likely remain that way. Consumers are buying big-screen TV’s for a reason. They like to watch movies in a large format. By promising an iTunes-to-TV connection now Apple may persuade otherwise skeptical consumers to buy downloadable movies knowing they’ll be able to watch them on the big screen soon.
• Microsoft: The iTV announcement was a preemptive strike against possible upcoming product announcements from Microsoft. Microsoft will be releasing it’s portable Zune player in time for the holiday shopping season. Insiders have hinted that Zune will somehow integrate with the XBox. With a few software upgrades and a wireless adapter the XBox is certainly capable of doing anything iTV will do. Apple is likely hoping that loyal iPod users will wait for iTV.
• Investors: Since we appear to be on the verge of a convergence war between Apple and Microsoft, it’s likely that Jobs wants to send a message to Apple’s investors. He wants investors to know that he’s looking at the big picture (no pun intended) and has a cohesive convergence strategy in place.

At this point the biggest question is, will consumers pay $299 for a specialized device that gets all of its content through iTunes? I suspect they might, especially when you add music and personal media like home movies and photos into the equation. One of the coolest parts of today’s presentation was when Jobs began flipping through his music collection on a demo iTV box. CD covers floated across the screen as if he was flipping through a physical music collection. This was all made possible by a new feature in iTunes 7 that will automatically download cover art for your entire collection (free, of course). If consumers can do the same with their iPhoto library and iMovie files there’s a good chance Apple will sell a lot of these little boxes.