What Apple tablet means for Hollywood

New device could accelerate digital content adoption


1977: Apple founded; Apple I personal-computer kit is launched.

1980: Apple does an IPO; Apple III is launched.

1984: Apple Macintosh is introduced via a Super Bowl commercial directed by Ridley Scott.

1998: Apple iMac goes live.

1999: Apple introduces iMovie video-editing software for consumers and Final Cut Pro for professionals.

2001: Apple retail stores open; the iPod enters the fray.

2003: iTunes Store makes its debut.

2005: iTunes begins selling TV shows and other videos.

2007: Apple unveils the iPhone and Apple TV.
Like the rest of the media world, Hollywood studios will be watching Apple closely next week when the computer maker is expected to introduce an unnamed tablet-type device that has been dubbed "the iSlate."

As per its modus operandi, Apple has been tight-lipped about the product launch, whcih is highly anticipated by the tech cognoscenti and many consumers. ISlate is expected to square off against the Amazon Kindle as an electronic reader and will come fully loaded with sexier multimedia capabilities that could make the device an important new platform for TV and film programming.

But while Hollywood is hopeful iSlate delivers, the industry isn't feeding into the frenzy.

"The whole game is changing, and this is just one play in the game," says Jared Tobman, executive vp digital and production at Reveille. "Apple has a great playbook for how the new game will be played, but I don't think one device or one company presents the salvation or the end of content distribution as we know it."

The Apple tablet is the most buzzed-about because of the company's high marks with consumer experience and because of the iPhone's popularity. Whether it's actually a game-changer, the iSlate likely will eat into market share for e-readers, netbooks and even smartphones, depending on its capabilities.

At the Consumer Electronics Show in Las Vegas this month, computer makers HP, Sony and Lenovo also introduced tablets. Most contain touch-screen computers, are about the size of a netbook and include more functions than an e-reader.

The iSlate is expected to have a full-color screen and navigation similar to an iTouch or iPhone. The device will be bigger, though -- somewhere between an iPhone and a netbook. As a result, the iSlate and other rival tablets likely will expand opportunities for magazine, newspaper and book publishers to offer printed materials in electronic form.

As for Hollywood content, studio executives don't expect major advances in presentation. Their programming on an iSlate likely will look the same as on other Apple devices, though the screen will be larger.

Even so, TV execs say it's important to remember that the iSlate also is just another home for iTunes. That means the same TV shows and movies available through iTunes should be accessible on an iSlate, as they are through an iPhone, iPod or iTouch. Revenue splits for shows on the iSlate are expected to be consistent with standard iTunes cuts.

Typically, iTunes splits are tilted in the content creator's favor about 70-30 for movies, TV shows and music. That split has remained consistent for several years, even with the addition of devices like the iPhone that bring more transactions to the iTunes Store. Studio executives say they expect the split to remain the same, even if the iSlate drives more content purchases.

The iTunes Store offers about 3,000 TV shows and 2,500 movies. During its first three years of offering TV programs, Apple sold more than 200 million shows on iTunes.

Revenue from the store largely is incremental for most studios.

The bigger issue for the success or failure of the iSlate lies in the business models it enables. The iTunes revenue share is a familiar beast for studios, but there has been talk recently of Apple offering subscription options for a range of TV shows. As subscription models for content, like Netflix, become more prevalent, the iSlate could be significant if it enables those models, says Max Benator, senior vp multiplatform entertainment at RDF Media USA.

"If the iSlate ends up in 100 million people's hands and there are new business models on it, that could make a big difference to Hollywood," he says.

The TV business model already is under enormous pressure as studios and networks look for ways to shave costs from scripted content. There are only so many ad dollars to go around, which is why devices that support and encourage paid models are alluring. That includes smartphones like those from Apple and Google.

Apple said last month that iPhone users have downloaded more than 3 billion apps during the 18 months since the store launched, though many of those are free. Still, the iTunes Store is training consumers to pay $1.99, in most cases, for TV shows, and about 99 cents for most apps. Apple hasn't released recent totals for iTunes movie and TV sales.

Likewise, content owners are keen on new platforms that enable multiple revenue streams. "The long-term sustainable model for entertainment will always need to include ad-supported and subscription and ideally a combination, like the cable model with dual revenue streams," said Albert Cheng, executive vp digital media at Disney-ABC Television Group.

Another important consideration for TV producers and studios with new devices is the content-protection capabilities they afford, notes Sean Carey, senior executive vp at Sony Pictures Television. "Any device that properly protects our content and has consumer demand, we want to be on," he says.

As the tablet market takes shape, winners likely will be those that include a touchscreen and a true keyboard, says J.B. Perrette, president of digital and affiliate distribution at NBC Universal. "You won't be satisfied doing a significant amount of work just on a touch-screen keyboard," he says. Some tablets include keyboards that pop out and pivot to offer full-screen functionality, he adds.

While other computer makers are rolling out tablets, Apple is in pole position in the burgeoning market because of the iTunes Store, Tobman says. Consumers like the store and Hollywood does, too, because of its promotional power for shows. "The Apple tablet could kill e-readers, but the bigger play is the threat to laptops because people do like the convenience of being able to take everything with them," he says.

Consumers also want a one-size-fits-all device. "We will see tablets and iSlates and e-readers merge in functionality; consumers don't want two devices," said Mike Bloxham, director of research and insight at Ball State University.

Perhaps the biggest threat Apple faces is Google. The Internet giant hasn't announced plans to offer a tablet, though it quickly has emerged as one of the toughest competitors in the smartphone business with its Android.

But the computer titans both need Hollywood because consumers want to be entertained on their tablets or phones.

"We believe in open distribution, and the idea is we want content, and we also respect content creators' wishes if they want to limit it," Google spokesperson Chris Dale says.
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