Apple’s iPhone Sets the Tone
By Mike Snider USA TODAY
Shoppers are expected to snap up 1 million or more iPhones when the sophisticated cell goes on sale Friday. But Hollywood and other entertainment providers will be looking for more than sales: They’ll be watching for signs of the next mobile revolution.
Video on cellphones is not new. But the new iPhone ($499 for the 4GB model, $599 for 8GB) is far more advanced than predecessors.
Its 3.5-inch widescreen display is larger than current phones, and its Web-surfing, video and music playback capabilities — it works seamlessly with Apple’s iTunes software — make it the best-equipped handheld entertainment-communications device so far.
"It is a paradigm shifter," says John Latona of Nielsen BuzzMetrics, which has monitored online chatter about the iPhone. "The launch itself has transcended whether this is a business or entertainment device."
At a digital entertainment conference last week, "everyone in Hollywood we talked to was upbeat about (the iPhone). The year before, everyone was taking shots at iTunes," says Richard Doherty of The Envisioneering Group. "They want to see how this goes."
Out of the box, the iPhone is expected to change the way consumers use entertainment and phones. Purchasers activate the device via the PC and iTunes rather than at the AT&T or Apple store where purchased.
That could mean new customers for the iTunes store, which stocks more than 5 million songs, 350 TV shows and 500 movies. IPhone users interested solely in music can load 800 or more songs onto the device.
"You might see a moderate uptick (in iTunes video sales) from people who weren’t buying video before because maybe they had a (non-video capable) Nano," says Charles Golvin of Forrester Research. He expects Apple to meet its goal of selling 10 million iPhones worldwide over the next 18 months.
Traditionally, cellphone carriers have made deals with content creators for specially prepared media to play on their phones. In the case of the iPhone, Apple has already arranged for 10,000 YouTube videos; consumers can connect directly with entertainment websites, too. (The device will play Web videos in Apple’s QuickTime format, but not Windows Media or Adobe Flash, both popular Web formats.)
The first iPhone relies on AT&T’s data network, generally considered one of the slowest. But the device also connects with local WiFi networks, and, as it moves to other carriers, will likely hook into upgraded "3G" cell networks that more easily transmit video.
The iPhone could stimulate competition among providers and help drive the overall growth of mobile entertainment, analysts say. Mobile TV revenues are expected to increase from $400 million in the USA this year to $1.6 billion in 2010, according to market research firm Parks Associates.
"The studios and content people are very enthusiastic about this new model," says Parks analyst Yuanzhe Cai. "It brings them closer to the consumer. What they want is more ad revenue and direct sales revenue."
Initially, consumers are expected to move video content from their iTunes library to the iPhone to watch, then swap that out to make room for new video. The iTunes store currently has episodes of popular TV series ($1.99 each) and films at $9.99 to $14.99.
"The video content they are looking to drive is via the iTunes store," says Michael Bonner of NBC Universal’s digital distribution division, which offers The Office, Heroes and The Starter Wife among other programs on iTunes. But, he says, "we are going to keep our eye on what (the iPhone) means to the actual video-store business and the consumption of content."
Like many studios, NBC Universal also has deals with major carriers, including AT&T, Sprint and Verizon. Salil Daliv, general manager of NBC Universal’s wireless division, hopes the iPhone signals an opportunity "to offer a broader range of content through the phones … not just subject to the way carriers say."