Apple Vs. Amazon Battle Continues: Adventures in TV Land

9/2/10Follow @gthuang

[Corrected, 11:00 am. See below] First it was the iPad vs. the Kindle. Now the battleground is shifting to television.

Apple keeps rolling out new devices to control how consumers interact with screens of different sizes. What the world really needs is a smart, stretchable display material so people could adjust their screen to whatever size they want, from a smartphone to a TV. Then they wouldn’t have to go buy a separate iPhone, iPod, iPod Nano, iPad, and now, Apple TV. Of course, that wouldn’t make Steve Jobs very happy.

Yesterday, Apple’s CEO and co-founder unveiled a smaller and cheaper version of its Apple TV, which is a box that lets people play movies and network shows on their TV via the Internet. The new Apple TV box is about the size of an ice cream bar, and will cost $99 instead of $229—the price of the old, larger Apple TV, which debuted in 2007 but hasn’t been much of a hit. The new device will be available within a month, Jobs said.

In conjunction with the release, Apple (NASDAQ: AAPL) will be offering 99-cent rentals of TV shows and $4.99 streaming video of first-run, high-definition movies, all through iTunes. Media companies including Fox and Walt Disney have signed up as partners so far. Consumers also will be able to watch streaming movies from Netflix on the Apple TV.

The announcement is a particularly big challenge to Amazon.com (NASDAQ: AMZN). The Seattle-based Internet retail firm has been working quietly to develop a TV and movie subscription service, which will be available to consumers through Web browsers, Internet-connected TVs, Blu-ray players, and Xbox 360 consoles. This news was leaked to the Wall Street Journal yesterday (probably strategically to coincide with Apple’s announcement). Amazon already sells some TV episodes and movie downloads in this format, but it is looking to form big partnerships with the likes of NBC Universal, Time Warner, Fox, and Viacom.

Here’s why Apple’s move yesterday is problematic for Amazon. One of the main pathways into homes for Amazon’s existing video-on-demand service has been the Roku digital video player, from the Saratoga, CA, startup of the same name. Owners of the Roku box, which connects directly to a TV and gets content over a home wireless network, can also sign up for other “channels” such as Pandora, Revision3, and Blip.tv, but the device is marketed mainly as a way to watch streaming video from Amazon and Netflix without a computer. The new Apple TV is, in essence, a Roku box with an Apple interface: it’s got the same wireless networking features, the same HDMI output, and roughly the same form factor. Roku dropped its base price from $99 to $59.99 this week, presumably for competitive reasons. [An earlier version of this article said Apple TV is the same price as Roku. This paragraph has been adjusted to reflect Roku's price change---Eds.]

The major difference is that the Apple box will, naturally, come with slick Apple-designed software for browsing and selecting video content, photos, and the like. It’s likely to make the Roku interface look clunky by comparison. And that could be enough to siphon away many of the consumers who want to experiment with Internet video and might otherwise give Roku and Amazon a try. As far as we know, Amazon has no plans to introduce a new piece of hardware to compete directly with Apple TV—but it might need to do that.

All of this underscores the fact that the race to bridge the gap between TV and the Web has become incredibly crowded and confusing. Google TV, which has yet to roll out, will supposedly let consumers search for and watch TV programs and movies from live TV, digital video recorders, and the Web. And MSN TV from Microsoft already exists, but is primarily a service for browsing the Web and e-mail from a TV set. With Roku, Boxee, Hulu, and Netflix already duking it out in the “Web TV” sector, look for some consolidation among the smaller companies in the next year—and, let’s hope, lower cable bills.

Wade Roush contributed reporting and analysis to this story.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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