I am a long time Macintosh user, and though I don't generally write about Apple products I'm going to branch out a bit this time. These observations are rather obvious, but I'm going to do it anyway. Pppffftt.
- Apple is reportedly pitching a $30/month subscription for TV via iTunes to content producers, to be offered sometime in early 2010.
- According to the iFixit teardown, the LCD in the recently announced 27" iMac is an In Plane Switching (IPS) design by LG. This provides a very wide viewing angle compared to the Twisted Nematic (TN) LCDs typically used in personal computers. IPS LCDs are generally used in television sets, as one wants to see the TV from the entire width of the couch not just one narrow section.
- The iMac LCD has an unusual native resolution, 2560x1440. It is exactly double in each dimension as the AppleTV, making it straightforward to optimize content for both devices.
- There is no TV tuner in either AppleTV or the iMac, though of course external USB tuners for broadcast HDTV are available. Nonetheless, HDTV broadcast is yesterday's technology.
- Apple is spending $1 billion to build a massive datacenter in Maiden, North Carolina. Certainly Apple's current MobileMe and iTunes services demand significant capacity to host them, but with such a large investment it seems likely that Apple is looking to expand into new areas and not just continue its existing services.
- Altogether Apple is budgeting $1.9 billion for capital expenditures in fiscal 2010, an increase from the $1.1 billion in 2009.
So, Apple is preparing to do to video distribution what it did in music, providing a complete solution including content, delivery, and customer device, right? Apple already provides selected video content on iTunes, and can expand from there.
Though there are a lot of clues, there is a big piece missing. If one is looking to spend billions to develop the infrastructure to become a big player in video distribution, a single massive datacenter on the US east coast is not the way to do it. It leaves you beholden to others to carry the bits around the planet, which becomes the dominant cost of the business.
The modern Internet consists of a series of interconnected backbone networks, generally referred to as "Autonomous Systems" following the BGP terminology. Packets leave the datacenter and traverse the backbones on their way to their destination. The final telecom facility before the packet reaches its destination is called the Edge Point of Presence. Delivering media streams all the way across the internet to thousands of individual subscribers incurs significant bandwidth costs. Content Delivery Networks reduce the bandwidth costs by scattering small caching servers across thousands of POPs, serving each subscriber from the closest cache.
Apple currently relies on both Akamai and Limelight to deliver its iTunes content. Apple could certainly expand its current relationship with those vendors to carry substantially more video traffic... but for the kind of investment they are making, it seems like the money would be better spent scattering a number of smaller facilities across the planet. Peer to peer between end users seems like an ideal way to distribute video by offloading the bandwidth costs, but in practice it has not worked very well. Content distribution at scale is something which requires significant investment.
Apple has $34 billion in liquid assets, and an economic recession is a great time to buy. I'll be watching for indications that Apple is bringing this solution in house either by building lots of smaller facilities, perhaps with their own fiber network between them, or by building or acquiring a CDN of their own. Massive investment at the endpoints while remaining completely dependent on others for the connection between them doesn't make sense.