Will The iPod Kill Blockbuster?
Forget the cavernous big box stores that laid waste to the retail landscape a decade ago. Apple Chief Executive Steve Jobs' tiny iPod has turned his company into a category killer for the digital era—first wiping out music stores and now, potentially, the corner video store.
Context & Ripple Effects
Forbes's question lands at the end of a year-long argument over whether Apple's music playbook transfers to film. The case against came from CNET earlier this month, arguing why Apple can't do to video what it did to music — studios control their catalog more tightly than labels did, and the living room is a different battlefield. The case for goes back further: as early as December 2005, Business Week was asking whether Apple was holding back the music business, and the Times mapped the iPod ecosystem in 2006.
What changed this week is the studio front: Variety reports Fox and Apple are set to sign an iTunes deal, matching the rumored plan for Fox movies to become digital rentals through the iTunes Store. That would be the first crack in the studio wall that skeptics pointed to — though it remains unconfirmed until announced.
First-order effects
- If the Fox iTunes rental deal is signed as reported, Blockbuster's core new-release rental window faces its first serious digital substitute inside the store where iPod owners already buy music.
- Apple's delivery hardware is the weak link: analysts and Retrevo judged Apple TV a poor consumer electronics product just this week, so rentals would reach mostly computers and iPods, not the television where Blockbuster lives.
Second-order effects
- Other studios would face pressure to follow Fox rather than cede digital rental distribution to a single storefront, turning licensing deals into the competitive battleground instead of store footprints.
- Blockbuster's thousands of leases on big-box locations flip from asset to liability if rental demand migrates online, forcing a response on pricing or kiosks/mail models it has so far resisted.
Third-order effects
- The pattern from music — a device maker becoming the retail channel and physical stores collapsing around it — points toward video retail consolidating around device-tied ecosystems, with studios deciding through licensing how many gatekeepers survive.
- Whether Apple repeats its music dominance is genuinely open: the same week's patent activity (iPhone coffee ordering, wireless pickup) shows Jobs extending the iPod-hub model into commerce broadly, but studio economics could cap the video version short of the music outcome.
The trend: Media retail is consolidating around device ecosystems, with each studio licensing decision determining whether Apple's iTunes becomes the same category killer for video that the iPod was for music.