Why Hollywood Snubbed Jobs at Macworld

Most of Tinseltown won't buy into the Apple chief's digital vision until he ponies up more money and gets more serious about protecting content

By all accounts, Steve Jobs gave a socko performance, delivered with his usual charm and controversial style, Jan. 9 at Apple's (AAPL) annual Macworld gathering. Apple TV, which Jobs says has licked the problem of linking your TV to content downloaded from the Internet, was introduced as thousands cheered in San Francisco's Moscone Center. Among the faithful were some tech companies, Walt Disney Co. (DIS) Chief Executive Robert Iger, and a smattering of TV executives.

Most of the rest of Hollywood was conspicuously absent. Only four months back, when Iger announced that Jack Sparrow and the rest of Disney's movie characters could be downloaded to Apple's video iPod, it looked like Jobs was on his way toward taming the beast called Hollywood. A prototype of Apple TV, then code-named iTV, would soon link to the iPod and ship movies from Steve's world to our TVs—or so the whiskered one led us to believe.

But no other Hollywood studio has yet joined Disney in giving Jobs their most precious commodity: new-to-the-home-market movies, which continue to be the studios' hottest sellers in the still-robust $32-billion-a-year DVD market. To be fair, Jobs & Co. did manage to lure a second studio, when Paramount Pictures announced it was joining the iPod brigade. The Viacom (VIA) unit, eager to overcome its image as a digital Neanderthal, said it would license to Apple 100 or so of its older movies. You want Breakfast at Tiffany's and Mean Girls, you can get them. But try to get Dreamgirls when it comes out on video in a few months, or Shrek 3, which Paramount will release this summer for DreamWorks Animation (DWA).

Wanted: Stricter Sharing Rules

Paramount may eventually give Apple its hot new flicks, but not yet and not until it sees how its maiden iPod voyage goes. But as Jobs was making his starlit announcement at Macworld, I was several hundred miles away in Las Vegas, getting the lowdown at the Consumer Electronics Show from studio executives who aren't likely to join Paramount and Disney anytime soon.

Hollywood, I was told, still doesn't trust Steve Jobs with its crown jewels. Yes, everyone loves that ratings for shows like NBC's (GE) The Office and ABC's Lost seem to be up thanks to the promotional exposure of being available via iPod download. But while just about every TV network quickly followed Disney's 2005 decision to give its TV shows to Apple, few have yet to join the Mouse with movies. When you have a piece of content than can cost upward of $100 million to produce, you don't give it up without a lot of soul-searching and number-crunching.

What does Hollywood want from Steve Jobs? For starters, more protection for their films. "His user rules just scare the heck out of us," one studio executive told me. Indeed, under Apple's video iPod digital-rights-management scheme, folks can share their flicks with as many as three other iPod users.

Balking at Movie Download Prices

That's good for the guys who get free flicks, but it's bad for Hollywood, which goes bat crazy over the notion of pirated freebies on the Internet. To them, losing a customer courtesy of the video iPod is just as bad. Add into the equation the new Apple TV, which would allow folks to put that movie on their TVs, and Hollywood sees more and more of its DVD bucks headed out the door.

Then, there is the issue of price. Charging $14.99 for new flicks and $9.99 for older ones, Jobs clearly wants to undercut big-box retailers like Wal-Mart (WMT) and Target (TGT), which sell the great majority of the newer DVDs these days for as much as $19 a pop. That's a bad move on Jobs's part. Both Wal-Mart and Target have made their feelings known about being undercut by Apple. Big surprise—they're not happy about it, and Hollywood has been paying attention to these all-important retailers.

Both Wal-Mart and Target have since moderated their stance, at least in public, but I was told the discussions between Hollywood and Apple of late have focused on how to raise the initial price, at least for the hottest hits.

Deal May Require Softer Touch

The big question, of course, is how much Jobs is listening. He didn't much care when the music industry came looking for more money when the music it licensed to him became huge thanks to iTunes. Why would he? He had the upper hand. This time around, with Microsoft (MSFT) already out with its own link to the tube (which it's called iTV, it seems, just to rub it in), Jobs has real competition. And movies aren't nearly the hit on the video iPod that music almost instantly became. If you're a Hollywood suit, you figure you can wait out the whiskered one this time around.

Disney had valid reasons for being first to the video iPod party. Iger loves to show people that the first image you see when you log on to the iTunes video page is a screen shot of Disney's Pirates of the Caribbean. That's free promotion, and any movie exec would take that. Plus, Iger needed to show the world that Disney, after years of stumbles, had become a champion of new technology. But others aren't so eager to be the second, third, or fourth out of the box, it appears. None of the studios involved would comment for this story.

My money is on Steve Jobs eventually winning over Hollywood. He didn't build his reputation as the high priest and visionary of the tech world without the ability to divine which way the wind is blowing. But it will be a little tricky for a marketing master not known for his light touch at the negotiating table. I'm betting that Jack Sparrow and friends will have company soon enough on the Good Ship Apple. But the swashbuckler from Apple may have to put away his sword.

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