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First Look: Apple TV 2.0 and iTunes Movie Rentals (photos, video)

What's New in Apple TV: Audio

As noted in Something in the Air: Anticipating Macworld 2008, the Apple TV hardware arrived last year with support for 5.1 audio and HD video, it just needed a software update and content that took full advantage of its innate capabilities. The new software now enables pass though of Dolby Digital sound for output over HDMI or the unit's Toslink optical audio outputs, so movies with high quality sound tracks can be played back through a receiver supporting Dolby Digital encoding and output to surround sound multi-channel speaker systems.

Previously, the best audio Apple TV could deliver from iTunes content was the older Dolby Surround, which mixes multiple channels of audio over a stereo pair. That's the same technology used by the Nintendo Wii to enhance surround audio; now Apple TV can deliver the same audio quality as a high quality DVD player.

Another new audio feature is support for AirTunes (below). Using an Airport Express Base Station, Apple TV can now wirelessly stream audio out to the same speakers used to distribute music from iTunes.

MacBook Air

What's New in Apple TV: Other Features

The new software update will also support viewing photos from Yahoos!' Flickr and Apple's .Mac Web Galleries, in addition to existing support for iPhoto. Although not confirmed by Apple representatives, the new Apple TV software is almost certainly based upon Leopard.

Among other things, this upgrade appears to have inherited Leopard's parental controls for content playback, including TV and movie ratings, and music or podcasts tagged as explicit.

How Apple TV Compares

With the new software update, Apple TV moves to challenge competing movie rental devices like the Vudu, the Amazon UnBox partnership with TiVo, and Microsoft's Xbox Live online service.

Last year, the lack of HD content and rental features relegated Apple TV to use as a simple media extender for iPhoto graphics and iTunes music, TV, and movies. Despite the weaknesses of its TV box, Apple managed to swallow 91% of the video downloads business, which included 99% of the paid TV downloads and 42% of all movie downloads.

That left Apple the largest movie download vendor in 2007, with twice the share of second place Movielink (21%) which has been in business since 2002, and well ahead of Cinemalink (15%) and Vongo (15%). All other movie download sources fought over the remaining 7%, according to data published in the last quarter by NPD reflecting sales from early 2007, as presentedin Apple TV Digital Disruption at Work: iTunes Takes 91% of Video Download Market.

Over the last two years, Apple's iTunes video downloads haven't matched its music sales (now passing 4 billion tracks), but have been growing at a faster pace. Between January 2006 and 2007, Apple doubled its iTunes cumulative song sales from one billion to two billion, but more than doubled video sales from 15 million to over 50 million downloads. This year, Jobs reported sales of 125 million TV shows and 7 million movies, significantly more than a 200% increase.

Apple TV Versus Vudu

Now that Apple has both rentals and HD content lined up, it shouldn't have any problem maintaining a strong showing in the video download business. The discounted price of the Apple TV hardware to $229 will provide stiff competition to the $399 Vudo, which only rents or purchases downloadable movies, and does not interface with a computer for photos or music. Vudu does now sell selected TV content.

The Vudo does offer higher resolution 1080p movies however. Whether Vudu can deliver a noticeable improvement still remains to be seen, as existing HD Vudu content is commonly so heavily compressed that the difference in top native resolution, 720p to 1080p, visibly doesn't matter. The difference between 720p content and 1080p content is typically only visible on sets over 50", particularly when viewed from a ten foot distance.

For download devices like Apple TV and Vudu, 720p can offer high quality video at reasonable compression settings; the additional pixels of 1080p requires more compression to deliver over the Internet, which results in either no obvious improvement or far longer download times. Vudu attempts to solve this issue by turning their box into a peer-to-peer network node, so that your Internet connection is used to speed the download of movies to your neighbors. Apple's iTunes uploads are all centrally downloaded using servers Apple pays to use. Vudu subscribers also have to have a very fast Internet connection; the company recommends having 2 to 4 MB service for SD and HD downloads, respectively.

Apple TV Versus Blu-Ray

The superiority of 1080p is more evident on less aggressively compressed HD content such as Blu-Ray HD disc. Consumers, however, haven't responded enthusiastically to to the heavily DRMed new HD disc formats, with HD-DVD going down in flames in the last few months and Blu-Ray only maintaining a niche audience with slower growth than the considerably cheaper alternative offered by upscaling DVD players.

While Apple's new HD iTunes content can't rival the specification numbers of a directly read optical disc, the convenience, rental options, and new jump in quality will make it a compelling alternative to Blu-Ray, particularly for users with HDTVs under 50", as noted in Why Low Def is the New HD.

Apple TV and movie downloads are also considerably less expensive, although iTunes isn't going to be selling any HD movies, only offering them for rent. Because Apple TV offers so much beyond movie rentals, it can also serve as an accompanying content source for users who buy Blu-Ray players such as the Sony Playstation 3.

Once Apple releases the new Apple TV update, scheduled for the end of the month, AppleInsider will present a closer look at the new features.