Video iPod Sales Growth Portends Big Things for Streaming Media in 2006

Sales of the iPod Video, the 30- and 60GB models in Apple’s iPod lineup that play QVGA H.264 video, were surprisingly brisk over the holiday season. It’s anticipated Apple will report a 30% increase over last holiday season’s staggering iPod numbers. Last year’s model, of course, played audio and displayed still images but lacked video capability.

As has happened in the past, the surge in demand for iPods in paralleled only in the surge for iPod-related accessories, content, and software. Within weeks of Apple’s product rollout for the iPod Video and word that ABC would sell iPod Video-compatible versions of its hit TV shows for $1.99 via Apple’s iTunes library program, no less than a dozen companies released paid or free content in the H.264 format supported by QuickTime 7 for iPod Video playback. In addition, iTunes reportedly had a huge Christmas surge; several analysts expect Apple will release numbers showing that traffic on the iTunes site increased by 50% between December 24 and December 25 of last year.

Not content to take a "wait and see" attitude, companies that produce digital media transcoding software also began touting the addition of an iPod Video-compatible compression output. The rationale behind decisions to rapidly launch product updates appears to have been two-fold. First, Apple left a window of opportunity open when the latest revision of its QuickTime Pro software, which can convert between other QuickTime formats and H.264, did not contain the ability to convert Real or WindowsMedia files to iPod Video-compatible files. Second, software product manufacturers learned a valuable lesson when the original iTunes shipped; their move to put new product revisions on the street has as much to do with retrenching market share before Apple decides to include iPod Video compression free in iTunes as it does with knowing the market for these iPod-compatible compression tools creates an opportunity to exploit first-to-market exposure of the "can I do that with my home videos?" question that arose within minutes of the iPod Video being announced.

Another group poised to take advantage of the increasing interest in video is the H.264 chipset manufacturers. One in particular, Mobilygen, has already capitalized on the post-Christmas influx of iPod Video units. Mobilygen, a privately held fabless semiconductor company backed by a who’s who in venture capital, issued a modified press release for a low-power H.264 encoding chipset it released back in September. The new press release, dated December 29, 2005, notes that the already-low-powered MG1264–which has received rave reviews for its ability to encode D1-compliant H.264 standard definition content in real time at only 185 milliwatts (mW)–can encode H.264 QVGA ("quarter-screen" or the size that the iPod Video uses) at only 125mW. Such low-power encoding is crucial for battery-powered devices like the iPod.

"Consumers want simple and easy personalization of their video content," says Steve Musallam, vice president of product marketing at Mobilygen. "Our MG1264 provides superior hardware-based H.264/AAC encoding quality and an inexpensive solution to building low-power devices that capture 30fps TV-quality video in real-time for new mobile products like the video iPod."

The move toward low-powered encoding solutions portends an uptick in mobile encoding and playback across the board; indeed, the convergence of low-powered H.264 encoding, more powerful mobile processors, and higher-bandwidth devices such as the Treo 700w for Verizon’s EVDO broadband data network may mean that the release of the iPod Video is just the Trojan Horse that the streaming media industry needs to resurrect several mobile business models that were attempted in 2000-2001 but failed for lack of limited device penetration and a dearth of network-savvy codecs.

The biggest unanswered question, of course, is whether the average consumer, who has preferred her iPod audio and video downloaded, not streamed, will warm to the idea of streaming content that could really be accessed from anywhere she has cell or wireless data service. The answer to that might just lie in Las Vegas this weekend at the CES 2006 show, coupled with the "next great thing up Steve’s sleeve" as Macworld 2006 takes place in San Francisco two days later. Alongside the impressive announcements for the desktop and the living room that are sure to emerge out of both shows, listen closely for foreshadowings of what just might make 2006 the year that turns streaming media into a real industry it hoped to be seven years ago. Maybe New Year’s Eve 2006 will see us partying like it’s 1999.

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