Thin Is In at Macworld

Steve Jobs didn't introduce anything as revolutionary as the iPhone at Macworld on Tuesday, but he did manage to make a few announcements that are guaranteed to alter the landscape in at least two different markets: movie rentals and laptops. The two major announcements at the annual event were the introduction of iTunes Movie Rentals, a new feature of the iTunes Store, and the unveiling of the MacBook Air, which Jobs is calling "the world's thinnest notebook." "It just goes to show that even when Apple doesn't announce a tsunami of a product, it still makes waves," says Michael Gartenberg, vice president and research director at JupiterResearch.

Neither announcement was completely unexpected. Indeed, on Monday Netflix, the mail-order DVD rental service, launched what some considered a pre-emptive strike against Apple. It said it would be offering unlimited streaming of movies and television shows to its 8 million subscribers. Previously customers could only stream a limited number of shows and films, and so far the service has been available only to Windows customers. But analysts would be surprised to see Netflix's streaming service hamper iTunes Movie Rentals, which Gartenberg says "is to video and movies what iTunes was to music. It has the potential to change the game in a dramatic way."

Not everyone would go quite so far. "Apple will probably have a disruptive impact on the movie rental market, but it probably won't be as significant as the iPod," says Mike Abramsky, a software and wireless analyst at RBC Capital Markets. The fact that Apple has inked deals with the six major studios is especially impressive and all but guarantees that its new rental store will be a hit: the large library of video will play on any device a customer wants, be it a PC, a TV or, crucially, an iPod. New movies will cost about $3.99 per rental and will be available in high-definition for a dollar more. Apple has also reimagined Apple TV, its failed initial foray into consumers' living rooms. Apple TV 2 will allow you to rent from iTunes without a computer.

Even more potentially game-changing is the MacBook Air, a beautiful machine that may or may not have been named after a sneaker. The sleek, ultrathin, three-pound aluminum laptop measures 0.76 inches at its thickest point (and a mind-boggling 0.16 inches at its thinnest). Intel completely redesigned its microprocessor to fit into the wee machine, and the optical drive—the CD/DVD player—has been evicted. "We don't think users will miss it," said Jobs, who cast the computer as a wireless device: a new program will allow software installation disks to be run on other computers—both Windows and Macs—and transferred wirelessly to the Air. Indeed, what better way to ensure that your customers buy music from iTunes instead of record stores than to eliminate a CD player? "Clearly the handwriting is on the wall for optical drives," says Gartenberg. "It reaffirms Apple's position in terms of design leadership by creating something aspirational. Even if people can't afford it, it's something they want to be able to afford." With a $1,799 price tag, the Air is competitive with other thin notebooks. "To be able to carry something around that is as much a statement as it is a usable product, it's very appealing to a lot of people," says Abramsky. "It will probably do better than people think."

Still, Apple isn't completely flawless. On the one-year anniversary of the iPhone's unveiling (and its 200th day on the market), Jobs shared some of the first hard data on the device's sales. Perhaps unsurprisingly, the iPhone represented a full 20 percent of the smartphone market in its first quarter of shipping. Apple has sold 4 million units to date, which is still fewer than the 5 million some analysts were predicting. Perhaps because of that—and because none of the news out of Cupertino this week was particularly breathtaking—Wall Street seemed unimpressed: Apple stock had dropped nearly 6 percent by the end of the day Tuesday (Netflix was down more than 3 percent). Still, that was likely an example of buying on the rumor and selling on the news. If there's one thing Jobs has taught the world to expect, it's the unexpected.

© 2008