Apple's Stealth Plan to Conquer the Media Industry

Poor Apple (AAPL). The company has lined up all the pieces to take over the media industry, but the big music labels and movie studios keep standing in its way. So Apple has been forced to build its media empire in a stealthy, piecemeal fashion.

Steve Jobs unveiled a couple of new pieces to that empire Wednesday. Dressed as usual in a mock black turtleneck and well-worn jeans -- a uniform much less threatening to media execs than, say, a coronation crown -- Jobs walked through a lineup of new products at Apple: an upgrade to the iOS software that powers iPhones and iPads (expected) and improved designs for iPods (obligatory). Then came the big news.

Software for Listening Together

First, iTunes is going social. Sure, the timing is odd given the Facebook privacy backlash and Twitter fatigue. But building a social network around music is a great idea -- so good, in fact, that it was the idea that first made MySpace an out-of-nowhere success back in 2003. MySpace, of course, had much grander plans and wanted to be all things to all users. The result was an ungainly mess, and users fled to Facebook.

But a quick look at Ping, the social network built into iTunes, suggests Apple understands two important truths about the social web. First, social media isn't an end in itself -- it's a feature. Second, as a feature, it needs to offer a service the people actually want to use. MySpace abandoned both those truths, and that explains a lot about why users abandoned MySpace.

Ping is good news for music artists large and small, because it provides instant access to their fans via a targeted marketing tool that just happens to have the most popular digital-music store built into the same application. But Ping is bad news for MySpace, even though MySpace has been working hard to be a music-oriented site. It will be nearly impossible for MySpace to reverse its decline now. Apple, meanwhile, is positioned to become an even more powerful player in the music industry.

A Black Box Intended to Reboot TV

If the Ping news was a surprise, then Jobs' other big announcement - a smaller, cheaper version of its Apple TV - was largely expected, thanks to leaks over the past week. Apple TV streams high-definition movies, commercial-free TV episodes as well as photo slideshows and music collections stored on a laptop, iPhone or iPad.

Many Apple watchers voiced instant disappointment at what Apple TV doesn't do: It doesn't fire up apps the way an iPad can, it doesn't run iOS and it doesn't seem to include the Tivo-like PVR functionality that many have wanted. While all of that would be nice -- and could even come in later generations of Apple TV -- the criticism misses the central point of Jobs' strategy with Apple TV.

Apple is pitching Apple TV to a mainstream market, just as it did with the iPad. When the iPad launched, many geeks were underwhelmed with it, dismissing it as an oversized iPhone. But Apple pitched the iPad to non-geeks as a simple way to enjoy digital books, movies and the web, plus all those fun apps. Importantly, it priced the iPad at $499, cheaper than many netbooks and lower than most had expected. The result: More than 4 million iPads have been sold.

But Apple TV is a trickier proposition. Here, you're not talking about a new toy like a tablet computer; you're talking about getting between people and their TV sets to alter viewing behaviors that have lasted a lifetime. People have been reluctant to connect their TV sets to the Internet, and Apple knows it. To date, Apple TV hasn't been a breakout hit like the iPad or the iPhone, and the company has half-jokingly called the project a "hobby."

With today's announcement, Apple is getting more serious about Apple TV's chances. It's taken a similar approach as it did for the iPad launch, emphasizing how simple yet versatile the device is, while shrinking its size by 80 percent. And most importantly, it's offering a seductively low price: $99 -- less than half the $229 price of earlier versions of Apple TV.

The Path to Empire Runs Through Your Living Room

On top of that, Apple is matching Amazon's (AMZN) prices for streaming video -- 99 cents for a TV episode, and as low as $3.99 for movies recently released on DVD. To sweeten the pot, those who subscribe to Netflix (NFLX) can watch older movies available on Watch Instantly.

Apple is attempting nothing short of doing to TV what it's done in digital music and the mobile phones -- remaking a market in order to make that market its own. With Apple TV, it's probably not going to work at first. But Apple will keep trying to break down the psychic barriers that deter many American consumers from connecting their TV sets to the Internet.

And if it can do that before competitors like Amazon and Google (GOOG) can, Apple will achieve one of its most important conquests in its piecemeal campaign to build a massive media empire.