SanDisk's Video Salvo

(page 2 of 2)

But its home video player, AppleTV, has been described by Chief Executive Officer Steve Jobs as a "hobby," and sales are thought to be slow. Apple doesn't break out unit sales of the device, but iSuppli analyst Chris Crotty expects Apple to sell fewer than a million units by the end of 2007.

Apple also is widely seen as vulnerable when it comes to adding and keeping content-providing partners. It's had a very public license-renewal spat with NBC Universal that resulted in NBC's programming being yanked. Movie studios, nervous about piracy as well as being locked in to Apple's inflexible pricing structure, have been slow to sign on to iTunes.

Meanwhile, Amazon (AMZN) has recently launched its Unboxed video download service and partnered with TiVo (TIVO) for direct-to-TV video downloads. Netflix has also started its own video download service.

Resonating with Customers

SanDisk CEO Eli Harari says launching Fanfare has less to do with attacking Apple in a potentially tender spot than about establishing a toehold in an incipient market. "The video market right now is just embryonic," he says. "Media companies have spent a great deal of money creating their content and they don't want anyone to tell them how to sell it. And we agree with them."

For David Poltrack, president of CBS Vision, the TV broadcaster's research division, it's a matter of getting the networks' programming in places that consumers will use it. "When we tested the SanDisk product it clearly resonated with consumers," Poltrack says. "There are other ways to do this with more sophisticated products, but because of cost and complexity they're not as attractive. This is going to be selling at Wal-Mart (WMT)."

TV show episodes and movies will sell at prices similar to what's found on iTunes: $1.99 per episode for TV shows, and $4.99 for movies, but the service won't be bound by any strict pricing models. That opens the door to free ad-supported downloads, which Poltrack says is hugely attractive to content companies like CBS. "The consumer prefers the ad-supported model," he says. "They would rather accept ads than pay for content. There is a minority that would rather pay, but the majority wants the content for free."

Combining the TakeTV device with the Fanfare service creates the means of tracking ads, he says. "When you plug in that device to the computer and sign in to the service it knows who you are," he says. "Having people say these are the categories of ads they're interested in—that opens up a lot of ways for advertisers to use this medium creatively."

Taking a low-tech approach on PC-to-TV transfers could make a big difference to consumers weary of technical complexity, says Jupiter Research analyst Michael Gartenberg. "We know consumers want to watch downloaded video on their TVs. But the biggest weakness is the complexity of the home network," he says. "This takes the maddening complexity of the home network out of the equation."

Hesseldahl is a reporter for BusinessWeek.com .