The latest battle of the network stars is playing out on an iPod near you, with the Apple (Nasdaq: AAPL) 
device now capable of playing video programs such as "Law & Order" and "The Tonight Show with Jay Leno" from NBC Universal through Apple's iTunes service for US$2 per show.
The industry was impressed with Apple's video iPod, introduced in October, but there was some skepticism over the lack of content for the new device and service, which started with music videos and a limited number of TV shows from ABC/Disney that included "Lost" and "Desperate Housewives."
However, Apple has benefited from the increasing willingness by content holders, including the major broadcast networks and movie studios, to digitize their content and make it available to not only Apple, but also to cable operators, Internet providers such as AOL, and even peer-to-peer (P2P) services.
"It's happening across the board, it's not just Apple," Yankee Group senior analyst Mike Goodman told MacNewsWorld. "We're starting to see the tip of the iceberg of what you're going to see over the next 12 to 18 months."
NBC Now Showing
Confirming industry rumors about a content deal for video on Apple's iTunes -- also reportedly occurring with ESPN -- Apple announced this week its iTunes store would provide primetime, late-night, cable and classic shows including: "The Office," "Late Night With Conan O'Brien," USA's "Monk," and oldies such as "Knight Rider" and "Dragnet."
"We're thrilled to expand the iTunes video catalog with 11 popular shows from NBC, USA Network and the Sci-Fi Channel," said a statement from Apple CEO Steve Jobs, who added iTunes has sold more than three million videos in its first two months.
Apple said with iTunes' 3,000 music videos, Pixar (Nasdaq: PIXR) short films and two million songs, its entertainment service delivered "groundbreaking personal use rights," coupled with Apple's ease of use and advanced features, which include Podcasting support 
and iMix playlist sharing.
Digital Direction
Goodman said Apple had done a good job of balancing content holders' and users' interests and integrating consumer behavior into its business model with iTunes.
"If all you're doing is restricting me, then you limit the value of the product," he said.
Goodman indicated video content owners, such as ABC and NBC, may have learned a lesson from the music industry, which missed out on digital distribution that was taken up by consumers and unlicensed P2P services. However, Goodman added that Apple is merely one beneficiary of the content holders' desire to deliver their content across a range of media. Goodman cited deals between CBS and Comcast (Nasdaq: CMCSK) and between Time Warner (NYSE: TWX) and AOL as examples, in addition to Apple's deals with ABC and now NBC.
New Video Business
Gartner (NYSE: IT) research director Mike McGuire told MacNewsWorld that other deals, including NBC's recent embrace of peer-to-peer distribution through a deal with Wurld Media's Peer Impact P2P service, represent the content holders's first significant efforts to distribute video online.
"The challenge now is the experiment to see how this channel works," he said. "It is definitely their first shot, their first experiment, so this is going to be fine-tuned."
McGuire added while consumers may be more willing to have limited viewing or copying rights with video since they are used to it with movie rentals, the business model for digital video remains a significant challenge.
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