Why Apple Isn't Losing Sleep Over Vudu

[update: Apple has now updated their product, and vudu has dropped its price to compete]

Apple's latest competitor to the Apple TV is the Vudu. Prices haven't been announced and the product isn't shipping yet, but it's already stirring up some buzz on the web.

What It Does

Vudu is an internet movie device. You find a movie you want to watch (the company hopes to ship with 5000 titles), press a button on your remote, and you start watching. It's also possible they will release a subscription model similar to NetFlix.

How It Does It

The company behind the Vudu has an interesting approach to downloading data, one that has warranted a rumored 42 patents. Vudu will store the first 30 minutes of certain movies on the device, so it can begin playing with no delay. Then, as you start watching the movie, the remaining data will be downloaded in the background. By the time you get to minute 31, it's already been downloaded. This solves one problem that has plagued download services -- the lack of instant gratification. After all, why wait for a downloaded movie movie for 2 hours when you can just drive over to Blockbuster in 15 minutes?

Enter Bittorrent

The other big problem is how expensive it is to send large files over the internet. Vudu is going to address this with a technology called Bittorrent, commonly referred to as "peer-to-peer technology". When you start watching a movie, it is broken into a thousand little pieces and shared with everyone else that owns a Vudu box. This spreads the bandwidth costs amongst all Vudu owners, saving the parent company a lot of money.

Why Apple Shouldn't Care #1: Vudu Is More Expensive

The Vudu is rumored to be more expensive than the $300 Apple TV. This could pose a problem for the upstart Vudu as it is harder to justify a premium with no brand loyalty fall back on. This is even harder when you're competing against Apple in the consumer space. Would anyone dare release an iPod competitor that costs more?

#2 Bittorrent Isn't a Magic Bullet

Bittorrent is a very exciting technology for cutting edge technologists, but it's yet to catch on with the mainstream. One of the biggest problems is similar to what Microsoft's Zune encountered: if no one else has a Vudu, sharing downloads with the Vudu community isn't very helpful. As the community grows, the download speeds will increase, but it remains to be seen if Vudu can reach the required critical mass. In the short term, they'll probably have to host the downloads themselves, increasing their initial costs.

#4 Vudu Only Does Movies & Can't Talk To iPod

So far, there's no information that the Vudu will suppport podcasts, music, TV shows, or anything else the Apple TV can. And even if they did support each of these media types, they wouldn't be compatible with the iPod or the iTunes Store. Like it or not, Apple currently owns the digital media field. Competing against them won't be easy.

#5 TV Interfaces Are Hard

The Vudu wants users to purchase movies through their TV. On one hand, this simplifies things because you can do everything from your couch. On the other hand, this means you can't use a mouse or keyboard. Where the iTunes Store allows you to browse like any other website, the Vudu interface will probably offer you about 5 buttons - up, down, left, right, and select. This is ok for navigating through a limited set of options, but quickly fails when you want to do something more complex, like type a term into a search box.

#6 Apple Can Imitate If Necessary

If the Vudu's Bittorrent approach to downloading turns out to be successful, there's nothing stopping Apple from adding it to their Apple TV interface. Because the Apple TV is just a cheap Mac, complete with a full copy of Mac OS X, they can write software to do whatever they want. In the unlikely event the Vudu is more than hype, it won't take long for Apple to respond.