2008 Macworld Predictions: Gaming the Odds

Jan.14.08 | About: Apple Inc. (AAPL)

2007 was a banner year for Apple (NASDAQ:AAPL). There was the iPhone, a new (and very successful) iPod family, a new and improved iMac, the Leopard update to the OS X operating system and a stock price that’s accelerated like a Ferrari on a track. Now it’s 2008 and Macworld, the trade show that is “Apple’s State of the Union” is just a blink away. Last year’s show revealed the iPhone. “What can we expect this year?” is the question on the minds of many. We all want to know: what promise and surprise does the 2008 product pipeline have in store for us?

Nobody’s talking, which is usual, and as usual, that has everyone talking. Steve Jobs and his team guard their secrets as tightly as a Vegas magic act, and like the elite illusionists, they enjoy misdirection just as much. That’s fueled a constant stream of predictions and forecasts. Analysts with inside sources, press and fans alike all have a perspective. Handicapping Apple product announcements is rarely a wise endeavor, nevertheless, below are some rumors, and odds of their likelihood:

(For investors, keep in mind speculation has historically fueled a pre-Macworld stock run up and a post show sell off during the past three years. Analysts note the stock saw an average gain of near 5% in the weeks prior to the show, and a post show sell off of near 11% in the month following).

iTunes Movie Rentals

Stories of an iTunes film rental program have circulated for nearly two years. So far, all have come up short but such an announcement is really just a matter of timing (and the deals with the studios). Definitive proof the service is coming came in September when a customer going through the customer service menu of iTunes stumbled onto a drop down menu that included subject headings about rentals. (Click here for the screen capture image from that menu). A few weeks ago, at the end of December, the Financial Times reported a deal had been struck with Fox. Recent rumors have added Paramount, Disney (NYSE:DIS) and other studios. The volume of chatter and buzz is high.

Rumor Likelihood: This one is probable to likely.
Odds: 1 to 2

Apple TV Version 2

The first model of Apple’s computer to TV connector didn’t do too well. Though slick in appearance, the unit’s audio quality and video quality were thought to be somewhat lacking compared to Apple’s usually cutting edge designs. The timing of Apple TV’s launch was, arguably, off too. The marketplace wasn’t ready for a TV/PC convergence device. Now things may be changing.

Recently, Netflix (NASDAQ:NFLX) announced a service streaming movies straight to the TV. Amazon (NASDAQ:AMZN) has been pushing similar for a while through a deal with TiVo (NASDAQ:TIVO). Additionally, Game console makers, set top makers and cable co’s are all eyeing ways to better bring the computer into the living room. The on-demand market is becoming a battleground, and that was a major theme at the Consumer Electronics Show.

If an Apple movie rental service is launching, an Apple TV upgrade would be a logical extension. High Definition support, more approachable interconnectivity to TV products and better audio/video quality would likely be included.

Rumor likelihood: Possible to Probable
Odds: 4 to 1

Micro MacBook

Near the top of the “whisper list” have been reports of an upgraded, slim but not “sub compact” or notebook computer. Speculation about the potential model includes theories for either an 11” or 13” screen in an extremely thin aluminum case body. Multiple mock-up pictures are floating around. Many hint at an auxiliary optical drive and an unusually large track pad/pointing device that theoretically involves some of the same multi touch software used on the iPhone and iPod Touch. Speculation also calls for an onboard NAND Flash Drive. Such drives have no moving parts which mean lower power consumption and smaller manufacturing footprint.

Adding to speculation something lean and thin could be in the works: Apple has filed patents for a monitor that doubles as a laptop docking station (Text of the filing is here). Drawings included with the patent show a very thin laptop sliding entirely into a slot in the side of the monitor.

Realistically, such a monitor is probably not due this week, but the laptop may be. And if not now, consensus among analysts seems to be it will arrive by the summer.

Rumor likelihood: Modest to Probable.
Odds: 5 to 1.

Beatles Finally on iTunes

It’s the recurring prediction. “A case of not if but when.” January, May, June. September. "The Beatles are coming has been a mantra." Music from all four of the Fab 4 is available independently at the music store. John Lennon joined in August. The long running fued between Apple Corp and Apple Inc is long past. McCartney called a deal imminent in May. Still, as a group, the Beatles are one of few major acts still missing. Previous expectations had that remedied by late 2007 (with catalog remastering being the sticking point). It’s now 2008….will iTunes finally get its trophy? Will Steve Jobs walk on the stage to a theme song from John, Paul, Ringo and George like he did last year? And this year will it be more than misdirection?…. It’sall possible but predictions about what song it will be, or when they’ll arrive have been wrong again and again. I’ve guessed before, and guessed wrong, about a Beatles release (including a list of the top ten Beatles songs that could go with it) It’s become too tough to predict. (Though list of top ten likely songs remains open).

Rumor likelihood: Possible
Odds: 9 to 1

Blu-Ray DVD Support

Another high volume rumor: “Apple will announce their support for the BluRay DVD Standard.” That’s definitely possible. Next generation DVD players promise discs with far greater storage capacity and offer videos with an optical quality ideal for Apple’s high quality screens. The questions fueling timing are: 1) are these DVD players affordable enough yet to include with the computers? and if they are: 2) Which format will win the format war and warrant support? Both Blu-Ray and HD DVD have distinct technological strengths and weaknesses.

Up until last week, the format war was the significant issue. There was no clear winner between HD DVD and Blu-Ray. Sony’s CEO, Howard Stringer, had called the battle a stalemate just a few months ago. But then Warner Brother’s made that point moot with their surprise decision to back Blu-Ray. HD DVD is down and just about out as a result.

Cost, however, is still a factor, especially with Blu-Ray which requires special blue lasers in its optical components.

Hinting nothing is coming yet: Last week Apple updated its Mac Pro line. They didn’t include Blu-Ray drives with the models. If it’s not on the top of the line, it’s not likely lower down the ladder.

Rumor Likelihood: unlikely to remote possibility.
Odds: 12 to 1

iPhone Nano/iPhone Version 2

People love their iPhones. Even with skepticism about using AT&T’s EDGE cellular network in the U.S., and some dream functionality not included: it’s been an industry changing product. CBS News called it the biggest tech story of 2007.

The phone’s success has fueled speculation that a smaller, more affordable version is on its way. There’s also a hint that an upgraded version supporting 3G networks and adding functionality to make the phone a stronger competitor with Blackberries and other business-user-centric smart phones (So far the iPhone has been a huge hit with consumers but is not as welcomed by business smart phone users) is on the way.

Given the iPhone is selling well and has only been on the market since the end of June, a next generation upgrade or new model is more likely a few months away. It’s certainly possible it could happen sooner. Apple did restructure their iPod lineup ahead of many analysts’ expectations (and it’s proving a big success).

Rumor likelihood: unlikely to possible. This one’s a wild card.
Odds: 13 to 1

Two Sided iPod

In May of Last year, Apple filed a patent for a two sided touch controlled device, fueling rumors of a possible new direction in the iPod. It never appeared. (So far.) Then again, neither have the Beatles, and Apple played Lovely Rita, a Beatles song at last years Macworld.

Both the patent filing and the music choice have fueled occasional, though not terribly high profile in the case of patent, rumors for a year. Is a new iPod model coming? Odds are no. Apple files many patents, many foward looking. An OLED keyboard is an example. Given the recent overhaul of the iPod product line another line change is extremely unlikely. However cool a dual sided device might, however novel, it’s a long way off, if it every gets built.

Rumor Likelihood: Low to Extremely unlikely.
Odds: 25 to 1

Mac Mini Tablet PC

Thoughts of an entirely touch screen, small form factor ultra mini computer running a full version of Leopard has some Apple fans drooling. They envision an iPod like device that’s as small as a PDA or smart phone, but as powerful as a full computer. To them it’s the return of the Apple Newton (Newton was a failed effort to improve on the personal digital assistants Palm (PALM)/Handspring etc) of the mid to late 90s.

It’s a nice dream but it’s extremely unlikely Apple will launch such a product any time soon.

Rumor Likelihood: extremely unlikely.
Odds: 30:1

Apple’s own Record Label

The Big 4 haven’t been playing very nicely with Apple lately in their effort to take back some power. That’s fueled an odd rumor that music icon and producer Jay Z and Apple will announce a partnership to start their own music label.

There’s been nothing to substantiate the rumor, and on its face, it sounds absurd. Apple’s a technology company. They build products, pretty impressive ones. It’s hard to believe they’d move so far away from their core, or toward one media industry in particular. Steve Jobs has in the past talked about their multi-prong strategy. The phone, the MP3 players, the computers – they all fit. Music Label? That doesn’t compute. Besides, there’s already an Apple record label…it’s called Apple Corps and its home to the Beatles.

There’s also the fact that Jay Z made a cameo appearance in Bill Gates CES keynote video. If he’s in bed with Apple too, it could mess up the now famous Apple vs PC ad campaign. We can’t have that.

Rumor likelihood: Too crazy to rate. Beyond a long shot.
Odds: 250 to 1

Disclosure: none.