Apple has overhauled key elements of its online video strategy following an admission by Steve Jobs yesterday that the company's early efforts had been a disappointment.
The changes involve a new online rental service for movies, and a revamp of the Apple TV set-top box so that viewers can stream movies direct from the internet, without the need for a computer.
In a rare admission that Apple's first attempts had failed, Mr Jobs conceded that customers had not taken to watching online video in the way Apple had expected. His comments came at the MacWorld show in San Francisco, which, thanks to Apple's success in digital music, has become one of the most closely watched events in the digital media and consumer electronics industries.
The company's initial plan had involved selling movies on its iTunes store that customers could download to their computers, then use the Apple TV box to watch them on their TV sets.
So far the company has sold seven million movies, Mr Jobs said, adding: "That's more than everyone else put together, but it did not meet our expectations." Rather than buying movies, viewers would prefer to rent them, he added.
Under the new plan, movies will be released to rental 30 days after their DVD release, with new titles renting for $3.99 each and older movies for $2.99.
In a second part of the overhaul, the Apple chief executive also admitted that its plan for letting viewers stream video from their computers to their TVs, announced amidst much fanfare a year ago, had failed.
He added, though, that other companies that have been trying to bridge the gap between the internet and the TV set, including Amazon, TiVo, Netflix and Blockbuster, had also failed.
Apple will offer a free software upgrade for existing boxes so they can access video direct from the internet, he said, while the price of the Apple TV will fall from $299 to $229.
Twentieth Century Fox was the first to join the service while others, including Warner Brothers, Sony and Paramount, are believed to have come aboard.
NBC Universal has also joined the video rentals service, which is a surprise because the company had a very public falling out with Mr Jobs and Apple over the pricing of television programmes on the iTunes platform.
Jeff Zucker, chief executive of NBC Universal, pulled all of the company's TV shows from iTunes after Apple refused to modify its pricing structure.
