SAN FRANCISCO (Dow Jones) - Analysts who follow Apple Computer Inc. say it is no surprise the company has already sold 1 million videos through its new iTunes Music Store service.
But what is of interest is the length of time it has taken for those 1 million purchases - just 19 days - considering how relatively little video content Apple (AAPL) currently has available, analysts believe the company has sent a message that says consumers are willing to pay to watch videos on a 2.5-inch screen, and that Apple intends on claiming the portable video market much like it has already done with online music and the iPod.
"No one had any doubt they would reach 1 million (downloads)," said Shaw Wu, of American Technology Research. "But I think the speed of adoption is ahead of expectations. It's a good sign for Apple, and its strategy."
Investors appeared to have taken Apple's plans to heart, bidding up the company's shares by $3.01, or more than 5%, to $57.50 in Monday trading. The stock earlier reached a 52-week high of $57.71 .
Gene Munster, of Piper Jaffray, said it's important to consider just what Apple is offering, how consumers have responded, and how video content providers need to look at Apple as a consumer-electronic force beyond the iPod and its flagship iMac personal computer.
"What Apple's doing is laying the groundwork for the next frontier in home entertainment," said Gene Munster, of Piper Jaffray.
If compared to Apple's more than 2 million song offering, the 2,000 music videos currently available barely make a dent in the company's data-storage library. Through a partnership with the Walt Disney Co. (DIS), Apple also offers downloads of five TV programs, including the highly rated "Lost" and "Desperate Housewives," both on Disney's ABC network.
All videos can be downloaded through iTunes for $1.99 each and watched either on an iPod or any computer with iTunes.
But the initial thin amount of video available makes Apple's numbers even more impressive, Munster said.
"Apple already has a huge market share (for MP3 players), and this is just going to make it grow higher," Munster said. "Out of 1 million downloads, probably 40% of the people are just trying the system out. But if there's that much interest, it's obvious the market for the content is there.
And if content is indeed king, Apple Chief Executive Steve Jobs wasted little time in letting content providers know his company's strategy, and calling up them to realize the strength of Apple's role in the video market.
In a statement announcing the 1 million downloads, Jobs said Apple's next challenge "is to broaden our content offerings so that customers can enjoy watching more videos on their computers and new iPods."
"What Jobs has done," Munster said. "Is put out an open invitation to content providers. Apple's showing that the demand is out there, and they (content providers) need to see that their customers are coming to Apple."
(END) Dow Jones Newswires
11-01-05 0146ET Copyright (c) 2005 Dow Jones & Company, Inc. Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.