Apple (Nasdaq: AAPL ) rocks, but who rolls? Here are three non-Cupertino-based stocks that may profit from iTunes 8 and the new iPods.
General Electric (NYSE: GE )
Let's begin with the obvious: GE unit NBC Studios. The last we heard from NBC, it was broadcasting content via Amazon.com (Nasdaq: AMZN ) and its now-defunct Unbox service. What changed? Variable pricing.
"What happened is that we got into a dispute over pricing and thought there should be variable pricing on the content in the iTunes store," NBC chief Jeff Zucker told Maria Bartiromo on CNBC. "The fact is, we have variable pricing, and the programs will be on there at the 99 cents price point, $1.99 price point, and for HD episodes of the program, that will cost $2.99."
So Zucker says he got what he wanted. But the real victory is that NBC is back on iTunes alongside Fox, CBS, and ABC. The network, once a powerhouse, is reestablishing itself with big ratings wins thanks to the Olympics, but it still ranks second to Fox in primetime in the key 18-49 demographic. Having iTunes back as a promotional channel should help.
Akamai Technologies (Nasdaq: AKAM )
Less obvious is Akamai, a longtime Apple partner that will very likely be called upon to deliver the high-definition content that iTunes will offer.
But this isn't a financial win so much as a positioning win. Limelight Networks has captured headlines for delivering video for Amazon, Netflix (Nasdaq: NFLX ) , and NBC during the Beijing Olympics, among others.
If Akamai is indeed delivering HD, as it first promised to do last summer, it blunts claims by BitGravity, Conviva, and other upstarts that Akamai is a "1.0" content delivery network, incapable of bringing users top-quality video content.
Sigma Designs (Nasdaq: SIGM )
Video is the key here -- high-definition video, specifically. Networks are already testing digital TV in certain areas of the country, preparing for the switchover in February of next year.
Researchers expect only 9% of viewers to be affected when the Feds officially pull the plug on analog broadcasts. More importantly, digital viewing begs for high-def content. Manufacturers know it, too. Check the A/V aisles at your local electronics retailer, and you'll find dozens of big, shiny new screens hungry for HD content.
But most of these sets are built primarily for cable, and Comcast and its peers aren't the only pipes for high-def goodness. The Web might be more efficient. Imagine receiving HD content wirelessly over the Internet via your set-top box. That's precisely the sort of breakthrough that Sigma Designs, an expert in IPTV, and Microsoft (Nasdaq: MSFT ) were working on in April.
My point is this: As the Web gets more viable as a host for HD content, innovators will find ways to get that content to your TV. You can bet that Sigma will play a role.
At the "Let's Rock" unveiling, Apple CEO Steve Jobs referred to the iPod and iTunes combination as an "ecosystem." He's got big numbers to back up that claim:
- 73.4% of the portable media player market, according to NPD.
- 100 million downloads at the App Store, which now hosts more than 700 games and is available in 62 countries.
- 65 million iTunes user accounts.
Jobs' implication: Apple is creating a media empire by engaging third parties. GE, Akamai, and Sigma Designs are just three. Surely there are, and will be, dozens more.
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