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Slew of new features--including movie rentals and HD video--en route to Apple TV

Steve Jobs announces several new enhancements and features coming to Apple TV.

Apple TV rental menu
Apple TV's updated functionality provides access to movie rentals and HD content Apple

Update: Check out three related videos with more info on the forthcoming Apple TV upgrade: Steve Jobs comments during his keynote address; the video guided tour on Apple's Web site; and a summary from CNET's Donald Bell. This post has also been updated since its original publication with additional information.

The Apple TV just got a whole lot more useful.

Steve Jobs unveiled a major feature update to the Apple TV today during his Macworld keynote address in San Francisco that aims to transform the device from a TV-based iTunes media viewer to a more full-featured media-on-demand device. The hardware will remain the same, with the entry-level 40GB model dropping from $300 to $230, but a free software upgrade--available in two weeks--will add the following functionality:

  • Direct onscreen ordering: Previously, video content for Apple TV needed to be ordered on a computer (Windows/Mac) and then streamed from that PC's hard drive to the Apple TV. The updated Apple TV will allow direct access to the iTunes Store, so you can buy or rent movies and TV shows directly--no PC intermediary required. (Music can also be purchased, as well.)
  • Instant streaming: Unlike the "queue-and-view" method listed above, the updated video functionality is said to allow videos to begin streaming within about 30 seconds.
  • Upgraded video and audio quality: We complained loudly about the substandard video quality of existing iTunes video downloads, which were optimized for the small screen of an iPod or iPhone. The new crop of videos are says to be two tiers: DVD and HD quality, with Dolby 5.1 surround sound (instead of the stereo-only soundtracks on earlier content) on the latter.
  • Wider selection of videos from all major studios: Past selections were a scattershot grab bag, but Apple has lined up content from every major studio (Disney, Fox, Warner Bros., Paramount, Universal, Sony, Miramax, and Lionsgate, and their respective subsidiaries). Apple is promising more than 1,000 movies, available 30 days after the DVD release.
  • Movie rentals: In the past, movies could only be bought on iTunes, at prices around that of DVDs. As of today, iTunes is kicking off movie rentals: $2.99 for catalog (older) movies and $3.99 for new movies, plus a dollar more for the HD versions of each. You have 30 days to start watching a movie, and 24 hours to finish it once you start. In addition to being available on Apple TV, rentals will work on Macs, PCs, and all current iPods and iPhones (though it's unclear if movies rented directly on the Apple TV will be transferrable to any of those other devices).
  • More photo options: The updated Apple TV will allow access to online Flickr and .Mac photo galleries. That's in addition to pulling photos from networked computers, as it does now.
  • music and TV show purchases: Music and TV shows can be purchased directly on Apple TV, and both will be synced back to the iTunes software running on your computer. (Presumably, they can then be transferred to iPods/iPhones as well.)

Notably, the forthcoming Apple TV upgrade hits three of the five "how to fix Apple TV" suggestions I made back in September. (Just as notable: it appears I was 100 percent wrong when I said that Apple TV couldn't handle surround sound.) Likewise--if effectively implemented--these improvements will also negate many (albeit not all) of the points listed in "the bad" on the existing CNET review of the product.

Still, because there's been no hardware upgrade, some of the other gripes remain. The dearth of composite and S-Video outputs mean the Apple TV will only connect to a newer wide-screen TV. You're still stuck with the tiny Apple remote, which may actually be too oversimplified for some people (you'll need the TV remote--or a universal model--to control the TV's volume, for instance). And the product remains completely iTunes-centric: Barring a hack or some major file transcoding, you won't have access to any other videos on your hard drive.

In the same vein, the fantasies of a supercharged "Apple TV 2.0" never materialized. Those looking for a built-in DVD or Blu-ray drive--or a full-on DVR replacement--will remain disappointed. Face it, guys, it's not going to happen: Apple's trying to upsell you on its own media service, where it's getting a commission on everything you watch or listen to. The company just doesn't have a compelling reason to make it easier for you to access non-Apple content (that's why I think Internet radio won't be added anytime soon, either). Likewise, a DVR would require a partnership with a cable company (via the still-dodgy CableCard technology) or satellite provider--and Apple already seems to have a somewhat strained relationship with AT&T Wireless, its keystone domestic partner in the iPhone venture.

That said, the combination of these imminent Apple TV and iTunes upgrades are a big step forward for moving Apple's media strategy beyond the iPod and into the living room. While we'll reserve final judgment until we get some hands-on time with the upgrade, it seems like "Apple TV Take Two" is very close to what we were all looking for the first time around. At the very least, it offers a serious challenge to the other competitors in this space, including everyone from Microsoft (Xbox Live Marketplace), Netflix, Blockbuster, Amazon Unbox, and upstart Vudu--and that's just for starters.

What do you think? Is Apple TV back from the dead, or are you looking for even more?