Where's the Video iPod?

Microsoft (Nasdaq: MSFT) entered the digital entertainment market last Thursday, hoping to cut into Apple's (Nasdaq: AAPL) significant market share -- 70 percent in digital music alone -- with a one-two punch.

Microsoft unveiled both the MSN Music Service, which caters to the many mobile music devices supporting the Windows Media format, and the Portable Media Center, which adds video capability.

Could these new developments -- not to mention Bill Gates' recent mocking of Steve Jobs for his reluctance to pursue mobile video -- goad Apple into adding LCD to the iPod?

It's the Music, Stupid

After all, the iPod from the beginning has been seen as a portable storage device as much as a music player. As mini hard-drive technology pushes storage capabilities into the hundreds of gigabytes, perhaps the iPod could be transformed into a video player as well.

Phil Leigh of Inside Digital Media doubts that this is the direction Apple is headed.

"I don't think the iPod will go video anytime soon. Jobs was pretty clear about this when asked in a public forum -- I think on the anniversary of the iTunes store," Leigh told MacNewsWorld.

"He said, 'It's about the music, stupid.'"

LCD Too Small

Leigh believes Jobs is taking the right course. He doesn't think portable players for video make much sense unless users have eyeglass screens to wear.

He thinks watching video on a small portable screen would be like having music come out of a tiny speaker on the iPod.

"You listen to music on an iPod thru headphones. Few of us would like the experience if the sound came from a half-dollar-sized speaker in the iPod. That dog won't hunt," Leigh said.

In the absence of eyeglass screens, he added, the next best bet is a 12- or 14-inch screen. "If you want a laptop computer-sized screen, then you simply use your laptop PC for videos and not some smaller device like a video-enabled iPod."

Barriers to Mobile Digital Video

Michael McGuire, senior analyst with Gartner (NYSE: IT) G2, agrees. He thinks the "portable media center" already exists. He calls it a notebook.

McGuire suggests there are two barriers to a major shift to hard drive-based digital video.

"One is the content holders, who see new methods for distributing and interacting with commercial video as a threat rather than an opportunity," McGuire said.

The second, McGuire said, is customers. "If they want to watch a movie, they buy a DVD."

iPod as Content Caddy

McGuire does consider the iPod to be video-ready -- but as a storage device rather than as a mini movie theater.

Looking beyond Hollywood blockbusters and commercial content, McGuire thinks that the iPod could simply serve as a distribution device, carrying music, art, photos and video. This fits well into the Apple niche of catering to creative consumers loyal to the platform.

"The iPod then becomes a digital portfolio, perhaps allowing someone to plug into a display or monitor and say, 'Here is my latest work,'" McGuire said.