CrunchGear’s Doug Aamoth is currently liveblogging from the Apple Store on Commonwealth Avenue in Boston. The line is now a mile long and growing. Yes, folks: This is a line to go into an Apple store in Boston. They’re not even announcing a 3G iPhone. More as we get it.

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After years of negotiating with the movie studios, Steve Jobs finally got them to agree to put their movies on iTunes the same day as they release them on DVD. Now, in addition to Disney—which has been selling movies on iTunes since September, 2006—Apple is distributing 1,500 films from 20th Century Fox, The Walt Disney Studios, Warner Bros., Paramount Pictures, Universal Studios Home Entertainment, Sony Pictures Entertainment, Lionsgate, Image Entertainment and First Look Studio. New movies can now be purchased for $15, or rented for $4 (older movies are $10 for purchase or $3 for rental).

Apple watchers have been expecting this for a long time. It announced a deal to distribute rentals in January, and even that leaked out beforehand. But both Amazon and Netflix already have their own movie download and/or streaming services. And both offer more titles—Netflix has more than 6,000 and Amazon has nearly 12,000. (Although, Amazon may be rethinking its Unbox service).

It was only a matter of time before the studios relented and struck a deal with Apple. They could only stand on the sidelines and watch Disney ring in the coin for so long. The idea of distribution windows is so Twentieth Century anyway. How long before movies appear online the same day they hit the movie theaters? Come on Steve, we’re counting on you.

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Razr anyone? Motorola can’t even give those things away anymore. The once-proud company reported horrible earnings today, with sales down 21 percent and a net loss of $194 million. But the big takeaway was the 39 percent collapse in its mobile phone business. Mobile device revenues in the quarter dropped $2.1 billion compared to last year.

Coincidentally enough, that is almost exactly how much Apple made last quarter on iPhone sales. The figure came to $2.3 billion (including lumped-in sales of Apple TVs, which likely made up less than $100 million of that total). During yesterday’s earnings call, Apple CFO Peter Oppenheimer spelled this out:

We sold 1.7 million iPhones during the March quarter . . .. Total revenue recognized during the quarter from sales of iPhone, iPhone accessories, and payments from carriers was $378 million. Total deferred revenue from iPhone and Apple TV was $1.93 billion at the end of the March quarter.

Add those together and you get $2.3 billion. That deferred revenue he is talking about is what Apple collects from its share of monthly subscription fees from AT&T and other carriers partners—an arrangement that Motorola has never been able to negotiate for its phones. So not only has the iPhone replaced Motorola-class phones as the mobile device of choice among consumers, but Apple is also replacing Motorola’s business model by tapping into that rich vein of monthly subscription fees: An arrangement, by the way, that has been as good for AT&T as it has been for Apple.

Here is the segment revenue line for Motorola’s mobile business:

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Apple’s Q2 2008 financial results were very strong and above expectations. The bottom line: they are selling a lot of stuff at very good margins.

Total revenue for the quarter was $7.51 billion; profit was $1.05 billion, or $1.16 per diluted share (up from $.87/share a year ago). Profit estimates were in the $1.10/share range. 2.3 million Macs, 10.6 million iPods, 1.7 million iPhones. The company now has nearly $20 billion in the bank and maintains 73% U.S. market share for music players. They expect to sell 10 million iPhones this year.

In the conference call, Apple gave guidance on the iPhone 2.0 - late June. 200k+ downloads of SDK to date, and “1/3 of Fortune 500 interested” in the new iPhone, with enterprise-friendly features.

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Now that AT&T and Apple are tied at hip with the iPhone, Apple watchers look to AT&T for details on the health of iPhone sales. This morning, AT&T announced a decent first quarter, with profits up 22 percent, driven by gains in its wireless business. The jewel of that business is the iPhone, which commands nearly double the average monthly revenue per subscriber that AT&T gets from other wireless customers, and is helping to reduce its churn rate. Yet during AT&T’s earnings call this morning, Apple’s shares slumped nearly 4 percent in morning trading after rising over the past two trading days.

Investors were hoping for some indication that AT&T blew the doors off its iPhone sales, and some assurance that Apple would hit its goal of selling 10 million iPhones by the end of the year. Anything over one million new iPhone subscribers would have been well received. It doesn’t look like Apple delivered anywhere near that number, since AT&T added 1.3 million net new subscribers across all phones. (It added 5 million gross new subscribers before accounting for churn).

AT&T didn’t break out the numbers of iPhone additions as it has in the past. (When iPhone sales beat expectations, they are not shy about sharing it). By the end of last year, AT&T had activated two million iPhones. But during today’s call, here are the iPhone details AT&T provided (per Silicon Alley Insider):

iPhone continues to be very popular with customers, feedback is very good. ARPUs are in the mid to upper 90s across the base. We continue to see customers adopting iPhone. Over 40% are new to us. Nothing really new in trends there. Continued, solid growth. Through Q1 stable.

We’ll have to wait for Apple’s earnings tomorrow to find out how many new iPhones were sold in the quarter. The number could still be around 1.5 million because other carriers besides AT&T are selling it internationally, and about 30 percent are unlocked. But AT&T still makes up the vast majority of iPhone sales and usage. The big bump in iPhone sales, especially in Europe, won’t come until the 3G version comes out this summer.

But handing over the keys to its network to Steve Jobs was the smartest thing AT&T ever did. That mid-$90 average revenue per user (ARPU) compares to about $50 for all phones. Higher ARPUs and lower churn is what drives profits in the mobile business.

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Very few would argue with the statement that video is hot right now. From the cultural phenomenon of YouTube, through to the rise of live streaming services, money is pouring into startups from content creators through to service providers. Getting into video isn’t as easy as setting up a blog, so here’s some advice of which direction to head in.

The basics

Obviously you’ll need a camera to get started in video; if you’re a Mac user you might have a cam built in, but if not web cam’s are fairly cheap. Alternatively people like Chris Pirillo stream from a professional video camera, but even a second hand older model can also work, for both live and recorded shows to computer. For camera effects, CamTwist for the Mac is free and fully featured with effects such as text, clocks, image overlays, Picture in Picture, and much more. Fix8 (our coverage here) offers cartoon style overlays if animation or funny faces are more your thing.

Recording

You’ll have two ways of recording a video: local or to the web. Local could directly on to a camcorder through to Quicktime or something in-between. Quicktime Pro (around $45) does the recording and it’s a quick and easy solution. To the web means recording your video directly to a website; the advantages are that you don’t have to upload it and it’s available immediately, however depending on your internet connection the recording quality can be significantly poorer than recording a video locally and uploading it. YouTube offers the direct recording option and is an obvious candidate, but the Live streaming services also allow you to record to their services and even distribute your video out to sites like YouTube later. I’ve also found that the quality of the live stream services can often be higher in recording than YouTube.

Streaming Live

Live in the newest sector in online video with venture capital being spread around a range of services. Live offers some advantages over doing recorded video alone (although they are not mutually exclusive); streaming live means you can interact with and network with your audience while creating archive footage than can be distributed later. Companies in this space include Justin.tv, Ustream.tv, Mogulus, BlogTV, Stickam and others. All of the services have strengths and weaknesses and you should explore each one, but if you haven’t got time for that I’d recommend Justin.tv or Ustream.tv. Ustream.tv is attracting the professional, higher quality streaming shows so if you want to be in that space, you’ll be well positioned. Their tool set including full video conversion makes for a solid product. Justin.tv has a slant towards a younger, Gen Y audience, and if you’re pitching more to that audience it’s the better place to be. I also found when testing both that Justin.tv was more reliable for streaming quality from outside of the United States, and at times Ustream.tv was unusable for me, even on a 14mb down, 1mb up ADSL2 connection; you wouldn’t experience this in the US however. Of the others, Mogulus has a stronger emphasis on professional video and doesn’t have the strong community yet, BlogTV has a lot of potential, and Stickam seems to be dominated by soft porn, at least when I visited it.

Distribution

I asked Chris Pirillo for some tips for this post and one of his key points was simply: “you must understand that (a) It’s all about YouTube, and (b) It’s all about YouTube.” Like it or not YouTube dominates online video today more than Google dominates search in the United States. Other video bloggers I’ve spoken to suggest distribution to many sites, but always making sure YouTube is top of the list. TubeMogul is one the oldest of the video distribution sites, and is simple to use and free. You upload your video to their servers, enter you user name and password for a list of sites (first time only) then press the button and off they go. TubeMogul also tracks traffic statistics from each site so you can see which videos are being watched there. An alternative service is Hey!Spread (our review here).

The other consideration in distribution is getting your video onto other devices, like iPods. The key is to provide the correct file type and feed for services such as iTunes. You can do it manually with a WordPress plugin and by making sure the file is available on your server in the correct format, or you can use Blip.tv.

We’ve covered the occasional content deal on Blip.tv but we’ve never seriously looked at their distribution platform, and it’s the reason shows like Rocketboom, Mahalo Daily and Moblogic are using Blip.tv. On top of the obvious video hosting everyone in this space provides, Blip.tv also offers distribution to external blogs (including an automatic option), the Internet Archive, de.licio.us (links), Flickr (pics from the video), Adobe Media Player, MySpace, Twitter (text alerts), Facebook, Yahoo Video, AOL Video, Akimbo, Lycos Mix, MeeVee, MeFeedia, Meebo, Blinkx, Splashcast, Pando and the most important one of all: iTunes. Blip.tv offers an iTunes subscription feed and file conversion service; users do have to manually go to the dashboard within Blip.tv and request the file conversion on a free account, but with a premium account ($8/ mth or $80/ yr) get the conversion done automatically. A premium account also has other benefits, such as priority file transcoding that in my testing made it the quickest service available (that is time from when the video was uploaded until it was ready to view).

There was an argument between Ze Frank and Rocketboom a year or two back where Ze Frank disputed Rocketboom’s viewer numbers as they were reporting 10x the traffic of Ze’s The Show. The key to Rocketboom’s success has always been distribution, and for a long time you couldn’t open a media player without seeing Rocketboom pre-loaded. Distribution is key, and combining services like TubeMogul and Blip.tv make it a lot easier.

Content

Chris Pirillo told me that the key is to make sure every video has something different, and that you should use supportive text with each video posted as Google loves text. Ultimately what you decide to create is up to you: it may be something simple like a web cam chat, or you may want to get more creative. We cant tell you what will work for you, but the easiest way to start is to get on YouTube and just see what different people are doing, you’re sure to find something to inspire you.

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As Mike reported earlier today, Fring is launching a downloadable app for the iPhone that will allow people to make Skype and other VoIP calls over the data connection instead of using up talk minutes. Fring supports Skype, MSN Messenger, Google Talk, ICQ, SIP, Twitter, Yahoo and AIM services.

It is now live. (Warning: You will need to Jailbreak your iPhone to make it work). The Fring blog has more details or you can download it at the Fringcubator. With so many minutes on most cell phone plans, most people won’t be using this to make local calls. But it could come in handy for international calls or simply keeping up with IM on the go. The latter is really the killer app.

And here’s a video of how it works:

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Fring, an Israeli startup that has a great VOIP/Chat service for mobile phones (see our February coverage), is launching an iPhone version of the service sometime in the next 24 hours, we’ve heard.

This is not a browser-based chat app like FlickIM or Mundu. It should be a fully functional downloadable version of the application that allows users to access the fring, Skype, MSN Messenger, Google Talk, ICQ, SIP, Twitter, Yahoo and AIM services.

That means they’ll be using the Jailbreak installer, which severely limits the number of iPhone users who will download and use it.

But Fring may also be the first really killer application that can get non-early adopter users to consider using Jailbreak. The ability to make VOIP calls over the data plan in itself is probably worth it (although it may only work over Wifi, not the Edge network).

This is most likely a test run in preparation for the official iPhone app store that will launch this summer. It’s also a risky strategy - some developers I’ve spoken with are avoiding Jailbreak because they don’t want to anger Apple and have their official applications banned down the road.

Fring is doing very well even without the iPhone. The service, which is about a year old, gets 100,000 new active users per month. We’ll update when Fring actually launches the application.

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Anyone who’s been reading this blog for more than a few months knows I’m bullish on mobile social networking.

The space is wide open at this point - no one has created an application that has gotten enough traction to go mainstream. That’s party because of tech limitations - browser based networks don’t leverage the power of the mobile device, and client based applications are blocked by service providers and handset limitations.

But it’s coming. A few years from now we’ll use our mobile devices to help us remember details of people we know, but not well. And it will help us meet new people for dating, business and friendship. Imagine walking into a meeting, classroom, party, bar, subway station, airplane, etc. and seeing profile information about other people in the area, depending on privacy settings. Picture, name, dating status, resume information, etc. The information that is available would be relevant to the setting - quick LinkedIn-type information for a business meeting v. Facebook dating status for a bar.

That requires a social network that has presence, location and contextual information about you. It needs to know where you are (via GPS or triangulation), if you are in business or personal mode, and similar information for the people around you. It also needs, at a basic level, the ability to sort and browse the people around you based on their picture and name, and what they are looking for (dating, investments, job, friendship). Once this network is established, you’ll know everyone’s name who’s around you (if they choose to share it), and enough basic information to jog your memory if you know them, or meet them if there’s mutual interest. Poking someone on Facebook is great, but “poking” them when you’re in the same bar as them can result in much more immediate social gratification.

The mobile social network that wins will go way beyond, say, Facebook’s iPhone site, which doesn’t leverage location information, or help you meet people around you.

So when mobile social network startups reach out to us, we give them a lot of attention. I waded through a bunch of them in September 2007, and followed up with a look at LimeJuice in December.

Frankly, MySpace and Facebook could lock up this space simply by focusing on it, but as far as I can tell from discussions with execs at both companies, they’re more focused on each other than in dominating the mobile space. That creates an incredible vacuum for a startup.

Start With The iPhone

In February I wrote a post called “Will There Be A (Successful) iPhone-Only Social Network?” and presented an argument that the iPhone SDK presented a compelling opportunity to launch a mobile social network while avoiding the chicken and egg problem that any new network, and particularly a mobile network, would encounter. iPhone penetration in Silicon Valley, and among early adopters, is so high that the application could spread virally among those communities. As the network gains traction, it could expand to Google’s Android platform and grow from there.

iPhone users are the perfect group to launch the network to. They’re passionate and elitist, and will like the idea of being in an iPhone-only club. Go to a party and see a picture and first name of everyone there who’s holding an iPhone - then meet them and add them as friends. Then, once mutual friendship is established, see those people wherever they are in the world, along with presence information telling you what they’re thinking, or up to.

I believe in the idea so much that I explored putting together a team to build a basic network on top of the iPhone SDK. But I abandoned that idea last week when I saw a live demo, on the iPhone, of an upcoming social network that does everything I called for in that February post.

It’s Coming

The startup behind the new application won’t let me disclose their name yet. But the application is awesome. It shows you everyone around you who has it installed on an iPhone (default privacy is set to off, but can be changed). Users can scroll through nearby users, and set filters for men, women or age ranges. If you find someone interesting you can pull up their profile and ping them. If they respond you can start a chat, on the phone or in person. Of course, they can also choose to block you.

Location is based on the triangulation feature of the iPhone, which is accurate enough to get this going. And the startup thinks they’ve found a way around the fact that third party iPhone applications can’t run in the background (meaning you’d have to have the application open, and not use any other iPhone features, to run the social network and see others). They explained the work around in general terms to me, but asked that it remain confidential for now.

As I said, I saw the app running on an iPhone and even the early prototype left me speechless. It will, I believe, prove to be very popular, and very valuable.

The image shows a mockup of the functionality I saw working live on the phone (I should be able to show a photo or video of it running in the next week or two as well). Look for a launch when the iPhone app store opens this summer.

Credit for that awesome image at top of post is to Hank Grebe at MediaSpin.

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Paying $1 per song on iTunes is starting to get old. And Apple knows it. It made sense to start with something simple to establish the legal digital music market. But now consumers are ready for more sophisticated offerings. That is why Apple is exploring ways to bundle an unlimited amount of music into the iPod/iPhone, according to the Financial Times.

The two options are either to charge maybe $100 more for an iPod and split the extra amount with the music labels, or charge a monthly subscription fee (which would work only for the iPhone at this point). Adding $100 to the price of an iPod and shipping it pre-loaded with music and the ability to access any song on iTunes would definitely keep the iPod money machine chugging along for Apple. But would the music labels go for it? That is the equivalent of only ten full-length albums on iTunes at today’s prices. I’d pay more than that for an iPod that comes with as much music as I can ever listen to. I’d pay maybe as much as $200 above the price of an iPod, which starts at $50 for the Shuffle and goes up to $500 for an iPhone or top-of-the-line iPod Touch.

But would the music labels go for it? Most people don’t buy ten albums a year, and people will upgrade their iPods every few years. Every time they do, they will presumably have to fork over another $100 or $200 for the unlimited music option. The question is, how often will people upgrade and what percentage of the extra price will Apple share with the music companies? Nokia is offering the music labels $80 per cell phone for a similar unlimited music service, but Apple is reportedly only offering $20. If that’s true, I don’t see the music labels signing on.

The other option is to go the subscription route. That would probably come to about $7 or $8 per month for the iPhone, and would be added to your monthly bill. At that price, it would take a little over a year to recoup the $100, and then everything beyond that is gravy. A recurring revenue model is much more attractive to the music labels, but paying once up front is more attractive to consumers (at least so far).

If the iPod/iPhone came with unlimited music it would create an even stronger bond between Apple and its consumers. It would turn iTunes into a true universal jukebox that people would connect to on a constant basis to update their playlist, discover new music, and treat as an online radio. It would become a daily habit instead of the place you go to on the odd occasion when you actually want to buy music (something that is happening less and less these days with the proliferation of free music elsewhere). Bands would then use iTunes to connect with fans much like they do today on MySpace or iLike, and Apple would be able to insert itself even deeper into the lives of its customers.

That would be worth a lot more than whatever extra margin it can squeeze out of the music companies.

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