Apple’s iTunes has been massively successful for two reasons, I think. First of all it got popular thanks to the iPod, of course, but also it did sell well because of a very simple pricing model that Apple could enforce on the content providers. I think most customers loved this (except for linux users that did not like the idea of being locked into a proprietary solution, of course).
On the other hand, according to rumors, the TV shows and movie side of iTunes never took off and I believe the reason was that Apple wanted to enforce a certain pricing model and most likely studios were not so happy. The result of this is the NBC is out of the game, the Apple TV never took off and while I enjoy from time to time to watch video podcasts, having shows would be better. Also, did I mention that in countries other than the US most movies and shows are not available?
Now Amazon’s music download service (Amazon MP3)is not yet selling as good as iTunes, but they have been able to sign all the major labels to provide un-protected music and they are using MP3 that while less efficient than AAC it’s still a good format and is supported by all portable music players. Looks like Amazon is suddendly a few steps ahead of Apple and I can’t think why the next step should not be to sell movies and shows.
Apple still has one advantage, the iPod and the Apple TV, but they need the content. The iPod was successful prior to the iTunes store because people could load their own music, the store was a subsequence.
If Apple wants to keep up with Amazon, they need to become less rigid and think about the business they can build around iTunes and not only on selling the hardware. If they can make iPods and Apple TV’s and iTunes store complementary, they can probably stay ahead of the competition.