Why the video iPod hasn't come out yet

A lot of people were expecting a true video iPod (among other things) at Macworld. They were also disappointed with Apple "only" announcing the iPod Hi-Fi and no video iPod. The problem with announcing a true video iPod is the content. Basically you can watch a TV show on the current iPod, but in order to watch a 2 hour movie you really need a bigger screen. Apple is planning on pricing the product above their current iPod line (bigger screen, HD, battery etc. add cost as well) and so they need movies to drive the sale of these iPods. The lack of a distribution deal with the movie industry is why the video iPod was not announced at either of Apple's two events.

While Steve Jobs just sold Pixar to Disney (where he is now on the board), he can probably pull some strings to get some Disney movies (Disney, Touchstone, Hollywood Pictures, Miramax and now Pixar), but more content would be better. With the current generation iPod there were only a few TV shows to start, but tons of music videos. So when Apple announced the iPod with video they had lots of content to sell.

As the article mentions, the movie industry wants what the music industry is trying to push on consumers. They want people to rent but not own digital movies. This might make more sense in the movie industry as people are very accustomed to renting movies from Blockbuster, Netflix etc. While people do buy DVD movies, people seem happy just renting when they want to watch something. Regardless the big Steve wants to sell movies to customers. This would definitely give Apple a leg up on competitors if they could work out a distribution deal early in a movies release window to sell the movie. i.e. during the DVD window would make sense.