In Steve Jobs’ mind, version 1 of the AppleTV failed to resonate with consumers because of its slavish reliance on the PC.

At last year’s D: Conference, when downgrading the device to the company’s “hobby”, Jobs told Walt Mossberg: “Coming from the PC market you first think about getting content from your PC to your living-room. I’m not sure that’s really what most consumers want”.

With AppleTV “take 2”, the chains are off so to speak. No longer does the device require the use of a computer to download and manage content (although it can still access media stored on a PC), and is instead capable of fetching content directly from the Internet– movie rentals; film, TV and music purchases; podcasts; and photos.

But aside from Apple-sanctioned access: the company’s own iTunes Store and .Mac service, podcasts, Flickr and YouTube — the AppleTV remains under lock and key, closed to third-party developers and web services, and subsequently unable to pull in additional content from elsewhere on the net.

During today’s Macworld keynote, Steve Jobs confirmed that Apple is adding movie rentals to its iTunes Store, entering a crowded market that includes similar services from major players, Microsoft (XBox Live), Netflix (Watch Instantly) and Amazon (UnBox), along with upstarts such as Vudu. However, for any new online movie rental service to succeed it will have to compete with traditional DVD rentals and illegal downloads — and to do so, must pass three basic tests: Content, pricing, and convenience. So how does Apple fare?

In what the Associated Press is painting as a preemptive strike against Apple, Netflix is ditching its quota/hours system for streaming movies online. As of today, all subscribers except those on the most basic two DVDs per-month plan will be given unlimited access to the 6,000+ movies available as part of Netflix’s Internet streaming option, dubbed “Watch Instantly”. Previously, subscribers were offered a limited number of Internet viewing hours based on which DVD rental plan they were on.

During tomorrow’s Macworld keynote speech, Steve Jobs is expected to announce that Apple will also begin offering online movie rentals, through the company’s iTunes Store. Rather than being priced via a monthly “eat-all-you-want” subscription plan, it’s thought that rentals will cost $3.99 per film and will be viewable for up to 24 hours after being downloaded.

Netflix vs Apple

Content

The biggest issue facing any online movie rental service is securing content from the major film studios, under terms which will allow them to compete with traditional DVD rentals (release windows and territorial rights). This is where Netflix appears to have an advantage over Apple.