Apple iTunes Getting Into Original Content

It’s about time — Apple (AAPL) is getting into the original content production game through its iTunes division. Rumors are that the first ever original project is a short film about the fictional cult rock band Spinal Tap.

The project is said to star the original band members—Christopher Guest, Harry Shearer and Michael McKean—all in character as rockers Nigel, Derek and David.

UPDATE: Some of the earlier reported details about this project we have been unable to officially confirm, particularly the film title which is still unknown.

Presumably, the iTunes project is part of a move to drive sales of the (briefly) reunited Spinal Tap’s recently released Back from the Dead album, which is for sale on iTunes along with a custom iPhone app. The band also played a live show at London’s Wembley Arena on June 30th and it’s not known whether footage from that performance will be in the short film.

This is a significant development for Apple, which is finally flexing the iTunes distribution muscle it so carefully built up in the past eight years—a massive pipeline for Hollywood’s music, TV and film businesses accounting for billions of dollars in annual revenue for the industry. The company has traditionally steered cleared of placing bets on entertainment content, but now it’s putting its own risky production dollars into play.

Apple As A Studio?

Why not? Microsoft sure hasn’t had any qualms about dipping its toes in the studio game with its original content teams at its MSN, Zune and XBox divisions. Original web series Cinemash and the upcoming Dave Foley web series project are being funded by the software giant and pushed out through its array of platforms.

Both companies have massive distribution channels

that they control and healthy amounts of cash on hand from their respective breadwinners (iPods/iPhones and Windows/Office). This sets them in an ideal position with a unique advantage over traditional Hollywood studios—Microsoft and Apple sell the devices on which people are consuming all this content. Could this be Jobs’ grand plan?

After all, Apple CEO Steve Jobs is no stranger to the life of a hollywood mogul, having founded and sold animation studio Pixar to Disney while on his resignation-hiatus from the company (he is now the single largest shareholder in Disney). He understands that entertainment is a hits driven business, and with Pixar he proved he perfected his blockbuster chops. Daniel Egan called this move way back in his 2006 in an article on Apple, appropriately named, Five Ways Apple Will Change TV: “After building a differentiated source of on-demand, alternative content, is it even a surprise that Apple will soon start commissioning its own original content, and continue to expand its efforts to provide an audience to other sources of original content?”

We hear that Suzanne Varney at Apple is overseeing the original content for iTunes, and her LinkedIn profile lists her as “Mgr, iTunes Original Content at Apple.” Not much else we know about her or her team, other than she has some entertainment background, coming from a stint at William Morris.

No official word from Apple yet on the plans for the new division and whether they will commission their first original web series. With Microsoft’s savvy alignment with breakout web hit The Guild, you have to imagine they are heading in that direction. The big question is how long will the FTC allow Apple to maintain its vertical monopoly?