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We have unfortunately come to the conclusion that we will have to release this as a jailbroken application which means it will be released on the Cydia Store rather than the Apple Store (here is a glossary of what these terms mean) which means restricting the audience to a more tech-savvy group, but there is no other way.
The bone of contention is the use of undocumented interfaces and there is specifically one called the MPTVOutInterface which lets you playback video onto an external device. Apple doesn’t support this for the development community which is a foot-shooting maneuver.
First of all: any video player should have a direct-to-device output. In fact, here is a great iPhone hardware hack that will let you do just that.
Second: this is already something that works for Apple’s own iPod video player. It is well-tested and should be folded into the general API.
The shoot-in-foot problem is this: it is only a matter of time before the open source Google Android phone catches up. Right now, it still lacks the necessary inter-phone communication via Bluetooth/wireless API. And also the phone is too expensive, requiring a service plan. The iPod touch is an excellent model: cheap, great UI and a lot of application support. Hopefully the Android will come up with a similar model sooner than later.
Apple could profit from iPhone-as-gaming device such as this example.
In the meantime, my co-developer, Eric Brelsford and I have decided to jailbreak and go Cydia on this one. Stay tuned.