Apple wants to slash iTunes TV show prices in half to 99-cents per episode; networks wary

“Apple is mulling a plan to cut the price of TV show downloads in half — an idea that’s not going over too well in Hollywood,” Josef Adalian reports for Variety.

“According to three people familiar with the proposal, Apple has told networks and studios that it would like to slash the cost of most TV episodes sold via iTunes from the current $1.99 to just 99¢ — the same as what Apple charges for most music singles,” Adalian reports.

“But entertainment companies don’t seem to be rushing to embrace the idea. Indeed, the half-price plan may have contributed to NBC’s decision last week not to renew its current deal with Apple (though if NBC had simply let its contract automatically renew, the current price of $1.99 would’ve stayed in place),” Adalian reports.

“Apple’s argument to studios and nets has been that they will end up making more money from digital downloads under the new proposal. Company believes the volume of sales for TV shows will rise dramatically, offsetting the impact of the price cut,” Adalian reports.

“Among the concerns is that at 99¢, iTunes downloads could impact sales of DVD boxed sets, an important revenue source for TV congloms. While many congloms believe digital distribution is the future for TV shows, retail sales of DVDs are of primary importance for now, along with protecting partnerships with giant DVD sellers such as Wal-Mart and Best Buy. Those retailers would likely scoff at selling DVD boxed sets at a price point significantly higher than what iTunes effectively charges,” Adalian reports.

Full article here.

Why Apple has to continually smash paradigms and drag obtuse people and organizations kicking and screaming into the future while generating profits for them is beyond us. wink

We imagine that NBC fled at the first mention of halving the price. The others probably just wet their pants. Can’t you just hear them? “Oh, no, oh, no, we can’t upset Wal-Mart! Let’s try to stave off the inevitable for as long as possible with higher prices, more DRM, protracted negotiations, opening and moving to also-ran online outfits that nobody uses, and/or general do-nothingness. Yeah, that’s the ticket!”

Hopefully, Jobs will be successful in persuading the networks and studios* to allow him to stuff their bank accounts full of profits.

*We do have faith in Job’s trump card, Disney/ABC – based completely on the fact that Jobs is the company’s largest individual shareholder.

45 Comments

  1. I’d sure be more inclined to buy them at $.99. Then, when the DVDs come out I wouldn’t even mind buying the box sets if they were reasonably priced. Instant gratification for $.99 and then get all the extra goodies later with the DVD release.

  2. .99 is a good price. How many times am I going to watch it. Twice max.

    The studios are being short sighted. DVDs have extras and better quality. I will pay for that if the original show isn’t crap (like a lot of tv is.)

  3. Believe me, I’m an Apple fan through and through, but I stopped for a minute and thought about the other side.

    If I were a producer of shows and I would like to set it’s price for downloads but some other company who I use as the vehicle to distribute tells me what to price it at, I would be quite irritated.

    There has to be some middle ground. Seems a distributor shouldn’t have full say on pricing over a creator of that content.

    Thoughts?

  4. I’d be far more willing to purchase TV shows at $0.99. As it is I generally stick with the South Park season pass and nothing else. If the price was reduced I’d certainly look at more purchases such as The Daily Show.

  5. I’m not sure that keeping Disney/ABC would singularly support iTunes TV downloads if all other networks started pulling out; simply because people often like the one-stop shopping scenario and might tend to go where they can get most of their shopping done all at once.

    Having said that, it sure does look like Apple’s got something up it’s sleeve again, and I’m really curious what the real issues are for Apple and its desire to halve its TV download prices. What’s the plan man – I know from experience that there almost certainly is one. Maybe SJ is moving slowly toward free downloads in exchange for advertising within the download stream or within the program itself – I really dislike that idea, but again, I’m just wondering what the real goal is – ’cause I’m pretty certain there is one [a goal]. Advertising dollars almost always mean more money for the producer and the distributer, one of the reasons we see more and more advertising when we go to the theater (I’m not refering to trailers), and more and more when we pop a rental DVD in to watch at home too.

  6. Fixed costs vs variable, and algebra. A x B = C.

    $0.99 x gigantic number. It’s a threshold consideration. AAPL just understands it’s about behavior modification – lower the price, establish an impulse to buy rather than steal, and repeat.

    Seems simple.

  7. This is nothing but negotiation. Studios want the moon and Apple wants $0.99. Maybe they end up at $1.29, who knows. It appears that SJ has the upper hand at present so he should come close to what he wants. If all the studios say no then the studios could have the upper hand and the price could go way up.

    No matter what it will be interesting to see this unfold.

  8. “Number One, Apple spilled the dirt of our little plan to radically increase TV show prices”

    “Dr. Evil, we should counter Apple with a lie saying it was Apple who wanted to cut TV shows to 99¢”

    “Huh?”

    “It will make the other networks reconsider their contracts with Apple”

    “Ahhh good Number One, muhhahhahaaa!”

  9. I have never been on the studios’ side for any of this, but that one thought did make me pause. I can see DVD sales taking a hit if shows were available on iTunes for a buck. (Now, whether the studios would make back the money is another story.)

    As for adding advertising, I think it’s very unlikely. Apple has made the correct financial decision so far to throw their lot in with charging for ad-free content (the HBO model) rather than the continuously-proposed idea that people prefer free content even if they have to watch ads (the network model). Plus I think that the idea of commercials embedded in iTunes-sold content offends Steve Jobs’ sense of taste — a very powerful decider in Apple’s design and product offerings.

  10. At 99c I would treat downloads like a rental and delete it after viewing. Anything worth watching twice is worth buying on DVD.

    WalMart needs to push HD as the differentiator for physical sales, since DVD is a dead end for them and it is not worth the effort for consumers to download and back up HD content.

  11. to M.A.D.:

    In principle, I agree with you regarding the concept of the content creator having the ultimate control over pricing of their product.

    However, much bigger thing is at play here. Digital downloads (an oximoron; what other kinds of downloads are there? Analog ones??) are a very new, emerging technology. Nobody knows how to operate it. The original business model has been out there for 7 or 8 decades (even more, for movie theatres). This is all new and right now, Apple seems to be the only one that shows understanding of the market. Therein lies the problem; Apple is forcing everyone to play by its rules, since it seems that the past four years showed that it is the only one in town that has figured it out correctly. Apple is saying: “You must listen to us! You’ll thank us later! Let’s first build this market as fast as we can! Our rules seem to be working, so let’s not mess with them!”. Meanwhile, studios are seeing rapid erosion of their level of control over their own content. Record labels have already gone through this and many secretly with they could do what Universal is trying to do — wrestle back at least some of the control over their ditigal distribution from Apple.

    Until this market is fully mature and consumers completely are familiar and comfortable with downloading their entertainment, labels and studios have no other choice than to listen to what Apple says and do what Apple wants. It is, at this point in time, in their best interest to do this in order to build this thing up fast. Once it is finished, let them maneuver around pricing, bundling, subscriptions and other concepts.

  12. Just a small thought here for all to consider.

    We are talking a re-broadcast of a TELEVISION show are we not???

    The show was broadcast FREE. NO COST. TAPE it ( VHS or DVD) and give a copy to your friend.

    And now you want HOW MUCH to let me watch it again or for the first time cause I missed it???????? HMMMMM????

    Lets see, does it include “Reverse-ie”? Does it have games included??? Does Ballmer sell it on TV?? LOL ” width=”19″ height=”19″ alt=”grin” style=”border:0;” />

    I will agree that for 99 cents, I would consider downloading a lot more shows to watch that I have missed. Hmmmmm?

    en

  13. Simple truth: he’s right! $0.99 is probably the sweet spot if you’re going to start charging for something people are used to receiving for free. I know I balk at numerous shows simply because I know I’ll never…EVER…watch it again. I probably would have bought a season of 24 @ $0.99 an episode…no way in hell is it worth $1.99! Wake up Hollywood!

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