“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. 
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.
Retailers have the right to determine what product they wish to sell on their shelves and to a degree indicate what price point they think that will sell. Target might have a bike company saying their bike is worth $1,500 retail and target can say sorry but that is not what our customer base is willing to pay for a bike. If you want to be in our store is needs to be X.
All the studios are free to not distribute their TV shows at all on the internet. They are also free to explore all avenues of digital distribtution. DVD boxed sets are important to the true fans of a show that want that quality and perhaps the bonus material that is offered. True fans would probably watch on tv, buy on internet and get the DVD a year or so later when they finally come out. DVDs do not address timely shows such as American Idol and The Daily Show.
I am one of those guys that has over a thousand DVD’s and collect them like crazy, but even I have very few boxed sets of TV shows for this very reason, they are way too expensive.
In Canada, the average boxed set of a TV show is just under $100.00 when it first comes out or is very popular and then settles down to about $50.00 or $60.00. Second hand they are between $20.00 and $40.00.
Considering most sets only contain about a dozen half hour shows, even the budget, second hand, cut rate price is far too much to pay for this kind of stuff. The only reason to pay it is if you are a “collector” but then a collector won’t buy a digital download anyway.
i have yet to buy a single TV show from iTunes…
but if they dropped to $.99, suddenly Apple TV and ditching the satellite dish seems like a good idea!
lets see, a few shows for the kids, a season of myth busters, and season of The Daily and Colbert…..
heck i could save enough money to buy a new video nano for the kids to watch on the go!
if he can swing this, i have to make a run to the Apple store….
I wonder what MDN would think if Apple released an update to Safari that would completely eliminate all ads on a web page. All of a sudden we could read MDN free of ads. I don’t think they would be appreciative of that
Now ask MDN: what if Apple blocked every ad, but in return you got 99¢ for each unique visitor every time you updated the site?
Just think of all those ipod nano owners coming in that will have a strong interest in tv shows for their ipod now. Maybe Steve is right, the studios will make more.
btw, mikeintosh’s analogy with apple cutting prices doesn’t work because, the studios cost will not change if they sell twice as many shows, where apple’s cost will double (well maybe not double) if they sell twice as much hardware.
“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.
This is very true. And after all, it’s all icing as far as the studio profits go so why the hell not? I’ve bought maybe 10 TV shows and one season from iTunes. I’d buy more than twice that if the price were cut in half. 99 cents just makes it easier to take a risk on a show, especially the “half hour” ones.
No more TV Shows on iTunes from NBC? But I was a faithful customer?!! Oh well. Hmm…what did I do with that bittorrent program….Ah, there it is. . .
MOST IMPORTANT:
Money from iTunes is virtually pure profit. From DVD box sets. a significant margin is spent on packaging and distribution….far, far more than Apple charges for iTunes. As well, in-store marketing costs are paid for by the distribution companies which eats significant margin as well.
More profit on iTunes? Maybe if prices come down to $.99.
Apple is simply using Wal-Mart tactics in negotiating with it’s vendors. Apple like Wal-Mart has an understanding of the price point at which the customer/consumer “perceives” value in a given product of service. This understanding is derived simply from a supply/demand analysis. Retailers like Apple and Wal-Mart that represent such an overwhelming amount of the retail sales for the respective products that they represent to customers can demand that the manufactures/producers of products adjust their pricing to be reflecting of the demand/supply curve. Unfortunately, for media producers, there is an unlimited supply of their product…it’s all digital…and the marginal cost to produce the product is actually incurred by the retailer (Apple) as reflected in the cost of the bandwidth used to deliver to product to the consumer. In effect, it costs the producer nothing to supply additional demand and it costs the retailer to meet the additional demand. Because the retailer, Apple, controls much of the digital content market for Internet download, it’s at a distinct advantage in price negotiation but at a distinct disadvantage in that the more successful a product, the more their costs increase. Apple believes that .99 is where the demand curves should be to increase business and thus profits. The producers probably believe that it should be higher. The market will ultimately determine who is right, but I would bet on Apple in this case. Ultimately, digital entertainment producers are due for an amazing market correction in the value of their product, which will democratize digital content.
Apple crapola-quality current video downloads ought to be 99 cents.
720p at least downloads should be $1.99.
What the networks really ought to do is make their own torrent site, distribute torrented copies of the programs at 720p or higher with ads included, and then they’d have the best of both worlds — revenue from ads, customers downloading legally, and the programs being free would be in part consideration for the fact that it is the customers rather than the network providing the bulk of the network capacity for distributing the programs.
It would also be painfully simple to tell which shows are more successful under the scheme.
1. Roughly 20 million+ iPods are 5.5G or 6G video iPods in the market (and a million iPhones).
2. With the new lineup, count on that number rising to 50 million+ in the next two quarters.
50 million+ TV screens to sell shows onto. Now that’s leverage, and the networks know it and are going to be sweating out new iPod sales – big time. If Apple sells over 20 million iPods this December quarter (very, very, likely), then count on Apple winning this battle.
Next year at this time, Apple will be narrowing in on 100 million little TV screens out there, and that’s just too much market for any network to eliminate out of their revenue stream.
1. Either they pony up to Apple’s pricing points.
2. Apple goes wifi with the nano and continues to push web content from YouTube and any other free source (such as podcasts), ensuring the networks continue to lose mindshare to other new media outlets.
3. Apple works on delivering original content via start-ups and privately held production houses that see the new opportunity via iTunes and iPods/iPhones.
Networks are going to lose this battle sooner or later and Steve knows it. The smartest networks will give up on the dying breed of DVD sales, and get on the new crack, which is downloads via iTunes.
@shen
Right on. With digital broadcast coming, that takes care of the three majors. Using the $80 per month I spend on DirecTV to download missed episodes and desirable “cable” network shows (Daily Show, Keith Olbermann, Bill Mahr, BBCA, Alton Brown) from iTS, I’d be a few bucks ahead every month. Or maybe DirecTV will recognize the real competition and stop bundling channel groups into 90% piles of crap and 10% useful programming and forcing you to go up a level to get one or two worthwhile programs.
You have to look at the network’s side as well here, folks. TV shows and movies are FAR more costly to produce than music. They they are being sold without commercials, which is the revenue generator for the network.
Now factor in that the typical person who downloads TV shows likely is doing so because he or she missed an episode or two, or he or she would like to have the episodes before they become available on DVD.
Now let’s throw into the mix that most people don’t want to watch TV shows or movies on their computer. Most people would rather watch them on their TV, especially if they have a nice, large, HD set. iTunes downloads are not HD, and only just rival DVD quality. Right now, there simply isn’t the market for TV show downloads. Sure, some people are doing it, but it’s a very immature market with a small base of users. Nothing like the DVD market.
The networks can’t throw all of their eggs in the iTunes basket and tell Wal-Mart and Target where to go. They still need DVD sales revenue from retail stores. Right now it’s far easier for most consumers to buy and use a DVD than it is to download from iTunes and play the show on their TV, unless you have an AppleTV, which few people have.
There is NO money ‘lost’ by selling shows at .99 They have already ben paid for by the advertisers. In the case of NBC and Heroes, NBC probably makes another big $$$ take by licensing the right to rebroadcast Heroes to the Sci-Fi channel.
What would be the advantage to networks to sell for .99 per episode? If someone told me I should check out this cool show, I could download a couple of episodes for .99 If I liked the show, I would buy more, or tune in during its live broadcast to increase the shows ratings, and the Network could get more advertising revenue.
So what about box sets? If the show is really good, Like say Heroes, and the box set had the ever present extras like the unaired pilot episode, out takes, interviews, behind the scenes stuff, commentary by cast, and etc that would be a great value and incentive to purchase the DVD set.
In the case of heroes, that is what happened to me. A friend said you’d like this. iTunes Store provided back episodes to catch up on, and the occassional missed episode, and I got the season 1 box set when it came out.
.99 is a real impulse deal maker. If a show that looked OK in the commercial previews suddenly showed up on iTunes, I’d be willing to pay $2-$4 to see some episodes and decide if I liked it. Isn’t that what propelled The Office to one of NBCs biggest hits?
Welcome to the 21st century dinosaur studio execs
Frankly, $1.99 for an individual episode seems reasonable to me. It’s the $40-something (i.e. no bulk discount) that you get saddled with for season passes that’s way out-of-wack.
A nice compromise between the two parties might be the following; keep the current pricing for individual shows up to one hour long, maybe bump up the price for TV movies & such to satisfy some sense of ‘variability’ (though no more than $3.99), and lower season pass prices so that each episode runs Apple’s suggested .99c. All of the above would seem to cover all the bases.
But the whole debate ignores the REAL pricing travesty on iTS – the movies. Paying $14.99 for a sub-DVD quality, DRM restricted, digital download is nothing less than highway robbery.
Good quality titles on DVD can cost up to 1/3 to 1/2 less (unless they’re new releases, which I don’t think Apple ever offers anyway), have better image & sound, can be taken to your girlfriend’s house, etc … For the life of me, I can’t believe anyone with half a brain would ever purchase a movie off iTS for anything but the novelty.
So if Apple want’s to do something to grow their business faster, they need to both ‘up’ the quality of what their selling across the board (‘near-DVD quality’, indeed – full STD Def should be the minimum), and lower the prices of the movie offerings. THEN they can dicker about the TV shows.
I mean, deal with your most obvious flaws first guys
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What if every movie producer of a movie could set the ticket price to see their movie? Don’t you think the distributors would get a little hacked at trying to keep track of what to charge?
That’s what we’re seeing here, folks – a free medium (network TV) is trying to make money the same way that paid mediums (movies & music) currently do, all while trying to figure out how to keep their advertising revenue stream, too.
It’s just not going to work that way. One revenue stream will have to give way to the other.
You have to look at the network’s side as well here, folks. TV shows and movies are FAR more costly to produce than music.
Your implying that the TV networks don’t make enough on the ad sales for their regular TV broadcasts to cover show production. That’s not true. If that’s the case, the show gets cancelled. Digital sales without advertising is extra money, above and beyond their standard revenue streams. If networks choose to sell more ads to add to the digital content, that’s just them wanting to milk their content for all they can. It’s not about recouping production costs.
“You’re” dammit.
I buy TV shows from iTunes regularly.
I do this because I work evenings and several shows I like come on at the same time (The Unit, House, etc.) or I forget record them.
I would love the whole 99 cent thing.
I would never buy or download a show with commercials embedded in it-never.
@lurker
i hear ya, if i could choose my channels OR get 99 cent showes, either way, i would be happy, this other stuff is killing me….
MW: “later” as in when the networks and record companies will figure out a good model…..