The Financial Times reports that seeking to spur demand, Apple is pushing the networks to lower the prices of TV Shows on iTunes (registration mat be required at that link) effectively by half, lowering the price from $1.99 to $1.00. The networks are resisting this, fearing a repeat of what happened with the music industry -- a huge increase in downloads, but at the expense of not selling nearly as many CDs.
With increased penetration of DVRs and the likes of Netflix already putting a dent into TV show DVD sales, it's hard to fault the networks and studios for resisting. Plus, Apple is still going to want their third. At $1, that effectively drops the cost of most TV shows down to $22 a season of which, the studios would receive about $14.50. Still, I could see some of the broadcast network shows coming around to the price drop, with less chances of shows on the cable networks getting that cheap anytime soon, and even less chance still of shows from premium networks dropping that low.
HBO usually doesn't even make its shows available on iTunes until after the seasons are already over. For example, you can get the first three seasons of HBO's Big Love on iTunes, but episodes for the fourth season are not yet available). While the DVD market might be dented, revenue for the DVD sales of True Blood is estimated at over $61 million. This explains why True Blood season two still isn't available on iTunes even though it's season has been finished for month. You can pretty much count on it not being available until the second season DVD is released.
Sounds like an awesome way for Apple to show how much affordable content they have for this tablet they are announcing on Wednesday.
I personally think that cutting the price of digital downloads will more than double the sales, increasing total digital revenue, but am uncertain of the hit DVD sales would take. An argument can be made both ways.
Don’t forget the iPhone! there will be way more of those, and for a long time if the rumors of the tablet’s price are accurate.
I think the FT article gets it right in suggesting that TV industry is scared off by music industry results.
I think the landscape for TV is quite a bit different since people who only wanted 1, 2 or 3 songs off a CD could easily buy them for much cheaper than the CD. But I figure “fear of less money” + “look at what happened to THEM” can scare off the TV folks from having an open mind.
I have a hard time believing that DVDs are equivalent to CDs. CD sales went down because they were cumbersome to haul around, and MP3 players were much more convenient. DVDs while still cumbersome, you don’t transport them anywhere. Its more convenient to just pop in a dvd you get from netflix. Digital sales from iTunes won’t be replacing TV show dvds.
Roland, also price didn’t do CDs any favors, no one really liked paying $15 for 10 songs especially if they only wanted the one or two that were overplayed on the radio or mtv.
I don’t see how downloading an episode from iTunes is going to replace buying a DVD set. Would someone downloading an episode or 2 be doing it for the same reason’s someone would purchase a set of DVD’s for an entire season. I get the networks being gunshy. Perhaps they can come up with a more beneficial revenue structure at least the first couple of years giving the networks time to assess the impact.
I think Amazon should start a bundling option. And allow digital downloads to exchange for a discount on a DVD set when they are released.
Millie, while TV DVDs get cheaper fairly quickly after they are released they are much more expensive when initially released. Example, the 5th season of Lost retailed at around $60, and when it first came out you could find it for ~$40. But if it’s $1 on itunes way before the DVDs come out, it winds up being $18 (for 18 hours) at $1 per episode.
Now, nearly two months after release the the DVD is down to around $25 and I’m sure it will drop below $18 ultimately. But typically most of a shows DVD sales happen in its first few weeks. In the first few weeks of availability in December, Lost was estimated to have sold over 730,000 units at a gross of $28.5 million so it averaged about $39/DVD.
At $1 an episode buying online would offer two advantages 1.) it’s less than half the price 2.) it’s available way before the DVDs are available. That second advantage is true regardless in the case of shows on broadcast networks, and there are also some downsides to the iTunes route versus DVDs/BluRay, namely:
1. no DVD special extras, director/actor commentaries
2. most people want to watch on their TV and most people aren’t set up to easily move digital media from iTunes to their TVs
I wonder about HBO’s strategy. They clearly think they’re pushing more people toward buying dvds than they are toward illegal downloads. But I can think of at least one person who’s checked the itunes store at the beginning of each season of “True Blood” and, finding it empty, has resorted to the illegal route. Though I would never admit that person was me. Never.
hey i’ll take the $1 download.
i don’t have a an ipod but i assume itunes is much like the playstation network store and if networks are smart this is the way to go none of the hassle of troublesome dvds which always end up scratched travel friendly great way to bring all your TV shows and movies with you on long trips may limit the pirating of intellectual properties if the product is more affordable for all
Based on the LOST analogy, even at the current price of 1.99 it sounds like Lost would be cheaper as a download than as a DVD set. Or am I missing something obvious here.
Millie, you are missing the difference between ~$3 cheaper and ~$21 cheaper.
DVD at release $39
iTunes @$2 ($1.99. but I’m rounding) for 18 episodes = $36
iTunes @1 for 18 episodes = $18.
I would not agree to this if I were a TV network. Hit songs, which are 3-ish mins of audio, are generally 1.29. That would be 29% more expensive than a 45-minute video?
As a consumer, I’d be psyched if I were the type to buy digital stuff.
J, the way it would work if Apple gets its way is that the cost of a TV show (whether ~22 minute or ~45 min) would cost less than the $1.29 songs on iTunes. There is a big difference, though: people will replay songs often many, many, many times. TV episodes are not likely to be replayed nearly as much.
you can’t really compare the price of iTunes and a DVD or Blu-ray since you’re not even coming close to the same bit rate. You’re paying more for quality. For throw away programs, it doesn’t matter. But if you want to watch your True Blood on your big screen, you’re not going to feel too good watching that iTunes upload versus the Blu-ray image.
Another reason for networks to resist is that it makes cutting cable even more attractive. $45/month for a year would be what 20-30 full seasons series without carriage fees and without advertisements? I would seriously consider get an iTV if Apple worked that out.
I love paying for downloads. My problem is I hate paying more for downloads then I do for either the DVD set or for the Blu-Ray Set.
I am very happy to buy both for content I love (SN, Lost, BSG, anything with Trek in the title, yeah I know its a weakness, ect), but I can’t picture that it is more expensive for a studio and Apple (or any online source) to produce and provide the content of one episode. I would really like to see how much it cost to provide that item and get it to you, versus the cost of production, marketing and shipping of DVD’s and Blu-rays.
And of course I would need to know the breakdown of where my money goes.
Frank Tien
From the downloads I have gotten from Apple, they look better on my 50 inch then DVD, but not as good as blu-ray. But I haven’t been getting to many of the HD files except for SN and of course since they aren’t (season 5) out on BluRay yet I can give a true comparison. But I would suspect that blu-ray would be superior (to what degree I can judge).
Robert
I am certainly spoiled, for the last three years my HD tv serves double duty as my monitor (well my HD in the bedroom, though I can also use the one in the Family Room and Den in the same way).
But I love both formats. I love that with my all my external drives I can have a huge video library without getting up to put in a disc. For example on one drive I have every season of Survivor and TAR, HD versions of BSG, True Blood, Dexter, Lost, Band of Brothers, and several non HD versions of shows like the various Treks and Babylon 5. Just point and click.
But I also love extras, the more the more the better. So DVD/Blu-Ray slash what ever comes next is always going to be important to me.
Now for pricing I do try and get a good deal and for DVD’s (except a few series that are never cheap yes Trek I am talking to you), now days I can almost always get them for no more then 29.99. Heck I bought Lost on BluRay at 39.99 per season (great price per season).
That’s the one thing that is really lacking for online. While Apple (and Amazon) have done specials or some discounts for season sets (though not always). For myself, for most shows (though not all) buying online has been more expensive. And that does bother me.
Wasn’t this already an issue? Well, kind of? A few years ago, NBC wanted to control the price of their shows (eg. The Office). Apple refused, so NBC stopped making their shows available on iTunes. I think they’ve since signed back on with Apple and have put up the missing seasons (I think it was season 3 and 4 that weren’t available immediately after airing).
I don’t see NBC (or really any other network) going along with a price cut, considering they pulled their stuff from iTunes when they weren’t able to RAISE the price past $1.99.