While showing off custom ringers for the iPhone at his media event this week, Apple CEO Steve Jobs played a clip of the Plastic Ono Band's "Give Peace a Chance" and quipped that he'd assign that ringtone to NBC's calls. Jobs was referring, of course, to the strained negotiations between Apple and the network over the sale price of TV shows on iTunes.
Last we heard, Apple decided to cut NBC's shows because the network wanted customers to pay $5 per show (that story comes from Apple; NBC denies it asked for $5 per show). But now Variety reports that the real sticking point was Apple's push to cut in half the price of all its iTunes TV shows, from $2 to $1 -- a move that Hollywood naturally doesn't like a bit.
Apple has sold nearly 100 million TV episodes through iTunes, but it argues that people would buy a great deal more if a single show was priced the same as a single song -- 99 cents. The networks, it says, would make up the price cut in volume.
But Hollywood worries that reducing the price of TV downloads would kill its most lucrative business, DVD sales. On DVD, a single season of a popular network TV show -- about 23 episodes -- goes for between $30 and $40, or $1.30 to $1.75 per episode. If people can get shows for 99 cents, many will choose that option instead, and the networks fear they'll lose a lot of cash because of it.
Or will they? You could argue that even if iTunes downloads sell at 99 cents, some people will continue to pay a bit more for DVDs, which offer compelling advantages -- commentaries, deleted scenes, as well as the inexplicable psychic pleasure of owning physical media (it's still a bit tacky, after all, to give someone a gift of downloaded TV shows; come the holidays, you buy DVDs).
Let's go even further: Isn't it conceivable that people might actually buy both downloads and DVDs? If you miss an episode of "The Office," you download it from iTunes in the middle of the week. (You could have gotten it for free using Bittorrent, but 99 cents isn't a huge price to pay for convenience.) Then, at the end of the season, because you love the show so much, you decide to buy the DVD for your mom. NBC gets your money twice.
I'm not holding my breath that Hollywood will see the virtue in such a plan; here's an industry that seems never to miss an opportunity to miss an opportunity. By dismissing Apple's push for 99 cent downloads, though, the network looks to be making a classic mistake -- protecting today's revenues at the price of tomorrow's even better revenues.
In the 1980s, Hollywood famously resisted the introduction of home videos, the very cash cow it's now seeking to protect. What it couldn't conceive of then was that anyone would want to buy TV shows after they'd aired; home video technology could only lead to illegal copying and, thus, reduced revenues, they reasoned.
They were dead wrong. It turned out that at the right price, lots of people were willing to buy what they saw on TV.
But what if there are many more such people waiting for an even better price to buy TV shows? DVD sales are huge, but a lot of us are still not buying TV shows, because, you know, you can get them for the price of a cable subscription!
Here then is my offer to NBC: If you sell me your TV shows for 99 cents -- $23 a season -- I'd either cancel or cut back on my Comcast subscription and give you that money instead. Like many people, I have never bought a DVD of a TV show, and yet here I am offering, now, to buy shows from you.
The same goes for all the networks. I'll pay you for what you're currently giving me for free. (Yes, I know you're charging me, indirectly, through advertising; I assure you, I am not watching any ads at all.)
Do you hear what I'm saying, networks? Take my money! Please!
Apple seeks TV price cut [Variety]
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