TV networks need to think hard about biting that Apple

Walt Disney Co.'s ABC and News Corp.'s Fox seem to be ready to take the plunge with Apple and cut a deal with the software giant to allow their shows to be rented for 99 cents an episode.

That Disney would be eager to go down this road is not too surprising. The company, whose holdings include the ABC broadcast network as well as cable channels ABC Family and Disney Channel, has always had a close relationship with Apple, whose chief Steve Jobs has a seat on the Disney board.

News Corp., which is headed by Rupert Murdoch and owns Fox as well as several cable channels including FX, is also enamored with Apple, particularly its iPad device. The news of all the talks between Apple and content providers heating up was reported by Bloomberg on Tuesday.

Apple wants to be able to rent shows to its iTunes subscribers as early as the day after an episode is shown on television. Furthermore, the shows will be rented without commercials. 

Some networks are not too thrilled with Apple's pitch. The networks that offer shows to Apple for rental on iTunes will get a piece of the 99 cents, but Apple is not currently willing to pony up a license fee separate from the rental fee, a person familiar with the talks said. That will likely keep some networks away.

Advertisers who shell out big bucks for commercials on network shows probably won't be too happy that those same shows will be available for rent so soon after they've aired without any advertising.

Also, the cable operators and other pay TV distributors who cough up cash to carry broadcast and cable networks, probably won't be too hot on the Apple deal.

One might wonder what the consumer appetite for all this will be. After all, Apple already sells TV shows through its iTunes at a price between $1.99 and $2.99. If that was really proving to be a viable business, it wouldn't be so eager to get into the rental game and offer the shows at a lower cost.

But Apple is thinking long term here. As its own Apple TV service gains traction and watching content from the Internet on television becomes easier, it figures it can launch a legitimate rival to cable, satellite and other distribution services.

The television industry is going to great lengths to avoid cannibalizing its audience. The TV Everywhere initiative that the industry is pushing is designed to ensure that before  consumers can watch content online or on other platforms, they can prove that they are already paying for cable or some other distribution service. Offering shows for rental on iTunes, so soon after they debut on television, would seem to undercut that initiative.

Though all these platforms are sexy, content providers need to make sure that their eagerness to embrace the future doesn't undercut the present because if it does, there won't be a future to embrace.

-- Joe Flint

Comments

[Arthur Greenwald]

While I generally agree with Mr. Flint, who SAYS the present iTunes TV business is not "viable" -- or that forthcoming 99 cent rentals won't carry advertising?

Apple is aggressively pushing its new iAD service so this has the potential to deliver a dual revenue stream for both Apple and the networks --- if not at first then soon.

Still, at a buck per show, the rental fees of a household of even moderate TV viewers will quickly exceed a monthly cable bill. Ultimately a subscription service with limited ads will likely emerge.

[Gerald Shields]

It's like the headlines of another story based on this exact subject: 99 cents or nothing! Because of P2P programs that use the BitTorrent protocol and users who post video files of TV programs for free, TV Networks need to recoup that lost revenue so in essence, the 99 cent deal with Apple, is a steal.

[Will]

"That Disney would be eager to go down this road is not too surprising. The company, whose holdings include the ABC broadcast network as well as cable channels ABC Family and Disney Channel, has always had a close relationship with Apple, whose chief Steve Jobs has a seat on the Disney board."

But only if, by "always" you mean "since 2006," when he received that seat in the Pixar deal.

The article also cites Jobs' board membership while failing to note the "close relationship" is probably more the result of Jobs being Disney's single largest shareholder than its board chairman. Of course, it would be remiss not to point out that prior to 2006, Jobs' relationship with Disney was rather contentious, as he had a pretty significant rift with Michael Eisner.

[Nick Lu]

Their best bet is to go the route of nexflix and do a monthly charge of about $10. Its reasonable and keeps your cost lower than cable.

99 cents a show is too much money for the average watcher

[Fred]

I just got Netflix for my iPhone. Aside from some choppiness and a couple of freezes during peak hours, I find it amazing.