Tuesday, September 04, 2007

Apple is in an argument with NBC, which wants to charge $5 an episode to download its shows. Apple wants to sell all TV episodes for the same price on iTunes.

I think charging a sawbuck is a bit much. Personally I think they will have trouble selling episodes for that much. I got a season pass for MAD MEN for a little over a buck an episode; individual episodes are two bucks. That seems about right.

But I think it's good that NBC is fooling around with its pricing model.

It's clear to most people who worry about such things that the broadcast model is deteriorating with the advent of TiVo and DVDs. If the nets can't count on ad revenu, then they have to move either to a subscription model like HBO, or to some kind of per-episode payment model, or severe product placement, or something new people haven't thought of yet. Figuring out what the market will bear for premium broadcast shows (HEROES) is part of the process of inventing the new business model.

Fve bucks an episode is, for example, more or less what you pay for an HBO show, if that's the only series you're watching on HBO.

Another thing I like about the idea of variable pricing is, it raises the value of well-made shows. I am not sure that you could sell episodes of THE AMAZING RACE for as much as you could sell LOST or GRAY'S ANATOMY. ROME got me to sign up for TMN (our HBO). And if I had to pay per episode for FRIDAY NIGHT LIGHTS, I would.

Per-episode pricing changes the medium. You won't have to worry about act outs, because once someone pays money for a show, they're likely to watch the whole thing; and if they don't, who cares? On the other hand it promotes serial shows: you want your audience shelling out for that season pass. A series like LAW & ORDER doesn't give you the strongest possible reason to watch the next episode over some other episode. LOST does.

A variable pricing model could also create economic efficiencies. You could sell a HEROES episode for $5 on the week it's released, then $3.50 the following week, and so on, till you get down to the Buck-a-Flix Cinema price. That gives the viewer options, and scoops up more money for the distributor. Why should I pay the same price for old LOST IN SPACE reruns and the next hour of MAD MEN? It's illogical, Captain.

So while I can understand Apple's point -- they want their pricing model simple, because Apple is all about simple. But NBC has an excellent point. I hope they get to try their experiment. We gotta figure out some way to pay for all these tv shows.

UPDATE: Tim W. makes the excellent point that people not only have the option not to buy an episode, or wait for the DVD, but also to download it illegally. So the online price really has to seem fair and reasonable. I'm happy to pay $25 for a season pass to MAD MEN -- and I did -- because I don't want to steal episodes via Bittorrent. But at $5 a pop, I might feel outraged enough to consider going through the hassle of pirating via torrentz.

Labels: financing, TV distribution tech

9:10 AM

6 Comments:

Personally, I think NBC is deluded and doesn't have much a grasp on reality if it thinks that people will spend $5 on an episode. It's getting so easy to download episodes for free, the last thing you should do is drive more people to download illegally. At $2 an episode, I can see a lot of people paying just to `stay legal'. $5 makes you think twice. That's what it costs to rent an entire season on DVD.

I like your idea about the subscription, and I think Apple might want to consider that (which would be like buying an album in the music store), but I don't think NBC/Universal is going to be able to get people to pay what they want. It's unrealistic.

It's comparable to what's happening in the music industry. It's proven that if songs are cheap enough, people will pay to download them.

By  Unknown, at 1:28 PM  

The problem is with pay-per-episode TV is that people usually need to have seen the show before they know if they want to pay for it. How do you promote new shows with that model?

It seems like a recipe for high-concept shows at the expense of character-driven ones. How do you build an audience for shows like FNL without letting viewers see the show?

By  Lisa Hunter, at 3:39 PM  

I just posted something about the less than 30.00 price for the first season DVD's of FNL...perhaps that's how NBC/Uni is trying to encourage new viewers to check it.

By  wcdixon, at 4:28 PM  

My inner business major perked up when you used the words "pricing model". :) Googled a bit and found this update:

http://www.nytimes.com/2007/09/05/business/media/05nbc.html?n=Top%2fNews%2fBusiness%2fCompanies%2fNBC%20Universal

The whole thing is interesting to me. I think it presupposes not only the decline of the broadcast model but the decline of the DVD model, which is, huh.

By  nadia*, at 12:41 AM  

Five bucks an episode is, for example, more or less what you pay for an HBO show, if that's the only series you're watching on HBO.

Maybe that's a pointer to the way ahead. Five dollars buys you the show you want plus your choice of a bunch of others from the catalogue.

NBC will have a real problem charging premium rate for content you could have picked up for nothing yesterday. That's why the makers of perfume and designer jeans sue discount outlets -- it's about setting the perceived value of the brand.

By  Stephen Gallagher, at 5:38 AM  

If NBC wants to charge $5 an episode they can - ON THEIR OWN SITE.

Apple can also run their business as they see fit. If NBC doesn't like it, tough.

By  Nathania Johnson, at 12:20 PM  

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