On the ITunes Store, you can buy the latest episode to Lost and some other shows the day
after they air on Network TV. in this case ABC, for $1.99. Sounds simple and reasonable. Not anything earth
shattering right ?
Content has been available for download for years and years. That content could be played on any number of devices,
from computers to DVD players to PDAs. Being able to playback a video from the new Video Ipodjust like you
can play a song from a current IPod, certainly is not a technical marvel.
It is a business marvel. Bob Iger has gone contrary to what every current and previous TV network
head has and would have done had Bob not turned the industry on its head with his
announcement with Apple yesterday. Bob
Iger has saved Network TV.
How ?
By completely changing the economic model.
When a show is produced for primetime network TV, its traditionally sold to a network at a given license fee. More
often than not, particularly for non reality shows, that license fee is less than what it costs to produce the
show.
The hope by the production company is that if they can produce good ratingsfor the network, not only can they
increase the license fee after the first deal ends, but they can also sell the episodes in the future as part of a
syndication deal and maybe even make some money back with DVD sales.
So for instance, shows like Law and Order, CSI, and all their different versions can fetch more than 1mm dollars per
episode. Most other shows fall in mid six figureprice ranges and can go as low as 50kto 75k for hit reality
shows like Survivor. The reality shows go for far less because everyone knows the winner already.
But what if CBS sold Survivor episodes the day after it aired like ABC is with Lost ? What if they sold them not
just on ITunes Store, but through CinemaNow, MovieLink, Netflix, Walmart Online, wherever.
Think some people would buy them to keep up with the action ? Possibly to sample the show ? Thinkthey might
sell more than 75k downloads at $1.99 each ?
Could this move have created a new market that could be comparable in size for some shows and more money for others
than the current syndication market ?
ABSOLUTELY. No question about it.
This is far far better than syndication because it can apply to all shows. For a bunch of reasons, most shows do
notmake it into syndication. Those that dont, typically just sit on the shelf collecting dust. Most dont
get DVD releases. They just rot.
And this isfar easier and safer than releasing a DVD. No extras.No inventory. No shipping. No Returns.
No shelfspace issues. You ship a file to Apple and boom, the sales begin. Whats more, Apple was incredibly smart
to set the price tag at $1.99. That meansfew if any movies. Just TV and video. You have all the shelf space
to yourself for at least a little while. And if the demand appears, you know which titles to invest in for a DVD
release
Even the worstprimetime television shows have on ABC, CBS, NBC and Fox get millions of viewers. If the network
can convert a couple percentage points of viewers into downloaders, it can turn into decent money. 2 bucks a pop. 50k
downloads per eps. Thats more money than a hit reality show like Survivor earns in syndication.
And for some shows, the conversion rate could be much, much higher. A show like Lost could have hundreds of
thousands of downloads per episode. Thats real money.
Which leads to how Bob Iger saved network television.
The entire TV industry is scared shitless about how advertising will evolve. Will the 30 second commercial survive
? Will PVRs eliminate commercial watching in a material percentage of homes ?What impact will HDTV have on
TV viewing and advertising (besides the obvious rush to HDNet & HDNet Movies🙂
? The answers to these questions are pivotal to the programming side of the equation because without enough
advertising revenue for the networks, how are theygoing to pay forprogramming ?
Bob Iger has enabled a new revenue stream which if it grows, could definitely be the revenue stream that saves
primetime network TV.
Its not inconceivable that just as DVDs have surpassed box office in revenues and the theatrical release has become
a commercial for the DVD sale, the network TV broadcast could become the commercial for the download sale. I dont
see download sales surpassing advertising revenue, but I do see it as likely that the download sales could more
than compensate for any advertising market weakness brought on by ratings erosion and / or changes in how ads are
delivered on TV. I also think it wont be long before we see an ad or twoin front of the show that will
further increase revenue.
How big a revenue stream could the two combined be ? Big enough to matter.
But wait, there’s more…
Its possible that the ABC offering
NightStalker , which because it
hasnt hadstellarratings, with 7mm viewers in its premiere could be themost important
pay per download in internet history !. Why ?
What if NightStalker turns out to be a hugely popular download ? Would ABC keep it on the air for that reason ? What
if the show is cancelled ? Will ABC sell any unaired episodes ? And how many downloads will be sold of those ? If the
show is cancelled, are enough downloads being sold so that when combined with a license fee from a cable network, the
show could live on ?
Since ABC will be able to see the sell through numbers on a daily basis, will that impact programming decisions
?
Of course Nightstalker will be replaced each season as the most important download in internet history by other
shows as the market grows and data exists to better understand just what impact the downloads are having on network
economics.
All of this isnt going to happen overnight.
Distribution must expand beyond Apple, and it will.It will be interesting to see how fast MicroSoft, Yahoo,
Google, Sony (If sony had an ITunes and an ABC deal for the PSP..wow !), AOL and even retailers like Walmart Online and
Best Buy respond. Which they will. They arent going to let Apple run away with this market like they did music.
Im not saying they can stop them, but I think they learned a lot from what Apple has done with the Ipod. The
competition in turn, should help the economics for the networks.
And this isnt about watching video on VideoIpod screens. Its about downloading video to ITunes software and
its competitors, and all the places it does and will reside. All will be playback devices.I expect that either a 2nd
tier of pricing will come along from Apple for full screen quality that is designed to play on a TV rather than an IPod
or half screen on a Laptop or PC, as competitors compete by enabling higher quality and full screen playback. All of
which will further expand the market.
The future of network television got immediately brighter yesterday. All because Bob Iger had the brilliance to say
yes to giving consumers his content , where , how and when they want to consume it.
Just one suggestion Bob. How about letting us show digitally Lost in theaters ? Its a great show. How cool would it
be to see it on a big screen in a theater ? Just show it in one 300 seat theater. Not enough to impact ratings, but
enough to give hard core fans a unique experience that bonds them further to the show.
Im happy to offer Landmark Theaters as a place to test it out 🙂
Create a great product that is easy to use and simple. Start with the basics. Taking your music with you. Then expand. That’s exactly what Apple has done and ABC is smart enough to see that.
Comment by runescape money -
This will come to bite the industry in the ass at some point, whether or not it’s actually worth it. It’s been the actual goal of the production companies producing episodic television and creatively has been one of the stifling influencing factors that has run many a fine show into dramatic incoherence with the need to produce more episodes.
Comment by wow powerleveling -
Great WebLog: Blog Maverick! Change the Paradigm! Change the World! You know, inside the Satellite World we see, is yet another: Stay tuned for “The Struggle of the Titans. A Cosmic Review.” Coming Soon!
Comment by Craig -
Won’t the content owners prefer to move to a subscription service, ala Napster, rather than dealing with lots of per-item licence fees ala Appla? I’d love to see a breakdown of Napster/Yahoo/Rhapsody to see how many people download how many tunes on subscription, versus paying for a single unlimited use licence.
Comment by recetas cocina -
ABC continues its TV innovation, now making programs available on-line for free–
http://abcnews.go.com/Business/story?id=1826551&page=1
Comment by JohnD -
This also addresses the normal “torrent” traffic just like iTunes did with other P2P music swapping. It leaves the pain threshold relatively low, while offering the content.
Comment by whales -
very good!!
Comment by 11nong -
Oops. I went to the Landmark Theatres site and decided to check one out, but there was no map to the location. I checked two other theatres in different cities and only one had a map.
Maybe I’m the only person around who doesn’t know where all the theatres are. Or where your theatres are. But that doesn’t mean I don’t want to know how to get there.
Comment by Jeffrey -
If you start from the premise that in the US, programming (as in the stuff that the networks make available to us via cable, satellite or free to air) only comes in two flavors – ad supported or premium (paid for by the viewer) then what Disney have started to do is address ways in which to replace the fall off in revenue generated by the sale of 0:30 spots etc. The increase in dollars spent in “product placement” and contributions to production costs were the first wave, download will be the second and actually getting paid real money (they did not until last week) for VOD will be the 3rd. Ad money will always be available to programming that either reaches the widest possible audience or the most niche, targeted audience. It appears to this viewer that if ad money disappeared entirely from the business of making TV my DirecTV bill would be $400 a month, and not the $90 odd it is now. I suspect we just might have to work a little harder to prove to advertisers that we are good value and deserve their money.
Comment by John Bryan -
Go back a few hundred years and you had musicians who were being paid by their patrons to create symphonies, etc. I foresee bands/musicians finding an audience online and then getting that fanbase to fund their recordings and subsequent tours. Video downloads could essentially work the same way. Got a critically acclaimed show with a small audience (who happens to download alot)? Create the show for pure download distribution. When the money stops coming in via download revenue, then it’s time to pause or halt production until the fans poney up for more…
Comment by George -
Great blog; Thanks.
This is all about two new capabilities that technology has recently given us: time-shifting and place-shifting. These are all about watching the content you want anytime, anywhere. I think what’s most interesting here as the technology gets deployed and the business models unfold is who controls what and to what degree will these capabilities be democratized.
iTunes is on the cutting edge. iTunes provides unique value today… But. iTunes is a walled garden. You may view the iTunes content on your iPOD. that’s it. And btw if you want to build a product like a Bose stereo that connects to the proprietary iPOD connector, pay Apple 10% of your revenue. That’s the power of market position.
However, for those that are slighly tech savy, you can copy your entire Tivo content to an iPOD for free using TiVo to go. There are well published details of how to strip off the Tivo meta data, convert from mpeg2 to mpeg4 and load the content into itunes. Also, the Dish Network has launched their PocketDisk devices that you can sync your entire PVR for free.
How long will we have limited choices of devices, content and cost. I say hurry up MS, Google, Yahoo, Intel et. al… let’s promote some demacracy! (-:
Comment by Pete -
I would bet that Disney only allows shows produced by its Touchstone TV unit be distributed via download, and that Disney likely will prohibit unaffiliated producers with shows on ABC’s schedule from making their series downloadable. With all the consolidation that has gone on in the TV biz, this will limit what the digital viewer can see on theior iPods.
Comment by Mark Pedgrakurgan -
Great blog. Exactly what I was thinking!
Too bad the resolution isn’t DVD quality. Bah.
As for Lost in Landmark Theaters… that would be nifty.. although I would hate giving up time slots that could otherwise go to great movies…
Comment by Nick Catalano -
Mark,
The Ipod video model sounds good, but in reality, the user experience will prove otherwise. I think it’s an obvious flop.
-Who wants to save TV shows on their hard drive? The downloadable model works great for music, because people go back to their music again and again. No one will watch Survivor or CSI 50 times.
-People buy DVD’s because of the extras and the commentary. If that’s not offerend on the downloads, where’s the added value?
-For sports, it’ll fail miserably. Watching sports is a group experience that will never be replicated by watching a small screen. Would you rather watch the NBA finals on a small screen with limited audio, or on a big screen TV with friends and beer around? Many TV shows are group experiences as well. Portable TV’s have been around for a long time, but they’ve never caught on precisely for this reason. Even Apples coolness factor can’t change it.
The ipod didn’t catch on because of convenience. People could already carry music wherever they went. It caught on because people were tired of paying $17 for a CD with one good song on it. Give me songs for 99 cents a piece. And make it easy. And boom you’ve got a huge business. It’s hard to see the same pent up demand for TV Shows. The TV model will obviously change, but not sure if this’ll be the holy grail.
Comment by John -
To me, one of the most powerful players in this is TiVo. What’s the difference between Apple offering TV downloads for $1.99 and TiVo modifying their service to a pay-per-record model, with a connection to a portable video player?
For a lot of people, not much- IF TiVo could strike the same kind of deals that Apple is working on.
Except for one thing- most people would still rather get their TV shows from the TV and not from a computer.
Why would I want a video iPod with a tiny screen if I could do all of this with my TV? Video on the go is not the same as music on the go.
Comment by Brian Yennie -
I think the success of HBO shows isn’t really because they contain profanity. I think it’s more because the characters talk and behave more like characters we know in life. I have never once met someone who replace the word “fuck” with the word “poopie do”. People say what they mean in real life and these shows reflect the expressiveness of real people.
Comment by Frank Z -
Where iTunes and other companies will make their money is by offering unrated versions of the shows. We all know that there have to be major edits to meet FCC guidelines. Why not offer shows like “Lost” and “Deperate Housewives” with the language and other original content that was written into it? Not that I’m looking for the morality of television to plummet any more, but this is the reason the shows on cable (specifically HBO) are becoming more popular than network television.
Comment by Jason Nelson -
Very good insight, Mark.
I definitely agree with your ideas about the advertising issue. Personally, I think advertisers would love to get in on the TV download, because you can more easily track how many and who downloads each show. Being able to track this will be far more effective than the random sampling by Nielson and the like. Just a matter of time before the $.99 download with 2 commercials comes along (or something similar).
One potential issue is that TiVo (and if you’re savvy enough, a PVR) can get you the same show for free onto your computer, which you can watch forever and put it on an iPod or PDA right now. However, this will probably be in the minority, because the 1.99 download is a lot easier and doesn’t require a DVR/PVR/TiVo…plus the American consuming public could care less about saving a buck or two – which is, in part, why iTunes has been so successful (glut of consumption).
Hey any chance we’re going to get some Mavs games on HDNet? I am sure the league has contracts and whatnot, but even like a practice would be fun to watch in HD. The content of HDNet is a little depressing at times (some random live concert? no thanks…plenty of other channels to watch).
MFFL!
Comment by Kevin -
I agree mostly with what you’ve said (long time reader, first time poster, etc.), but I must say that I am greatly disappointed by this sales model.
$1.99/episode is fine to sample a show to see if it’s worth watching, perhaps, but it is far too expensive to make it a viable means of keeping up with your favorite shows. They are treating the pricing of these episodes the same way they price DVD sales when what I feel would be a greater boon would be if they priced them like network airings. First, I don’t want to keep an episode of Lost on my computer forever. I want to watch it and then get rid of it! I can’t watch the same episode of Lost nearly as many times as I can listen to my favorite songs! If the season turns out to be really great, I want to buy the DVD set with its high quality video and extras for about the same price I would pay for the whole season at iTunes.
The point you bring up about the production companies is a good one, but what I think is more important is to look at how much ABC makes in advertising revenue for Lost. Divide that number by the average number of viewers, and that should be the base price for an episode of Lost to download, with a little extra padding for bandwidth, money for Apple, and perhaps a small premium. And because less popular or smaller shows probably don’t generate as much revenue as big shows, those should cost less. A flat pricing scheme doesn’t make much sense.
If this model was the model, I could eventually ditch my cable subscription and simply pay Apple (or whomever) to watch only the shows I care about, delivered to me when they’re available (or the next day, as it turns out).
Just my 2 cents.
Comment by Vincent -
But Apple adds DRM to the files. This is not pro-consumer. A simply bad idea.
Comment by Marco Raaphorst -
I don’t even own a video iPod (no consumer does, right? They aren’t out until next Wednesday!), but I’ve already downloaded to episodes of nightstalker to watch on my Powerbook. I’ve got Tivo and I love it, but it only has 1 tuner and there is a conflict recording nightstalker, so this is an excellent chance to get a show I wanted to watch, but coulnd’t record because of conflicts. On some nights, I watch one show from my hdtv tuner, record another show from my Tivo on cable, and miss a third show (that I know about, what about all those shows I don’t know are on at the same time as these 3 that I want to watch!).
As a consumer, I want complete control over my viewing habits. Tivo gives partial control so its great but has limits. And I don’t have HD control. So I get to watch some shows in HD live, but the ones I record in Tivo get downconverted.
I’m looking forward to the day I can subscribe to what I want to watch, and have the whole season delivered to me at once, digitally, in high def. Then I want the infrastructure in my house to watch it where I want. Voom almost had this infrastructure in place with their hi def, networked dvr phantom-ware.
What I don’t want to see, is for shows that I want to subscribe to, show up in one company’s format only, and me not be able to get it because I chose to support another company.
I choose apple now, because I am an apple fan and apple does it right first. But I hope the market doesn’t make a mess of competing services with exclusive content.
Comment by Scott -
One important question: Are soaps also on the ABC sell list? If they are, then Bob Iger just saved the American soap opera, too — making a soap available for a person to play back during breakfast or lunch or on the subway would mean increased ratings for another program with a limited syndication market….
Comment by blue balaclava -
Mark,
I suggest you put together a TV show that takes advantage of this distribution model. You could experiment with all the implications. It could also be made available to be shown digitally at theaters. You are in a unique position to make it happen.
Comment by Thorn Bigley -
Mark,
I suggest you put together a TV show that takes advantage of this distribution model. You could experiment with all the implications. It could also be made available to be shown digitally at theaters. You are in a unique position to make it happen.
Comment by Thorn Bigley -
Oh yeah, I want to add that my point in bringing up AOL is that AOL could have been in the same position as Apple right now. Now AOL has egg on its face as it watches Steve Jobs gloat on stage as he’ll be no doubt recognized as the *forefather* of online video distribution. But AOL has no one to blame but themselves. They’ve had to the content to do this YEARS ago.
Comment by Frank Z -
I’m surprised no one has mentioned Firefly and Serenity yet. Without “long tail” DVD sales of the cancelled TV show, there would have never been a theatrical movie release. Downloadable video content that is easy to buy and track could quickly become a barometer for producers and distributors on whether or not to create new content. This might lead to a ransom model (http://www.danielsolis.com/meatbot/ransom.html) or voting model (http://www.indieflix.com/About/OurMission.aspx) to produce new episodes and more seasons of a show. BTW, with downloading that word “seasons” will fade int part of TV lore – like how “Soap Operas” were called that because originally soap companies sponsored the shows.
Also, I read that the Video iPod (ViPod?) has a video out connection. That alone makes it a perfect “last mile” distribution method for video content. I agree that watching any video over 2-5 minutes in length on a small cell-sized screen is an annoyingly poor experience. I feel the same way about downloaded content on my PC in my home office. I would certainly watch the same content on my living room TV if it were easy (no configuration/Media Center Extenders, etc.) to transfer from a download source to my big screen. In this case, I would have no problem taking my ViPod (or buying one there, next to the Hot Tamales) to a Landmark Cinema Kiosk to download the movie I just bought a theater ticket for if I liked it enough. Just as easily, you could have a secured wifi connection that turns on when the lights go up, with instructions to pay for and download right in your seat after the credits roll. Same could be true for TV shows if Mr. Iger takes up Mr. Cubans offer to show Lost.
Comment by Marc Nathan -
I knew you would jump on this…
I stay current on my Apple software updates, and when I saw iTunes 6.0 I was psyched. Here’s the thing-I DON’T own an iPod. My 15″ Powerbook goes everywhere with me. When I’m in recording sessions, it’s open, sitting next to me. During breaks I listen to other music, surf the net, and now, I watch Lost. I never got into Lost before because I don’t have the luxury of watching too much TV with my schedule. In the past I have used P2P to download one other television show: 24. Sometimes it would come up with Asian subtitles, the quality low, etc… The download times would be massive because who knows where the file was coming from.
But last nite I decided to catch up and see what the fuss about Lost is. The price for Season 1, 25 episodes, is $35. I began to debate what value it had against buying the series on DVD. (Currently $39 on Amazon pre-order.) Well, here is the plus-I have it all on my laptop, no need to rip or carry DVD’s around. The quality is ALMOST as good as a DVD. Like maybe just a hair less quality. (There was one digital click in my Lost episode.) So the negative is that the quality is a bit less, but not much. The file comes as and .m4v, which is basically a mp4, video version.
My download took appx 8 mins for a 43 min video. Not bad at all.
I think this is what the networks needed. Although I won’t be going crazy downloading shows, There are certain ones that I’m hoping for, like 24, Season 4, and maybe some others. How great would it be to get an NBA team pass thru iTunes? I’m a Pacers fan in Atlanta. I pay a fee to download the games, after the fact, maybe the next day….
Comment by Mark Goodchild -
#6, it’s hard to fathom watching a movie on a small screen but I think the serial nature of television series makes it a better fit (so to speak). Generally the utility in the iPod model is that you’re using it to fill yourself in on something you miss. This gives you an opportunity to see what you missed at a time that’s convenient for you before the next episode comes. If you don’t have time during the week, getting a chance to watch it on a train or during a lunch break is ideal. In choosing television show content instead of movies, I think this is a brilliant move.
Comment by Frank Z -
Just as your name isn’t formated mArk cUban or MarkCuban, it isn’t a Video Ipod or VideoIpod. Its an iPod.
Great post though. As always, you are spot on when it come to distribution of media.
Comment by Andrew Escobar -
I’ve felt for a while that AOL should be giving its client away for free to broadband clients and selling access to its huge library of content. i.e. original shows, classic Wimbledon, classic fights, etc.. That way, instead of letting their dialup customers escape when they get broadband, they still get a chance to tap some money out of that customer.
Being able to pay $2 for a missed episode of something is invaluable and I would prefer it to torrent networks if it can deliver it reliably within a half hour. The thing about torrents is generally you have to wait much longer to get something you want because it depends on the amount of seeders and downloaders connected. If a show isn’t as popular, you’re out of luck.
As an invester in Time Warner, I’m annoyed they’ve been sitting on a content library that’s generating ZERO revenue. Mark, why don’t you make a bid for Time Warner and do it right???
Comment by Frank Z -
I think it would be cool if the $1.99 came with a $0.25 – $0.50 discount for the item on DVD – for instance, I download every episode of Lost, and now I get $5-$10 off the DVD.
Comment by Aaron -
thanks Mark.
for those interested, here’s the link to Steve Jobs’ keynote/webcast of the announcement:
http://stream.apple.akadns.net/
note: the webcast lasts over an hour
Comment by martin rivard -
great points Mark, but just like the Sony Watchman of the 80s and 90s, who wants to watch this crap on a mini screen? Conceptually, i agree with your argument, but don’t agree with the final execution – the video ipod is expensive and i see it as a fad. What is it 2x the size of a cellphone screen?
Comment by starexplorer -
I can only hope that the ‘Suits’ in Hollywood put down their Hermes catalogues long enough to read this blog. What came out last week from Apple/Disney will, thank god, change the entertainment industry forever. A lot of these posts indicate the grasp of what is happening. One minor point; 43 minutes for $1.99 also means that for about 8 dollars(4 shows) i am buying over an hour of free time (no commercials) I would hope that the intelligent posters on this blog would value their time at more than that. It also means big trouble for Cable and their forced ”package deals”. I sure hope these geniuses are expanding their broadband/isp business because their prime source of revenue is about to take a major hit.
Comment by George Gillespie -
Bittorrent. The target audience already gets their content for free.
Comment by Peter Wallroth -
But of course Apple are only selling it the american audience – I wonder – does this mean the rest of the world will continue to download Lost for free?
Comment by PJ -
Once again, collectively, if we vote with our dollars, we can change the status quo.
Comment by Harry -
Gee, when I suggested that people would pay for content they could easily steal as long as the process was convenient and inexpensive, a few folks told me I was crazy. Now Apple is doing just that and it’s brilliant. Go figure.
I think this model has legs because:
1) It’s video. Indoctrinating the public to paying for video content while video piracy is still relatively inefficient goes straight to the “laziness” factor… make it easier to buy it than steal it;
2) Appeals to an older demographic. This approach works well for 25 year olds and up… in other words, the guys young enough to care about getting content in this manner with the disposable income and consumerish attitudes to actually purchase it rather than steal it. In fact, the older the group, the less likely they are to be involved in piracy. I’d venture to guess that “Lost” and “Desperate Housewives” main viewership demographic is squarely over 25 years. These are people with jobs, disposable income (generally), credit, fast-paced lifestyles and little patience… just the type willing to shell out a couple of bucks for video rather than steal it. It gets even better for “That’s So Raven” and “The Suite Life of Zach and Cody”… their main viewership is too young to be savvy enough to steal video but has parents hovering around the mid-thirties to early forties range that would generally have little problem shelling out a couple of bucks for a show to keep the kids quiet while they are running errands. Don’t expect to see “The O.C.” anytime soon.
3) Convenience. It’s iTunes, enough said. Are there easier ways to deliver content? Yes, but iTunes is pretty close to ideal.
As I stated in one of your other blogs, now is the time for video content producers to work out the kinks in delivering digital content… while video piracy is still generally impractical. Attempting to meet the demands of consumers RIGHT NOW (inexpensive and convenient, convenient, CONVENIENT) will go a long way to preserving the value of video content. It’ll be a learning process and there will be bumps along the way but it beats the hell out of trying to turn back the clock and wishing the problem away, as is the strategy of the music industry.
Comment by James King -
Mark,
Take a look at the Refco fraud….something like $400 mill in naked shorts being hidden…
Guess those guys bitchin about naked shorts were on to something, it is one gigantic fraud.
Comment by eric -
Excellent analysis. This could also potentially change the way advertisers approach their market. Similar to Pepsi’s iTunes giveaway, a savvy marketer could conceivably strike a deal with Apple to offer a million downloads of a range of TV shows that appeal to their target market. That’s a million guaranteed viewership, with demographic information, for less than the price of a superbowl ad.
Comment by TreoToday -
Won’t the content owners prefer to move to a subscription service, ala Napster, rather than dealing with lots of per-item licence fees ala Appla? I’d love to see a breakdown of Napster/Yahoo/Rhapsody to see how many people download how many tunes on subscription, versus paying for a single unlimited use licence.
Perhaps single-pay content aggregators (which is, after all, how networks such as HBO got started, will emerge in the online video world?
Comment by meehawl -
It’s about time HollyWood got someone who isn’t living in the roaring 20s.
Comment by Rusty -
Interesting perspective — During a week where the “internet tv” conversations have all been top-down programming v. bottom-up content…
…My take: recycling broadcast/cable television to online, portable and wireless platforms is doomed.
…Entirely new production formats, styles, genres and productions will emerge to produce for the specific mediums.
…No one knows how to produce a successful “series” for iPOD/video, or video enabled cell phones (but, trust me, a few of us are working on it)…it will be fresh, original, geared for watching on the fly…for specific resolutions (no quick camera movement and :12 second cross-fades)…
…Why doesn’t this exist right now? Why didn’t Apple engage a half-dozen emerging production companies to create REALLY UNIQUE ENGAGING CONTENT? Because, it doesn’t carry the buzz of getting DESPERATE HOUSEWIVES a day late, for a buck-99.
…the only folks really engaged in producing specifically for these new platforms, with any serious money, big surprise, porn again (yes, the folks who expanded the 8mm projector market, home video and pay per view)…
…but, there will be broader content applications soon…just watch us (on whatever device you have)…
— my 2-cents
Comment by Eric -
Great post, but I have to take issue with the title. It’s called network TV because of the network of local affiliates, who are in the process of being cut out of the action on prime time programming. So, what happens to them in all this? I’m sure they’d like to know.
It’s interesting that this is happeneing a ownership of local stations has consolidated. The consolidation gives them a stronger bargaining position for a cut of download revenue. On the other hand, they’ve cut down on their local assets in order to improve post-consolidation profits. This would seem to leave them less well positioned to take advantage of their logical connection to the community.
Comment by eas -
Mark, how about selling Mavs game broadcasts on iTunes etc RIGHT AFTER the game has ended? While we are at it, make a shorter highlight reel version available at a lower price, since not many people have 3 hours to burn every other day during the season. You can reach:
1. International fans, who normally don’t get to see the game live, if at all.
2. Fans torn apart by simultaneous games/TV shows.
3. The fans in the “my PVR ate my recording” situation.
4. People who didn’t watch last night’s game, but heard about how great it was at the water cooler.
Comment by Cindy -
Mark, how about selling Mavs game broadcasts on iTunes etc RIGHT AFTER the game has ended? While we are at it, make a shorter highlight reel version available at a lower price, since not many people have 3 hours to burn every other day during the season. You can reach:
1. International fans, who normally don’t get to see the game live, if at all.
2. Fans torn apart by simultaneous games/TV shows.
3. The fans in the “my PVR ate my recording” situation.
4. People who didn’t watch last night’s game, but heard about how great it was at the water cooler.
Comment by Cindy -
Just to clarify one thing, video you buy off the iTunes Store is viewable on your IPOD AND YOUR COMPUTER (Both Mac and Windows).
Also, with the release of FrontRow, your Mac now works as a digital hub. You can pull up music, photos, movies (both the ones you’ve made and one’s you’ve bought). Just run the optional TV adaptor to your TV, bingo. If you look at the interface steve jobs demoed (large text, large icons), it’s meant to be viewed on a TV screen, not a high-res computer monitor.
Plus, with Apple’s rendezvous (now Bonjour) technology. All of you Movies, Music, and Pictures are shared automatically on your network (like your house). So you could buy that little $499 mac mini, stick it next to your TV, and be purring away in your digital heaven.
Chris
Comment by Chris -
Given that Apple has pushed HD in its video creation software and hardware offerings (not to mention the Quicktime site), I’m surprised that it’s not embracing HD on the ITMS. (One advantage of, um, unauthorised TV releases is that they’re often taken from the HD feed, rather than the 525-line feed.) HD-capable displays are a route into HDTV for those who haven’t yet wanted to splash out on a HD-capable TV and/or cable/satellite package.
If I’m paying $1.99 per show, I’d like to get the HD version, if one exists. That creates issues when transferring to the iPod, but the iPod functionality is a side-issue here. It’s the point of entry for adding TV to ITMS.
Apple has proved that its H.264 codec can make HD downloads feasible for broadband users. Will content providers (hint, hint) take the plunge?
Comment by Nick S -
Damn right! I don’t even have a tv, and tthis just might turn me into a junkie for certain shows. Not a bad way to segway into movies either.
Comment by Nicholas -
Mark – been lurkingly reading for a long time but I thought I’d chime in finally.
One thing that has yet to be reconciled in this rush is the devaluation of syndication rights. This will come to bite the industry in the ass at some point, whether or not it’s actually worth it. It’s been the actual goal of the production companies producing episodic television and creatively has been one of the stifling influencing factors that has run many a fine show into dramatic incoherence with the need to produce more episodes. But today you read that even ABC affiliates are worried about this. Consider this: would Seinfeld have generated as much revenue in syndication in today’s world of DVD box sets and downloadable episodes? Probably not as much, and then you have viewership erosion from all the fragmentation going on. The same way the music industry is now trying to play chicken with iTunes will come back in future.
All that aside, I think this is an incredible idea. The big problem with peer to peer is that a large segment of the audience out there want to download content but are not technically savvy enough to navigate peer to peer. Those people would rather just have the convenience of paid downloads – in the early days while I was a college student as mp3s hit nothing was more frustrating than finding an ftp site that had partial uploads of an album. I think you could even make a case viewing the top 20 albums at iTMS being representative of upwardly mobile, young professionals more than any other group.
Same goes for television shows. The absolute convenience is incredible (though I find the encoding quality at the iTMS to be less than ideal even with the h.264 codec in their hands) and much, much handier. I have a friend who travels excessively who loves the show Lost and cannot make himself available to watch it during broadcast. He doesn’t care to even bother with bittorrent. He would gladly pay $2 to keep up with the show and download it at his convenience through his hotel broadband connection.
As would I – I marvel at $2 an episode. Seeing an entire episode of a tv show minus ads of my own choice at that price is so much more valuable than the terrible theatrical experience on offer today.
The television industry has been broken for a long while being based upon Nielsen’s television ratings system. Hell has anyone here ever even met a Nielsen family? Middle class lives don’t lend themselves to communally agreed upon time slots any longer.
I think the ultimate effect will be when it comes to travellers – in the way that the book industry has an entire segment devoted to travellers (think pulpy best sellers about lawyers and military operatives and thrillers about collegiate b.s. agnosticism), I think you’ll see declining book sales and more and more people watching on airplanes.
Ultimately, however, the main thrust here is that this is inevitable. The movie and television industries have no idea whatsoever about how freely their content is being exchanged via the net. No idea at all. The quicker they legitimize and make it convenient at an affordable price point, the sooner they’ll have grasped where their audiences live now.
As a disclaimer, I independently was contracted to shoot video material for the iTMS.
Comment by otakuhouse -
Let’s not forget about special episodes that wouldn’t normally air on television. I expect that we’ll see “lost” or special episodes of these ABC shows once they figure it out.
It is my hope that the other networks will jump on board sooner rather than later. I for one would like to see shows like Firefly available, even though they’re no longer on air. Imagine the catalog for Star Trek: TNG being available, or even daytime soaps (which I don’t watch, but millions do).
Don’t forget that even though you might not buy an iPod for its video capabilities, it has them by default, from now on. And if you should ever want to use them, there is no barrier to entry.
Comment by Michael Sitarzewski -
Mark, how about selling Mavs game broadcasts on iTunes etc RIGHT AFTER the game has ended? While we are at it, make a shorter highlight reel version available at a lower price, since not many people have 3 hours to burn every other day during the season. You can reach:
1. International fans, who normally don’t get to see the game live, if at all.
2. Fans torn apart by simultaneous games/TV shows.
3. The fans in the “my PVR ate my recording” situation.
4. People who didn’t watch last night’s game, but heard about how great it was at the water cooler.
Comment by Cindy -
What does this do to the music labels asking to raise the price of their downloaded content via iTunes? A song costs $1 for 5 minutes, and now a 40+ minute TV show costs $2? Would anyone pay $1.25 or even $1.10 for a song now that the price for a TV show is set at $2? Granted, the quality of a downloaded song compared to a CD track is much closer than the quality of a downloaded TV show compared to broadcast or DVD content. But now there is a stake in the ground for pricing downloaded content. Every consumer will be aware of that pricing, even if that consumer never downloads a single TV show.
Comment by Charles Dostale -
Will this finally be the thing that drives true high-speed broadband to the home? Will Apple have to acquire new infrastructure to support this?
Comment by C Irwin -
Congrats to somebody in the Television industry for doing what the Music industry refuses to do: Embrace new distribution models!
Interactive TV (even though it’s with a seperate TV and Computer) has been on ABC for some time and it’s nice to see them leading the way. Of course, Apple is an innovator but you need to go back to the beginning of the iPod to realize why we are able to come to this point.
Create a great product that is easy to use and simple. Start with the basics. Taking your music with you. Then expand. That’s exactly what Apple has done and ABC is smart enough to see that.
Now it is up to those companies who can provide the best user experience with the best hardware to take the market to the next level. I would expect to see some of the major Networks to start doing licensing deals with people regarding their content.
Question: Does this change the idea of iTunes as a purchase model to a Subscription model for Video content? I wouldn’t necessarily buy every episode of Lost (only those I missed) but if you has a “Season Pass” I might buy it.
Also, Arrested Development is the FUNNIEST show on TV, this could save the show as you really need to see all the episodes to get all the laughs…
Comment by Brandon Rothe -
This is a great commentary. Network TV has been in a downward spiral since the “success” of reality TV. Apple’s approach can potentially be a far better barometer of viewership than the all important Nielsen ratings.
The one caveat right now is that this is mainly for those
1) connected via broadband,
2) willing to pay for something on-line,
3) audience with a significant attach rate to the content offered. (the hardcore will always pay for their favorite content)
The problem with #3 is that I think Hollywood / TV has lost touch with this as so many other have commented on above while chasing the almighty buck.
This also addresses the normal “torrent” traffic just like iTunes did with other P2P music swapping. It leaves the pain threshold relatively low, while offering the content.
Again great entry Mark.
I’m a Warriors fan, but I do think your Mavs did a lot to revive Run-and-Gun ball.
Comment by todd -
There’s another interesting thing about this model. Big fans of a TV show with low ratings can buy the same episode 5 or 10 times. It’s only a matter of time until a show comes out on iTunes with a cult following and they start clamoring for all fans to purchase it as many times as possible. Wouldn’t that be a great way to save a show instead of the letter-writing campaigns of yore?
Comment by Carl -
Re: Watching on you PC, you can. You’re allowed to copy to a few machines (4? 5?) and iTunes allows playback on the PC/Mac itself. The quality is quite good.
Comment by Mindy -
You mention that Yahoo!, MS, and others will not make the same mistakes with TV that they did with Music in competing with Apple. First, they already are. But the real problem with your point is that you’re looking at this one-dimensionally. This isn’t just about iTunes or the iPod. Both could have been–should have been–copied long ago. No, it’s about the user-experience, and not just the software experience, but hardware too and how those two come together and work together. And that hasn’t been copied, not even almost, by anyone.
There have been competitors to iTunes and the iPod since day one. Remember that Apple got into the MP3 music and player market pretty late. At that time and since, some offered more features or better pricing. But the one advantage Apple has had, one that none could compete with, is that Apple offered a better user-experience. Why hasn’t anyone matched Apple on that one point and taken its market share away? Well, because user-experience is hard. Anyone who has developed a commercial application will tell you that the user-experience is the toughest thing to get right, not the code.
So why haven’t Apple’s competitors like MS, which has much deeper pockets than Apple, beaten Apple yet? Because MS, despite all of its money and army of programmers, just doesn’t get it when it comes to user-experience. For MS, this is the least of their strengths; just look at their software competitor to iTunes. MS has been copying Apple since the Lisa, but where they were able to beat Apple in the 90’s because Apple had incompetent management that did not know what it was doing, today MS is competing with Jobs, and he does know what he is doing. And he knows user-experience better than most in the field. And none of Apple’s other competitors have so far even come close. It’s not like Apple has been revolutionizing iTunes on a annual basis.
And that user-experience limitation seems to extend to darn near every handheld manufacturer that could compete with Apple for that market. None have a great user-experience, or are elegant and small. Right now, the only possible competitor to the iPod Video is the PSP. But the PSP is so big and clunky compared to the iPod Video that if you carry the PSP in your pocket, people will think you are VERY excited about something. Yes, the PSP plays games AND does movies! It might be able to compete on the hardware side, if size, as some girls say, doesn’t matter. But it does. And there is no iTunes equivalent. So the PSP stands alone–you have to buy media to play media on the PSP, not a good model. As I see it, the iPod Video will take away from PSP sales, but not the reverse.
Apple has a perfect storm between software and hardware, between getting the content and using the content, and all of that is held in a tight eco-system by the user-experience. The key is the mix. And we can begin to see where Jobs’ experiment in video is going to go. The mix, the synergy, between iTunes and the other Apple products such as Front Row and the iPods announced and to come will be what Apple competitors will have to overcome. Apple’s competitors may know what Apple is going to do. But unless they realize how to do the user-experience better, how to build the software-hardware bridge better, that knowledge will do them little good. And, so far, it looks like they don’t. It looks like they are making the same mistakes all over again.
Comment by James Hillhouse -
To me, the most interesting part of your post was the suggestion that pod sales and downloads could change the fates of some shows. I think we saw the beginning of this with Fox bringing back “Family Guy” after its DVDs became popular. It could if done right signal a return to quality programming; with new revenue streams, the networks are more likely to spend money on “different” shows such as HBO does now, rather than recycled plots and reality filler. (And how much rerun value does a reality show have? Folks who would happily buy a favorite episode of “Lost” probably aren’t going to rewatch a “Survivor” more than once.)
You’re right in thinking this would have implications well beyond the merely financial.
Comment by Ray Barrington -
you are always in the mist of breakthrough things …….will it ever end
Comment by jeffy -
I wonder if there are any implications for selling pilots as a way of measuring if they are worth pursuing or not. I wouldn’t pay as much for them but it might be a nice way to get the word out for cheap.
Comment by Charles -
Nice post, Mark. I also wonder if it’s possible for production companies to spring up based solely on this concept.
My only question is what is keeping a production company from combining the traditional content-distribution model with this new on-demand model – I mean, couldn’t they embed 30 seconds spots in their shows and offer the content for free? Would advertisers not be willing to pay for this type of advertising because of the ease of fastforwarding their commercials? Is there a way to protect 30 second spots so they can’t be fastforwarded if the person downloaded the content for free?
I am excited to see what happens in this industry moving forward.
Comment by Preston Wily -
The Charlie Rose appearance was great… as was the first one and the Tavis Smiley appearance. Andy Grove (who was also on Charlie)is always brilliant and inciteful as is Mark.
Sometimes you just want to get out of the house, or.. you have to make that commute and wish that you could drag along that new show or your favorite old show– you know, that series you loved that never quite caught on? Well imagine if someone got the rights, and set up a service allowing you to drop it for a buck a show (or less if you buy the entire series) onto that Sony stick and pop it into your PSP (better resolution than the IPOD anyway). The WB or the other mega media corps might even want to do a bundle- the show and a single from the artist they are pushing on the show too.. or maybe a music video?
I’m looking forward to the day I can go to a local theatre and watch the F1 race (the Shanghai final is this Saturday night), World Cup, NBA/NCAA playoffs, or a festival of Monty Python shows with my fellow hardcore fans. I’d even be willing to be a captive audience for some commericals and eat an upgraded food selection to help the theatre owner to offset the costs. We may even return to the day of the big old intermission so I don’t have to miss any of the show while I restock the munchie tray. Could we be returning to the age of the Serial? Flash Gordon returns in the guise of “SMALLVILLE” complete with the “in our last episode” and “don’t miss next weeks” teaser?
I live in a part of the country where old cinemas are shutting down or sit empty -and just scream for retrofitting with a big Barco projector, line doublers and fresh content dumped from an hard drive in high def. Or how about second run movies? Classics?
Keep up the good work Mark.. shake up these big slow moving (publicly traded) dinosaurs and eat their lunch before the realization makes it from their tales to their brains. Investment, Innovation not speculation will bring us into the next era.
I wonder if Charlie knew what Mark meant when he mentioned Google buying up “dark fibre” to hook it up to wireless for the last mile of delivery at +100mbps connectivity?
Mark- here is an idea for your next high def production/documentary (if no one has it already) “Confessions of an Economic Hitman” John Perkins, a former respected member of the international banking community. In his book Confessions of an Economic Hit Man he describes how as a highly paid professional, he helped the U.S. cheat poor countries around the globe out of trillions of dollars by lending them more money than they could possibly repay and then taking over their economies.
http://www.democracynow.org/article.pl?sid=04/12/31/1546207#transcript
I would love to see the ENRON movie, the Corporation, and that together.
Comment by Rex -
A couple of thoughts…
1) How did ABC/Disney obtain the rights to do this? As Mark points out at the top of the piece, the networks normally only have the right to air an episode–and sell advertising on it–once or twice, then the rights revert to the production company. Did they (ABC) negotiate special permission to do this? Do they have blank permission to do whatever they like within a certain time frame? Are they blasting ahead without explicit permission? Are they only doing it for shows where they are also the producer? Some combination of the above?
2) If this experiment is successful, why won’t the production companies just retain the download rights and do it themselves, cutting the networks out of the revenues entirely?
3) Will there be advertising in the downloaded episodes? Will it be the same as the broadcast spots, or will it be sold separately? Will the advertising be custom-composed for each individual recipient?
4) What do the craft guilds have to say about all of this? Producers have never before just volunteered to pay additional residuals to the guilds. I imagine this will be the next strike issue for SAG, DGA, WGA etc.
–scott–
Comment by Scott Trotter -
Mark,
I think Eisner gets some credit for coming around to this thinking too. I can’t seem to find the unabridged version of his farewell address to employees, but according to several stories, “he also told the executives not to fret about the advent of technologies — particularly the Internet — that are changing the nature of the business.”
Also, you were unbelievably good on Charlie Rose. Why didn’t you plug it here? It was just like reading the blog, except you were on the TV. Watch Mark on Charlie Rose and you can really see how this blog and the interaction here shapes his thoughts from just wondering (post below about local high bandwidth) to conclusive thoughts (Rose excerpt about grandma getting a high tech scan at home, read by an expert miles away).
-Brad
Comment by Brad Hutchings -
Great blog Mark! Always good to see someone challenging the status quo.
To clarify a few things from the user comments. You can watch the videos on your computer, your ipod or your TV (via $19 cable from ipod to TV) .The file size for the first epesode of Lost is 204.4MB for a 43 minute epesode. (no commercials)
Comment by Greg Furry -
I’m curious as to how long downloads will take. How big of a file will they be? Is there a big enough market (how many people are going to have Ipod Videos)? If Apple expanded this so that I could watch it on my laptop, that would be different.
I don’t see how it can beat torrents. Why should I have to pay for something that I can download for free and that everyone can watch for free? The only way I would be enticed is if they had a “not shown on TV yet” episode.
Comment by Asher -
What, no kind words for Steve Jobs? iTunes is the real story here, and Bob is getting in on the ground floor of a new market at the same time as he cements his relationship with the CEO of PIXAR (which is Disney’s best source of income in the theatrical realm), which had become quite frayed recently. The video iPod is just one means of viewing that content, which can be connected to any TV with video hookups or viewed on the PC. Road warriors can download a show and watch it at the hotel on the TV, or on the plane with the iPod. The impact on broadcasting as we know has the potential into turning every day of the week into a mini-version of DVD Tuesdays, when new episode of your favorite show is made available for download. Yes, the format is still lo-res, but that’s easily changed as the market develops.
And when will Landmark get those fabled digital projectors into the theatres? One thing about Apple, they don’t annouce their products until they’re ready to ship.
Comment by Mark Centz -
TiVo remains the best positioned company to thrive in a world of alternative content distribution mechanisms, content portability and timeshifting. TiVo is the only device that enables consumers to easily record content, transfer it back to the PC for storage purposes, mobile devices (e.g. laptops) for portability, and even around the house for viewing in different rooms, etc. – all at a formfactor optimized for viewing. They remain the only company that provides an effective bridge between the Internet, PC and home entertainment system.
Comment by Jonathan Marcus -
That rules! The digital age rules.
Comment by Ben Adams -
Great entry and some good info to absorb here. It is, however, difficult to fathom that the masses will want to view video content on a handheld. Big difference between listening while doing myriad other activities and solely devoting one’s attention to a 2½-inch screen. Hopefully, downloading shows and videos will soon come to my living room’s HD Sony Wega, a la “In Demand,” but with better selections and without the many technical glitches that remain.
Comment by Ken in Cali -
Mark,
It’s interesting to watch you switch your views on TV and movie distribution. At Warez P2P we are working with the record industry on a great business model for paid downloads. (yes, we got the ‘cease and desist’ letter, but we having been trying from day one to compromise while protecting independent content.)
We have seen the paid content model coming for ages…and we hope, content providers such as you mark will help us provide tv and movie content via a DRM method that satisfies consuimerts and the IP owner.
And regarding Live broadcasting via P2P, our upcoming next generation P2P technology will change the distribution world.
Go Astros! Go Mavs! Farefell Finley…
Kaleb
Comment by Kaleb -
Great entry and some good info to absorb here. It is, however, difficult to fathom that the masses will want to view video content on a handheld. Big difference between listening while doing myriad other activities and solely devoting one’s attention to a 2½-inch screen. Hopefully, downloading shows and videos will soon come to my living room’s HD Sony Wega, a la “In Demand,” but with better selections and without the many technical glitches that remain.
Comment by Ken in Cali -
IPTV will bring unique advertising.
The 30 second spot’s death is long overdue, the beancounters hate it because its hard to quantify the results.
Unique based ads are where we’re heading. They’ll make ad breaks a more interactive user experience; think competitions and such.
All the IPTV STBs are going to have profiles based on the Microsoft guidelines, it’s a great move on their part because it’ll give them access to millions of eyes; advertising goldmines.
As far as iPod video goes, it’s useless. A 2.5″ screen and a bad DRM format? I doubt many people will be putting their portable DVD players on Ebay.
Apple has done exactly what it was expected to do, it’s not innovative or impressive. The move was designed to keep investors happy with their over-inflated share price.
As far as Bob Iger saving television? I’d say Lloyd Braun will have a bigger impact
Comment by Adam -
MS is also working on this. Video will be able to be purchased from MS friendly places.
http://channel9.msdn.com/Showpost.aspx?postid=43571&pvrid=13
It was the content that was/is missing.
Richard
Comment by Richard Bothne -
Personally I am disappointed that Apple is only doing this for the tiny little iPod screen. I want to buy video to watch on my awesome powerbook LCD screen already!
Comment by Dustin Sacks -
Mark, I think you’re right on the money here. I wonder how this will affect shows like “Firefly” that have a rabid following?
Comment by Brett Nordquist -
what impact is this going to have on local network TV stations? my guess is it will be a negative for them.
very interesting situation.
thanks for your thoughts on the topic.
Comment by garrett -
Great Blog! I’m glad someone can help explain the economics and business behind the decisions of Apple and Disney.
btw – good luck with your Mavs this year! It’s kind of sad to see that you’re not a lock for Top 4 anymore as you were in the past. Maybe trading dirk and rebuilding is the right move. Look at how the Pacers did it . . .that was pretty good.
Comment by Jeff -
How long till the NBA realizes that they could embrace this same technology and truly reach a global audience with their broadcast product.
I work in broadcasting for the Pistons, and can attest for the halftime chat folks from around the world who would gladly pay $5 a game to be able to watch it.
Maybe for sports leagues they could sell a package similar to DirectTV’s NBA league pass. That way a fan could download a few games and enjoy all their favorite Turk’s or Argentinians.
My first impression is kinda so-so for the quality of the video itself however. Espescially for Apple and their fantastic Quicktime H.264 HD video in comparison.
Another revenue idea with video downloads is the idea of offering “Bug” advertising or a scroll at the bottom. In this way you could offer higher quality video, and offset some of the costs or create more revenue through ad sales.
For a much more detailed look into this idea, try this link
Piracy is Good? How Battlestar Galactica Killed Broadcast TV
http://www.mindjack.com/feature/piracy051305.html
and
PART TWO: THE NEW LAWS OF TELEVISION
http://www.mindjack.com/feature/newlaws052105.html
Comment by Kyle Clements -