According to a number of press reports, Apple has been pressuring the television studios to move the price point on many of their individual TV episodes on iTunes from $1.99 to 99 cents. The hope is that the move will increase sales, thus helping the adoption of Apple’s new iPad.
Aside from the obvious question of whether the studios should be helping Apple to build a dominant position in the tablet market, the studios should also keep another issue in mind as they decide on the pricing sweet spot for those individual episodes of "The Office" and "Gossip Girl."
While it is a convenient way to catch up with your favorite shows, it’s hard to find a bigger waste of your media buying budget than when you buy a TV episode from iTunes.
Unlike when you purchase a DVD, you are buying a file which can’t be resold. It can’t easily be viewed on devices other than ones approved by Apple. In fact, at $1.99 an episode, you’re paying as much or more per episode than you would for the exact same episode on DVD.
The problem is even more profound when you purchase episodes through Amazon, or several other less-successful iTunes rivals. In each case, you’re paying full price for episodes which can’t be sold, can’t easily be transferred and aren’t compatible with versions of the exact same episode sold by competing digital retailers.
I’m not arguing that digital TV episodes aren’t worth buying in the abstract. Although I think for most shows, a 99-cent price point is closer to their real value. But as things stand now, consumers are foolish to buy a file which has no value past its initial purchase.
If you’re a longtime fan of digital music, than this scenario harkens back to bad old days following the collapse of the original Napster.
Digital music was sold in all sorts of competing formats, many of them with digital rights management wrapped around the files that limited where your could listen to your music and for how long. Eventually, market pressures and consumer preferences forced music labels to sell the majority of their files without DRM and in the popular MP3 format.
Even iTunes has been forced to offer consumers the ability to buy at least some of the music they purchase on iTunes in the MP3 format (albeit at a higher price).
For the digital TV episode market to mature, it needs to move towards a single format that can be viewed in whatever manner the consumer prefers. I should be able to purchase an episode on Amazon and watch it as easily on my iPod as I can on my laptop or my television. Only then will the market grow enough to become a true competitor to the revenue streams provided by DVDs and other secondary broadcast rights.
Digital video files need to have a widely accepted equivalent to the audio mp3 format. A format which is DRM-free, easily portable and playable on any major market portable video player.
This, by the way, is not the future Apple forsees. They like the idea of a closed ecosystem. By persuading consumers to purchase episodes through iTunes and in a DRM-wrapped format, Apple hopes to build the same overwhelming dominance in tablets that they have in portable audio and video players.
The record labels foolishly allowed Apple to control the majority of the digital market. TV and motion picture studios would be just as foolish if they concentrate on protecting their assets instead of opening up their digital distribution options.
Studio executives I’ve spoken to about this consistently draw the wrong lesson from the music industry. They focus on piracy, and the damage that illegal file-sharing has inflicted on the major music labels.
But the real lesson to be drawn from the music industry is that in a digital world, content will find its own value. Consumers will pay for content, but only when they’re confronted with a price that makes sense. Music labels made a lot of money selling 10 track CD’s for $15 retail.
But in a world where you can buy only the tracks you want, labels have struggled to revamp their business model. Yes, piracy has hurt. But stupidity always causes more damage to the bottom line.
The studios should worry less about control and focus more on opening distribution and encouraging impulse purchases. The best way to do that is with a sturdy DRM-free format that is available everywhere. At a price that seems fair to the consumer.
While this won’t end piracy, it will push the casual pirates towards the legitimate market. Which is what the industry needs in the long-term.