In a January article “Apple pushing TV Networks to slash prices on iTunes” and more recently “Apple to offer $1 TV shows in April” Business Insider/Silicon Alley Insider suggest Apple are pushing the price of programming through iTunes down, with the goal of selling “some shows” for 99c.
This is absolutely a step in reality’s direction but it still prices individual programs at well above the traditional income-per-viewer that networks have traditionally received, and way above what it would cost for an average viewer via a cable or satellite subscription.
At 99c, the content owner would get 65c per download as Apple take 35% and pays for the bandwidth (at about 10c a GB).
65c per viewer per show is right at the top end of what the big four networks have been able to command from advertising: per show, per viewer. (Even the Superbowl only gets 85c average per viewer per 3 hours show). At the other end, the big four get a low of 25c per viewer per show.
But not all television is “big four” nor is it always worth the network premium. Take one of my favorite shows: The Daily Show with Jon Stewart. The best research I can find is that Comedy Central pays Stewart’s company about $5 million a year or $32,000 each for the 160 shows a year that are produced. The Daily Show has an audience of around 1.5 million viewers according to Wikipedia and other sources. Cost of production to Comedy Central is just about 2c per viewer.
Presumably Comedy Central are turning a profit between the 60c per subscriber per month they get from cable carriage and whatever advertising revenue is generated across the 5 or so showings of each episode.
And yet, through iTunes that show is currently $1.99 or 99c per episode if you buy a season pass for 20 episodes. (One of the few cases where a season pass gives significant savings). It’s still too much.
If Jon Stewart’s company sold direct through iTunes at, say, 10c an episode (because once watched it has little future rewatching value, unlike episodic drama or comedy) then gross revenue would be $150,000 per show or $97,500 after Apple’s cut. (Apple’s bandwidth cost would be around .6 of a cent in SD, or $8550 leaving Apple $43950 gross profit on the sales.)
On the other end of the equation, the content creator (Stewart) gets $97,500 or three times the income for the same show as working for Comedy Central brings.
So, while 99c TV shows are a step in the right direction there’s still a long way to go before Internet, on demand, video reaches fair price parity with traditional revenues. This is not an opportunity for the existing entrenched players to dramatically increase their margins: it will kill the nascent future.