Apple doesn't need media conglomerates to sell iPods. Enderle is a joke.
Greg Sandoval and CNET if you want to appear to have journalistic integrity you need to stop quoting Rob Enderle. He's consistently wrong and consistently shows he does not understand let alone have any insight into Apple's market. Have you looked into his track record? Have you noticed he routinely comes up with unfounded wild comments that seem more geared to draw attention then to give real insight? It calls into question the competance and credibility of any media outlet that quotes him, yours included.
Speaking of journalistic credibility, where did you come up with this assertion: "Apple needs to have access to a wide range of content to keep iPod owners interested in their devices. Apple's iPod succeeds mainly because of iTunes; its simplicity, low prices and quality content. What happens if Apple lost access to the best music and TV shows".
This is clearly and roundly recognized as wrong on many levels. It is a false crisis. First, Apple doesn't need access to content itself to drive iPod sales because most of the content on iPods comes from iPod owners and not through Apple's servers. Customers can and do get their content from other means and load it onto the iPod themselves.
Sure, it helps Apple and iPod owners to have the iTunes Store to make digital media super easy and convenient to buy, but most people have bought iPods because they could load the media they got from CDs, peer to peer networks and DVDs they've bought, borrowed or rented. It's plain as day in the numbers reported by Apple itself and research groups. Very little of iPod content comes from the the iTunes Store. iTunes Store is a perk, not the engine that drives iPod sales.
The context in which you state that "Apple's iPod succeeds mainly because of iTunes" implies that it's the iTunes Store that makes the iPod popular. This completely misses the fact that the iPod has first and foremost succeeded because of it's own ease of use and quality design and features. Remember, the iPod drew lots of Windows users even before there was an iTunes store...even before there was iTunes.exe jukebox software for Windows (which is more important to iPod users than the iTunes Store).
Also, for shame in confusing the iTunes software with the iTunes Store. The way you described one when you meant the other is a classic case of argumentative bait and switch.
The executives at Universal and NBC simply don't understand the New Internet Economics. The market price for something has always been the lowest price it's being sold for in the marketplace. For music, movies and TV videos on the Internet, that price isn't quite zero. As Steve Jobs has pointed out, it's the value people attach to the hassle and time illegal downloads take. Apple has probably guessed right that the hassle-factor is about $0.99 for music and $1.99 for TV shows. No matter what is being sold, the market price can't rise much higher than that.
Keep in mind that the New Internet Economics breaks all the rules of traditional economics. Copies are so easily made that supply will always meet demand, even if the selling price is zero. The only way the entertainment industry can keep their products off this black market is to keep them locked in vaults where they earn no money. Making any effort to make money off a product will create a near infinite supply. That's the reality.
The New Internet Economics also breaks the old rules in another way. The more popular something is, the more likely it is to be easily available for free. Someone who wants to watch an obscure fifties sit-com will have to look long and hard for it and may, in the end, decide that buying it on iTunes makes more sense. Someone who wants the hottest show on network TV, will find it easily in the black market. Supply not only meets demand, the supply is best where the demand is greatest.
That's why nothing demonstrates just how clueless the executives at NBC are better than their antiquated assumption that they'd be able get larger profits selling their hottest shows for $4.95 rather than $1.95. All they'll do is create a livelier black market, one that isn't likely to go aware when they return to reality.
In short, Steve Jobs' one low price for everything is the only way to make a buck in this New Internet Economy.
I might add that I've got quite a bit of experience in this area. My primary business is publishing interesting books that are in the public domain. Much of what I publish is available legally and for free electronically and from other sources in print. I survive in that market by adding more value to my books than anyone else with useful footnotes, commentary and appendices that make the books more useful and enjoyable. Michael Crichton praised my edition of G. K. Chesterton's Eugenics and Other Evils in his most recent novel, Next.
The entertainment industry's problem isn't bootlegging and it isn't the iTunes Store. It's the fact that they arrogantly assume that nothing has changes since the 1960s and that they can control the market and generate any level of profit they like if only they can "get control" again. They can't, because this is a market no one can control. They're simply going to have to sell at a price that reflects the value they've added to it. Nothing else will work.
[[Apple don't seem to have a problem charging $4.00 for TV shows in the UK. (£1.89 sterling is about USD$4).]]
I tend to think that Apple is still forking over the same amount to the studio, and keeping about the same amount themselves... Where's the rest going? My guess is UK taxes... Don't get me wrong... I love the UK... Spent the best couple years of my life there (about 25 years ago), but UK, and most of Europe, is well know for taxing the crap out of their citizens.
I don't know or claim this as fact, but I really doubt that Apple is saying "Hey, let's screw the Brits out of a couple more bucks per TV show, just because we can."
I would be very curious to see a breakdown on where the money goes on UK sales vs. US sales.
If the executives for NBC and Universal are so behind the times that they don't even realize that the playing field has changed, how can they be trusted to govern their business correctly?
It's time to dump NBC and Universal stock and invest in the stock of media companies that are changing with the times.
NBC may want to run there own little website and try to make money off of ads, but there are missing out on money from me and probably more like me. I can easily DVR the NBC Universal shows I want to see but I dont because I like to watch them during my travel time on airlines where there is no Internet access! So now I will DVR all the NBC shows and not spend any money or watch them on hulu.com. You have to have a downloadable option for people who dont have internet access and want to enjoy some TV shows.
As unlocked iPhones come into the market, there will be more sales around the world, you can get unlocked iPhones at <a class="jive-link-external" href="http://www.iphone-singapore.com/" target="_newWindow">http://www.iphone-singapore.com/</a> while stocks last.
as a former broadcaster myself....I just have to shake my head as the music and broadcast industry continue to play greedy, and blame all their woes on the Internet. I wish the media would do a better job of investigating this story. Apple has been a breath of fresh air to an otherwise heavily controlled music and broadcast industry. Look at the number of artists who otherwise woudn't have gotten exposure.
One of the reasons why NBC want to pull out is because of the rivalry between Blu-ray and HD-DVD. NBC has ties with Microsoft, ie. MSNBC, who support HD-DVD while ABC has ties with Apple ie. Steve jobs having a seat in the board of directors at Disney which owns ABC, support Blu-Ray. Media companies are choosing sides on which format to go with while others are staying neutral and are doing movies and shows in both formats. The new revenue for NBC is the HD-DVD format. They have something to fall back on if hulu.com fails. In the end, the consumers lose.
"We never asked to double the wholesale price for our TV shows. In fact, our negotiations were centered on our request for flexibility in wholesale pricing, including the ability to package shows together in ways that could make our content even more attractive for consumers.
It is clear that Apple's retail pricing strategy for its iTunes service is designed to drive sales of Apple devices, at the expense of those who create the content that make these devices worth buying."
Yeah, so what's the other part of that variable pricing scheme? Something along the lines of "this show is popular, so let's force people to spend a lot more for each episode".
Both parties are doing what they have the right to do. Apple has the right to do with iTunes whatever they want, they created it and it belongs to them. They can set prices in their stores however they want to. NBC also has the right to not agree to the terms and with hold their business from Apple. There is now good guy bad guy here, they are both well within their rights in what they can do with their property. However having said that, there is the question as to which is a better business model and who has the more economically sound concept. Prices are more than just a price. They are information about the thing that they are associated with. For example, an old Leave it to Beaver episode and a new Desperate Housewives Season Finale probably do not have the same market value, yet I suppose on iTunes they would in fact have the same price, since Apple insists on flat pricing. Prices are indicators of what people want and demand and what people dont want. Flexible pricing means as much lower prices as higher prices. Yes some things would be higher, and some things would be lower. The prices would reflect the preferences of the customers not NBC or Apple. If a show was in demand it might cost more to own it, if its been in reruns for decades, even the flat price might be too high for most. Flexible prices also give feedback to the vendor. They can try out a price for a show, and if sales a lacking they can lower the price, and vice versa. Prices are information for both the vendor and the customer. Apple can do what they want with iTunes, but if they want to have an even more vibrant marketplace there they should establish freedom in prices in their store, afterall wouldn't it be odd if you walked into Wal-Mart and all the CDs were exactly the same price ?
Economics lesson 2.0: how NBC arrived at the $4 price point
The cost of a show is $1.99 so let's say iTunes takes 49 cents on each sale. So, for the sake of argument NBC grosses $1.50 on each sale.
Hypothetically, let's say it takes roughly 50 visits by iTunes members before someone decides to buy the video.
That means for every 1000 people that comes looking for their shows NBC makes about $30 in sales. That's obviously a hypothetical ratio and probably on the optimistic end of the scale.
Which sounds great, doesn't it? It does until you realise that if people know the entire season of that show that they love is free on NBC.com they will definitely go there. Free means that 1000 potential viewers on ITunes turns into 50,000 definite viewers on NBC.com.
Still with me?
Each video advert on NBC.com is worth $20+ CPM, which means they make at least $20 for every 1000 viewers per ad. At 4 ads per episode, that's roughly $80 per 1000 viewers.
So, not only will they make more per 1000 people who come looking for their shows, if they focus on NBC.com they will also get 50x more viewers.
Now do you understand where the $4.99 price point came from? It basically matches what they make from the free stream.
I'm not saying that's right or wrong, I'm just pointing out the economic logic behind how NBC might have arrived at the $4.99 price point.
Of course, an equally logical argument could be made that NBC will actually lose paying customers to illegal bit torrent downloads or P2P - where the adverts will probably be stripped out - but, they face that threat anyway and for my money, I would tend to follow the quality route...i.e.
Offer consumers a low quality stream/download for a low price point as well as offering a medium/high quality version for a slightly higher price.
Which is the variable pricing model that Apple fought for years with itunes music because they insisted consumers wouldn't "get it".
And how wrong were apple about that?
After years of fighting the music industry over variable pricing...Apple quietly introduced it this year, with the "next big thing" promotions after EMI's offering of higher quality DRM FREE versions of their catalogue...
Did you also know that for music, the big publishers charge over 70 cents per track? Add in iTunes production, software development and bandwidth costs and do you really think Apple is out there to gouge you on price?
The article states: "Apple's iPod succeeds mainly because of iTunes; its simplicity, low prices and quality content."
Yes, iTunes is a big part of the iPod's success. But that's got nothing to do with the iTunes STORE. I saw a stat a while back that showed that even with all those billions of songs downloaded off of iTunes, that only translated to around 21 tracks purchased per person. Clearly, most iPod owners are getting their content elsewhere, unless we're all walking around with only 21 songs on our iPods.
One of the great things iTunes does is allow you to easily import either your own music or video and transfer it to your iPod. This is how most people are using their iPods. I have 3,300 tracks on my iPod and every single one is ripped from a CD I already own. I still buy CD's - no DRM, better quality, liner notes, usually lyrics and photos included - and then rip them myself.
As for video, who actually pays to watch TV shows they can otherwise get for free over the air? The entire concept is ridiculous.
The article is right to point out that video is a "miniscule" part of Apple's business - and it probably always will be. Apple doesn't need *any* video on the iTunes store to be successful; all they need to do is provide good hardware and the software that allows users to import their own content.
itunes vs piracy - the studio pinheads STILL dont seem to get it!
first, i wont even bother address the studio's crocodile tears shed on behalf of content producers not getting paid their due ... these parasites are usually only the exhibitors, not the originators of original programming. The tv/film studios have no more interest in the well-being of the artists (or the consumers) than do the music labels.
second, Here Is The Big Kuhuna:
if nbc insists on jacking up the price (doubling now, and then probably doubling again next year), they will in effect be issuing an open invitation for everyone to go back to pirating their material.
here is the VERY SIMPLE choice at issue: distribution will be either via the tv networks or the p2p networks - it all depends on how much respect the studios treat their customers.
If the studious insist on these ridiculous prices, then their customers will just boycott them outright & go back to pirating.
so instead of trying to undermine thw One Good Thing to come there dim & venal way, the tv/film studios should try to make nice with itunes ... it is one of the few allies they have in the digital universe!
third, as for the money issue - well let's just pause a moment & reflect on the insanity of asking nearly the half the ticket price of a movie for much less than an hour's tv fare ...
cost of a movie = $30M, $60M, $100M, etc ...
license fee for a tv episode? maybe $2M-ish!
hoping to scam near-cinema ticket prices from tv viewers is just plain nuts! (again, i stress that charging 50% of a movie ticket is NOT going to be the final attempt at gouging - it is just the begining).
ain't gonna happen.
these studio pinheads just dont understand the peril they face from the internet, consoles, dvd, fun-in-real-life (eg ultimate frisbee), etc!
in a world where they are constantly losing eyeballs, they simple dont understand the value proposition invloved with digital media.
fourth, there is no threat to the ipod/iphone/itv ... the pinhead-in-arms analysts (i'm looking at you, gartner) who think that consumers need itunes to supply content in order for these devices to have value are just trying to kiss up to the studios so they can sell more of their of their bogus consulting services. Consumer demand for apple media devices will not be impacted when p2p content is an alternative to the rapacious & antediluvian studios.
score for the last 10 years: Pinheads 0, Apple 36
there's lots of stuff apple is foing wrong - but this aint one of them.
Apple should not be allowed to bundle the iPod, iTunes, and the iTunes Store; and they should not be able to employ an exclusively-owned proprietary file format as the sole format their product. This hinders the advancement of technology and sets the stage for a monopoly, as you can see in the article:
"But the risks involved with bucking Apple are great. Apple has sold more than 100 million iPods. The iPod makes up more than 70 percent of the overall mobile player market. How long can NBC Universal go without access to iPod owners? "
I have news for you. There are several companies that do this already. Microsoft has theirs, Sony has theirs and so on and so on.
There are several alternatives for people who wish to boycott Apple. There are several makers of media players. There are several internet stores that sell music. There are several stores that sell music in a proprietary file format. None of them are as successful as iTunes and the iPod though and I guess that's the real beef you have isn't it?.
What is your solution? Make it illegal to come up with new products and services?
Nobody wanted anything to do with selling music over the internet. Everybody thought it was a big risk and a dumb idea except Apple. Apple had to really do a hard sell just to get some music on their iTunes when it started. Apple took the risk and it paid off for them. Everybody else was late to the party as usual and now you say it's not fair?
Suppose NBC signs with Sony? The only place you will be able to buy TV episodes of NBC content will be from Sony's site and it will be in their proprietary file format that no other player will play. How can we let this go on!!!!
If monopoly means lower prices, what are you complaining about. When Apple started to become successful, there was no video on iTunes. Talk about music differently.
Apple bundles ipod and itunes for the sake of the consumer. It is simple to use and need very little computer knowledge to use- Which is Apple's claim to fame. Their file format is in the consumers best interest as it's small and of good quality which gives you more songs of the same quality per unit of memory- AND you can change the file format if you want! You don't HAVE to use AAC. And your statement about a monopoly- A monopoly only exists when you are FORCED to choose that company. If you don't want an ipod then don't buy one!! It's that simple. Many other companies have come out with ipod wannabies and ipod lookalikes like the Samsung that has different software to use. People still choose to buy ipods because they work and are simple. Dont talk against a company just because they make a god product and are successful with it. You SHOULD BE PISSED that all the media companies aren't happy with their ten mansions, 20 planes, 30 boats, forty cars, and 50 mistresses! No!! They need more of OUR MONEY to make their wallets bigger. Do you actually want to pay more for your media? Why not stick by a company that says, "No! We want to deliver quality content at an affordable price." Kepp stayin' strong APPLE!!!
Another bone-headed decision of GE and Jeff (I'm the decider) Z/ Sucker. Hey, GE why don't you go back to making light blubs maybe you'll get a better idea than kicking out Jay Leno. How about watching the cable networks maybe you can pick up some pointers on programming like Mad Men on AMC, Damages on Fox, or another Fox show House Oh! thats right House is a NBC/ Universal property it's just not on NBC. Oh-Boy ! I cant wait to download another episode of The Singing Bee.
In doing further research on this subject, I found this: "NBC Universal and other companies say they want to increase prices by packaging content? say an episode of ?The Office? with the movie ?The 40- Year-Old Virgin,? because they both star the comedian Steve Carell." <a class="jive-link-external" href="http://www.nytimes.com/2007/08/31/technology/31NBC.html?_r=1&ref=technology&oref=slogin" target="_newWindow">http://www.nytimes.com/2007/08/31/technology/31NBC.html?_r=1&ref=technology&oref=slogin</a>
I do NOT want to pay for shows or movies that I don't want to see just to be able to watch the show that I DO want to see!
NBC is once AGAIN making decisions FOR it's viewers/customers that they do NOT want made! It's the same thing they just did through their Sci-Fi Channel - cancelling a show with good ratings just because the demographic was middle aged & female instead of their target young male demographic! They aren't interested in their customers & what THEY want. They're only interested in money & getting more of it. No wonder thier overall viewership is still dropping!
It's their job to dictate people watch NBC content over someone else's.
For my money, NBC had the gumption to invest in shows like the office and Heroes.
Apple didn't.
And while I disagree with the idea of doubling the price (I think they can offer variable pricing downloads...one with advertising, the other without and in higher quality) I think Apple are displaying the negotiating skills of a petulant child.
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journalistic integrity you need to stop quoting Rob Enderle. He's
consistently wrong and consistently shows he does not
understand let alone have any insight into Apple's market. Have
you looked into his track record? Have you noticed he routinely
comes up with unfounded wild comments that seem more
geared to draw attention then to give real insight? It calls into
question the competance and credibility of any media outlet that
quotes him, yours included.
Speaking of journalistic credibility, where did you come up with
this assertion: "Apple needs to have access to a wide range of
content to keep iPod owners interested in their devices. Apple's
iPod succeeds mainly because of iTunes; its simplicity, low
prices and quality content. What happens if Apple lost access to
the best music and TV shows".
This is clearly and roundly recognized as wrong on many levels.
It is a false crisis. First, Apple doesn't need access to content
itself to drive iPod sales because most of the content on iPods
comes from iPod owners and not through Apple's servers.
Customers can and do get their content from other means and
load it onto the iPod themselves.
Sure, it helps Apple and iPod owners to have the iTunes Store to
make digital media super easy and convenient to buy, but most
people have bought iPods because they could load the media
they got from CDs, peer to peer networks and DVDs they've
bought, borrowed or rented. It's plain as day in the numbers
reported by Apple itself and research groups. Very little of iPod
content comes from the the iTunes Store. iTunes Store is a perk,
not the engine that drives iPod sales.
The context in which you state that "Apple's iPod succeeds
mainly because of iTunes" implies that it's the iTunes Store that
makes the iPod popular. This completely misses the fact that the
iPod has first and foremost succeeded because of it's own ease
of use and quality design and features. Remember, the iPod
drew lots of Windows users even before there was an iTunes
store...even before there was iTunes.exe jukebox software for
Windows (which is more important to iPod users than the iTunes
Store).
Also, for shame in confusing the iTunes software with the iTunes
Store. The way you described one when you meant the other is a
classic case of argumentative bait and switch.
market price for something has always been the lowest price it's being sold for in the marketplace.
For music, movies and TV videos on the Internet, that price isn't quite zero. As Steve Jobs has
pointed out, it's the value people attach to the hassle and time illegal downloads take. Apple has
probably guessed right that the hassle-factor is about $0.99 for music and $1.99 for TV shows.
No matter what is being sold, the market price can't rise much higher than that.
Keep in mind that the New Internet Economics breaks all the rules of traditional economics. Copies
are so easily made that supply will always meet demand, even if the selling price is zero. The only
way the entertainment industry can keep their products off this black market is to keep them
locked in vaults where they earn no money. Making any effort to make money off a product will
create a near infinite supply. That's the reality.
The New Internet Economics also breaks the old rules in another way. The more popular something
is, the more likely it is to be easily available for free. Someone who wants to watch an obscure
fifties sit-com will have to look long and hard for it and may, in the end, decide that buying it on
iTunes makes more sense. Someone who wants the hottest show on network TV, will find it easily
in the black market. Supply not only meets demand, the supply is best where the demand is
greatest.
That's why nothing demonstrates just how clueless the executives at NBC are better than their
antiquated assumption that they'd be able get larger profits selling their hottest shows for $4.95
rather than $1.95. All they'll do is create a livelier black market, one that isn't likely to go aware
when they return to reality.
In short, Steve Jobs' one low price for everything is the only way to make a buck in this New
Internet Economy.
I might add that I've got quite a bit of experience in this area. My primary business is publishing
interesting books that are in the public domain. Much of what I publish is available legally and for
free electronically and from other sources in print. I survive in that market by adding more value to
my books than anyone else with useful footnotes, commentary and appendices that make the
books more useful and enjoyable. Michael Crichton praised my edition of G. K. Chesterton's
Eugenics and Other Evils in his most recent novel, Next.
The entertainment industry's problem isn't bootlegging and it isn't the iTunes Store. It's the fact
that they arrogantly assume that nothing has changes since the 1960s and that they can control
the market and generate any level of profit they like if only they can "get control" again. They can't,
because this is a market no one can control. They're simply going to have to sell at a price that
reflects the value they've added to it. Nothing else will work.
--Mike Perry, Inkling Books, Seattle
original article. Kudos.
shows in the UK. (£1.89 sterling is about USD$4).]]
I tend to think that Apple is still forking over the same amount
to the studio, and keeping about the same amount themselves...
Where's the rest going? My guess is UK taxes... Don't get me
wrong... I love the UK... Spent the best couple years of my life
there (about 25 years ago), but UK, and most of Europe, is well
know for taxing the crap out of their citizens.
I don't know or claim this as fact, but I really doubt that Apple is
saying "Hey, let's screw the Brits out of a couple more bucks per
TV show, just because we can."
I would be very curious to see a breakdown on where the money
goes on UK sales vs. US sales.
It's time to dump NBC and Universal stock and invest in the stock of media companies that are changing with the times.
money off of ads, but there are missing out on money from me
and probably more like me. I can easily DVR the NBC Universal
shows I want to see but I dont because I like to watch them
during my travel time on airlines where there is no Internet
access! So now I will DVR all the NBC shows and not spend
any money or watch them on hulu.com. You have to have a
downloadable option for people who dont have internet access
and want to enjoy some TV shows.
Part of the deal with At&T (I think the iphone contracts were for 5 years) was a huge chunk of revenue being kicked back to Apple.
If you unlock a phone and put in a t-mobile sim card...apple loses all that moolah...for the next 5 years.
the music and broadcast industry continue to play greedy, and
blame all their woes on the Internet. I wish the media would do a
better job of investigating this story. Apple has been a breath of
fresh air to an otherwise heavily controlled music and broadcast
industry. Look at the number of artists who otherwise woudn't have
gotten exposure.
rivalry between Blu-ray and HD-DVD. NBC has ties with
Microsoft, ie. MSNBC, who support HD-DVD while ABC has ties
with Apple ie. Steve jobs having a seat in the board of directors
at Disney which owns ABC, support Blu-Ray. Media companies
are choosing sides on which format to go with while others are
staying neutral and are doing movies and shows in both
formats. The new revenue for NBC is the HD-DVD format. They
have something to fall back on if hulu.com fails. In the end, the
consumers lose.
It is clear that Apple's retail pricing strategy for its iTunes service is designed to drive sales of Apple devices, at the expense of those who create the content that make these devices worth buying."
<a class="jive-link-external" href="http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=AAPL:US&sid=aR7Te_sjiGug" target="_newWindow">http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=AAPL:US&sid=aR7Te_sjiGug</a>
Yeah, so what's the other part of that variable pricing scheme?
Something along the lines of "this show is popular, so let's force
people to spend a lot more for each episode".
NBC sucks.
the right to do with iTunes whatever they want, they created it
and it belongs to them. They can set prices in their stores
however they want to. NBC also has the right to not agree to the
terms and with hold their business from Apple. There is now
good guy bad guy here, they are both well within their rights in
what they can do with their property.
However having said that, there is the question as to which is a
better business model and who has the more economically
sound concept. Prices are more than just a price. They are
information about the thing that they are associated with. For
example, an old Leave it to Beaver episode and a new Desperate
Housewives Season Finale probably do not have the same
market value, yet I suppose on iTunes they would in fact have
the same price, since Apple insists on flat pricing. Prices are
indicators of what people want and demand and what people
dont want. Flexible pricing means as much lower prices as
higher prices. Yes some things would be higher, and some
things would be lower. The prices would reflect the preferences
of the customers not NBC or Apple. If a show was in demand it
might cost more to own it, if its been in reruns for decades, even
the flat price might be too high for most. Flexible prices also
give feedback to the vendor. They can try out a price for a show,
and if sales a lacking they can lower the price, and vice versa.
Prices are information for both the vendor and the customer.
Apple can do what they want with iTunes, but if they want to
have an even more vibrant marketplace there they should
establish freedom in prices in their store, afterall wouldn't it be
odd if you walked into Wal-Mart and all the CDs were exactly the
same price ?
Hypothetically, let's say it takes roughly 50 visits by iTunes members before someone decides to buy the video.
That means for every 1000 people that comes looking for their shows NBC makes about $30 in sales. That's obviously a hypothetical ratio and probably on the optimistic end of the scale.
Which sounds great, doesn't it? It does until you realise that if people know the entire season of that show that they love is free on NBC.com they will definitely go there. Free means that 1000 potential viewers on ITunes turns into 50,000 definite viewers on NBC.com.
Still with me?
Each video advert on NBC.com is worth $20+ CPM, which means they make at least $20 for every 1000 viewers per ad. At 4 ads per episode, that's roughly $80 per 1000 viewers.
So, not only will they make more per 1000 people who come looking for their shows, if they focus on NBC.com they will also get 50x more viewers.
Now do you understand where the $4.99 price point came from? It basically matches what they make from the free stream.
I'm not saying that's right or wrong, I'm just pointing out the economic logic behind how NBC might have arrived at the $4.99 price point.
Of course, an equally logical argument could be made that NBC will actually lose paying customers to illegal bit torrent downloads or P2P - where the adverts will probably be stripped out - but, they face that threat anyway and for my money, I would tend to follow the quality route...i.e.
Offer consumers a low quality stream/download for a low price point as well as offering a medium/high quality version for a slightly higher price.
Which is the variable pricing model that Apple fought for years with itunes music because they insisted consumers wouldn't "get it".
And how wrong were apple about that?
After years of fighting the music industry over variable pricing...Apple quietly introduced it this year, with the "next big thing" promotions after EMI's offering of higher quality DRM FREE versions of their catalogue...
managing, and configuring music collections with a Nokia phone?
Who the hell says, "omg I love my music applications on my
phone!"
Well, besides iPhone owners. Even then? it's an iPod.
Jesus, either apple is 'beleaguered' and should just shut its
doors, or it's the king of the hill and no one can touch it?
If other people competed on quality, Apple wouldn't be so
dominant. Period.
And don't use the iTunes-DRM argument, because the
overwhelming majority of tracks on a typical iPod comes from
CDs ripped to AACs or MP3s.
No one's stopping people from buying Zunes and putting their
own music there instead of on an iPod.
Did you also know that for music, the big publishers charge over
70 cents per track? Add in iTunes production, software
development and bandwidth costs and do you really think Apple is
out there to gouge you on price?
phone purchaser uses it as their music player?
Yes, iTunes is a big part of the iPod's success. But that's got nothing to do with the iTunes STORE. I saw a stat a while back that showed that even with all those billions of songs downloaded off of iTunes, that only translated to around 21 tracks purchased per person. Clearly, most iPod owners are getting their content elsewhere, unless we're all walking around with only 21 songs on our iPods.
One of the great things iTunes does is allow you to easily import either your own music or video and transfer it to your iPod. This is how most people are using their iPods. I have 3,300 tracks on my iPod and every single one is ripped from a CD I already own. I still buy CD's - no DRM, better quality, liner notes, usually lyrics and photos included - and then rip them myself.
As for video, who actually pays to watch TV shows they can otherwise get for free over the air? The entire concept is ridiculous.
The article is right to point out that video is a "miniscule" part of Apple's business - and it probably always will be. Apple doesn't need *any* video on the iTunes store to be successful; all they need to do is provide good hardware and the software that allows users to import their own content.
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It's great for surfing the "music web" and organising your music + synching with your mp3player (including ipod).
It's like a very clever version of the itunes software.
second, Here Is The Big Kuhuna:
if nbc insists on jacking up the price (doubling now, and then probably doubling again next year), they will in effect be issuing an open invitation for everyone to go back to pirating their material.
here is the VERY SIMPLE choice at issue: distribution will be either via the tv networks or the p2p networks - it all depends on how much respect the studios treat their customers.
If the studious insist on these ridiculous prices, then their customers will just boycott them outright & go back to pirating.
so instead of trying to undermine thw One Good Thing to come there dim & venal way, the tv/film studios should try to make nice with itunes ... it is one of the few allies they have in the digital universe!
third, as for the money issue - well let's just pause a moment & reflect on the insanity of asking nearly the half the ticket price of a movie for much less than an hour's tv fare ...
cost of a movie = $30M, $60M, $100M, etc ...
license fee for a tv episode? maybe $2M-ish!
hoping to scam near-cinema ticket prices from tv viewers is just plain nuts! (again, i stress that charging 50% of a movie ticket is NOT going to be the final attempt at gouging - it is just the begining).
ain't gonna happen.
these studio pinheads just dont understand the peril they face from the internet, consoles, dvd, fun-in-real-life (eg ultimate frisbee), etc!
in a world where they are constantly losing eyeballs, they simple dont understand the value proposition invloved with digital media.
fourth, there is no threat to the ipod/iphone/itv ... the pinhead-in-arms analysts (i'm looking at you, gartner) who think that consumers need itunes to supply content in order for these devices to have value are just trying to kiss up to the studios so they can sell more of their of their bogus consulting services. Consumer demand for apple media devices will not be impacted when p2p content is an alternative to the rapacious & antediluvian studios.
score for the last 10 years: Pinheads 0, Apple 36
there's lots of stuff apple is foing wrong - but this aint one of them.
This hinders the advancement of technology and sets the stage for a monopoly, as you can see in the article:
"But the risks involved with bucking Apple are great. Apple has sold more than 100 million iPods. The iPod makes up more than 70 percent of the overall mobile player market. How long can NBC Universal go without access to iPod owners? "
How can we let this go on?!
already. Microsoft has theirs, Sony has theirs and so on and so
on.
There are several alternatives for people who wish to boycott
Apple. There are several makers of media players. There are
several internet stores that sell music. There are several stores
that sell music in a proprietary file format. None of them are as
successful as iTunes and the iPod though and I guess that's the
real beef you have isn't it?.
What is your solution? Make it illegal to come up with new
products and services?
Nobody wanted anything to do with selling music over the
internet. Everybody thought it was a big risk and a dumb idea
except Apple. Apple had to really do a hard sell just to get some
music on their iTunes when it started. Apple took the risk and it
paid off for them. Everybody else was late to the party as usual
and now you say it's not fair?
Suppose NBC signs with Sony? The only place you will be able to
buy TV episodes of NBC content will be from Sony's site and it
will be in their proprietary file format that no other player will
play. How can we let this go on!!!!
LOL
Worth noting that Apple have until october 1st to sort out their Apple IPOD ONLY DRM or face closure in europe.
Financial times article linked:
<a class="jive-link-external" href="http://www.ft.com/cms/s/1fc40360-abe9-11db-a0ed-0000779e2340.html" target="_newWindow">http://www.ft.com/cms/s/1fc40360-abe9-11db-a0ed-0000779e2340.html</a>
simple to use and need very little computer knowledge to use-
Which is Apple's claim to fame. Their file format is in the
consumers best interest as it's small and of good quality which
gives you more songs of the same quality per unit of memory-
AND you can change the file format if you want! You don't HAVE
to use AAC. And your statement about a monopoly- A monopoly
only exists when you are FORCED to choose that company. If you
don't want an ipod then don't buy one!! It's that simple. Many
other companies have come out with ipod wannabies and ipod
lookalikes like the Samsung that has different software to use.
People still choose to buy ipods because they work and are
simple. Dont talk against a company just because they make a
god product and are successful with it. You SHOULD BE PISSED
that all the media companies aren't happy with their ten
mansions, 20 planes, 30 boats, forty cars, and 50 mistresses!
No!! They need more of OUR MONEY to make their wallets
bigger. Do you actually want to pay more for your media? Why
not stick by a company that says, "No! We want to deliver quality
content at an affordable price." Kepp stayin' strong APPLE!!!
Sucker. Hey, GE why don't you go back to making light blubs
maybe you'll get a better idea than kicking out Jay Leno. How about
watching the cable networks maybe you can pick up some pointers
on programming like Mad Men on AMC, Damages on Fox, or
another Fox show House Oh! thats right House is a NBC/ Universal
property it's just not on NBC. Oh-Boy ! I cant wait to download
another episode of The Singing Bee.
"NBC Universal and other companies say they want to increase prices by packaging content? say an episode of ?The Office? with the movie ?The 40- Year-Old Virgin,? because they both star the comedian Steve Carell."
<a class="jive-link-external" href="http://www.nytimes.com/2007/08/31/technology/31NBC.html?_r=1&ref=technology&oref=slogin" target="_newWindow">http://www.nytimes.com/2007/08/31/technology/31NBC.html?_r=1&ref=technology&oref=slogin</a>
I do NOT want to pay for shows or movies that I don't want to see just to be able to watch the show that I DO want to see!
NBC is once AGAIN making decisions FOR it's viewers/customers that they do NOT want made! It's the same thing they just did through their Sci-Fi Channel - cancelling a show with good ratings just because the demographic was middle aged & female instead of their target young male demographic! They aren't interested in their customers & what THEY want. They're only interested in money & getting more of it. No wonder thier overall viewership is still dropping!
For my money, NBC had the gumption to invest in shows like the office and Heroes.
Apple didn't.
And while I disagree with the idea of doubling the price (I think they can offer variable pricing downloads...one with advertising, the other without and in higher quality) I think Apple are displaying the negotiating skills of a petulant child.
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"NBC Universal Television Content Now Available on Amazon Unbox"
<a class="jive-link-external" href="http://biz.yahoo.com/bw/070904/20070904006367.html?.v=1" target="_newWindow">http://biz.yahoo.com/bw/070904/20070904006367.html?.v=1</a>