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Summary:

Coming down from the high of St. Steve’s Macworld keynote yesterday, it dawned on us — movie rentals are great and all, but what about television program rentals? Matrix shmatrix, what if I want to spend a weekend burning through an entire season of Weeds? Until […]

Coming down from the high of St. Steve’s Macworld keynote yesterday, it dawned on us — movie rentals are great and all, but what about television program rentals? Matrix shmatrix, what if I want to spend a weekend burning through an entire season of Weeds? Until it fixes this glaring hole, I don’t see Apple TV being quite the Netflix killer people are making it out to be.

TV programming is proliferating on the web. Between the networks’ own sites, Hulu, Amazon and even Netflix, you can stream your favorite TV shows anytime. But these services are only available on your PC, not your TV set; the selection offered is limited, unlike DVDs, which generally offer most of the show’s run; and downloads (if available) are for purchase, not rental.

When it comes to creating a download TV rental service, three issues seem to come into play: price, availability and greed.

An older movie on iTunes will cost $2.99 to rent. But buying a 22-minute television show will still cost $1.99. The price of TV seems pretty steep at that point. Be honest, do you need to own it? How many times are you actually going to watch that episode of House? Even renting at 99 cents a show, it would cost more to download the first seven episodes of Arrested Development‘s first season than it would be to rent those same episodes on disc one of the DVD set.

Second, if Apple rents TV shows via download, how many episodes do you get at a time? Lining up a TV series in your Netflix queue is easy and economical; each disc gets you multiple shows at once. So Apple would need to bundle a bunch of episodes into one download to offer the same value. But even if Apple assembles multiple episodes into one package, under its rental terms you’d have just 24 hours to watch everything, which gets a little tricky if you’ve got a bunch of one-hour dramas. Apple could do something on the back end to mitigate this, but then rentals get complicated, and Apple likes to keep things simple.

I’m sure Apple and Amazon are trying to get TV shows available for rental download, but perhaps the licensing terms are too stiff. Hollywood is making a pretty penny selling us those shiny discs and it’s not unreasonable to think networks and studios are hampering the efforts in an attempt to squeeze more dollars out of us. Plus, Apple’s relationship with certain networks (paging NBC!) has been downright hostile in the past, with price being the main issue.

TV shows on DVD are addictive. How many times have you stayed up way past your bedtime with a newfound TV show, saying to yourself, “Just one more episode…?” We’re impatient when we like something and we expect to be satisfied right away. Download rentals are the perfect solution. The “video store” would never be out of what you want, it would be open all the time, and you’d probably never buy another DVD agai–. Oh wait, i think I just answered my own question.

Until Apple addresses the TV issue, I won’t be ditching my Netflix subscription (and its queue, which is bursting with TV goodness) anytime soon.

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  1. Amen, brother. I was thinking just such thoughts yesterday whilst contemplating the new version of Apple TV. Here, here!

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  2. I can’t say that I’m a fan of any of the pay per view business models. I don’t mind paying $3 for a movie, but it does feel like a rip off to pay $1.99 for a 22 minute program. Ideally, I’d like to see a setup where we pay $1 per hour of TV regardless of the show or content. This way if the program was terrible, you could always skip it and would only have to pay for the time spent watching.

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  3. It is a very complicated situation and I liked many of the things you said. How much can they really charge to rent just one show? One thing that is a possibility is maybe they will offer up a season bundle and you have the same restrictions as they do on movies. Each episode would stay available to watch for 30 days. After you start watching an episode you have 24 hours to finish watching that one episode.
    Something I really liked from the keynote was Fox announcing a digital copy for iTunes from DVDs. We all want to move our media around.

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  4. I think I understand where you’re coming from here, Chris. You want lower-cost TV shows, but I think the rental model (presumably rental would be cheaper than purchase) makes less sense revenue-wise for the studios for shorter content, unless you do it as more of a bundle or a “channel” of shows.

    I think what would make more sense is to have free downloads with ad support. Essentially these would be the exact same as what the networks are offering as online streams (like ABC-HD, NBC / Hulu, Fox / MySpace, etc). This would allow the consumer to take the content on portable devices like their iPhone or iPod. If ads are embedded, going DRM-less would actually help in the number of eyeballs, because you’d be increasing the number of device screens (whether or not those screens are on Apple devices really shouldn’t matter).

    These could essentially be podcasts of msm with advertising.

    When / if that happens, it will be the true competitor to linear cable/satellite/broadcast TV, because consumers will be able to access any content, essentially on-demand.

    One other thing: has anyone talked about how much the studios will be raking it in with Apple’s download model? I may be wrong on this, but generally, with DVD rentals, the studios only get paid when Blockbuster or NetFlix buys a physical disc, and (unless there’s exclusive deals) none of the brick-and-mortar’s $4/rental to consumers. Here, the studios are getting a portion of $3-6 every time a video is downloaded by a consumer. That’s a huge change in the rental business model, and I’d imagine if successful, a big boost in the studios bottom line.

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  5. Ads is what i dont want when im watching my movies/tv shows

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  6. Apple sells “seasons” now. A rental scheme would likely entail a season of shows each show’s download would require viewing in 24 hours. You can download them anytime. You don’t have to download the whole series at once.

    Another scheme would entail a bulk subscription to a number of shows for the season. This is similar to a choice version of shows on cable packages.

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  7. So if i rent a FOX DVD with the iPod Digital Format, can i just copy it and return the DVD?

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  8. Someguy who does math Thursday, January 17, 2008

    we need to ask ourselves, ‘what’s the value of 22 minutes of content?’ which becomes, ‘what’s the value of 30 minutes of attention?’ in TVlandia.

    22 minutes of content carries about 8 minutes of ad time (ignoring any product placement, local ad time, etc.). So 8 minutes of ads is about 16 30 second spots. So, how much is each spot?

    Well that depends on the show, the network, negotiations, etc etc… for the sake of argument and easy math let’s assume it’s a fairly small but decent show that brings in 4 million viewers weekly for a new episode. Let’s also assume that each spot goes for $25k. (again this is all to make the math clean). Well the show is “worth” $400k in revenues for delivering 4 million viewers. Run that math all the way down and it’s a $10 CPM.

    In this scenario the network could replace its revenue per capita with a rental fee of $0.16. El Jobso needs some new mock turtlenecks, there’s delivery cost, etc. so let’s up it to $0.25.. even $0.50.

    Of course this is a “top down” pricing model that assumes the value of this content (and our attention) is the same in this new medium. I’d generally disagree – just looking at the supply/demand equation. More viewing outlets, more shows, more content available for our attention – while by definition our attention is a fixed good: you’ve got 24 hours of it to spend every day – even if you are extremely ADD.

    okay, back to work.

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  9. all speaking the word! Friday, January 18, 2008

    The vast majority of consumers want to RENT movies. This is clear as rental sales always greatly over shadow those of actual DVD sales. THANKS APPLE for giving us Movie Rentals!

    But here, you hit is on the head and where everyone is missing the boat is TV Shows? If it is clear that the majority of consumers don’t want to own really awesome movies, then why does everyone think that we want to always own all those episodes of Ugly Betty? Really? If I only want to watch a move once or twice, how many times am I going to go back and watch that same episode of The Daily Show? And why would I want to deal with having to house and backup all that crap too?

    TV is 1000x’s more disposable then movies. Lets get real APPLE! Give me $0.25 or $0.50 rentals of TV shows and I will tell Charter to bite it and go to 100% digital download programming and never watch another commercial.

    Don’t know about you, but if I have an option to BUY an episode of Ugly Betty for $1.99 or just simply watch it and lose that 30 minutes of my life never to be repeated for $0.25, 99.999% of the time I will drop that quarter again and again for more TV to WATCH then I will EVER BUY.

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