Why Pay for What ABC and CBS Already Give Away for Free?

The industry is abuzz with news that Disney and CBS are in the early stages of negotiations with Apple to join an online video subscription service that could launch as part of iTunes as early as next year, as reported by the Wall Street Journal. But while certain outlets are already dancing on the grave of the cable industry, there’s little indication that what Apple, Disney or CBS would be offering is particularly innovative.

See, the devil is in the details, but there are few details to be had. For instance, will the proposed subscription service include linear television programming, or just a collection of on-demand titles from the networks’ libraries? How will the content offered be different from what’s already available on ABC.com, Hulu or CBS’ TV.com? Will broadcasters be willing to give up ad revenue for a monthly fee of $2 or $4 per subscriber? And most importantly, will the service be available only through Apple products, like iTunes or the Apple TV?

Here’s the problem as I see it: The offering will likely have too little content, cost too much, and will likely be tied to a proprietary software application or hardware device sold by Apple.

Sure, $30 a month — the amount that Apple was rumored to be charging the first time the news hit the industry — is less than what I pay for FiOS TV, but not substantially less than what I pay for my TV service when one considers that it’s bundled with my Internet and phone — and I’d still have to pay for each of those individually.

Also, it’s difficult to believe Apple will be able to negotiate rights for content that’s substantially different from what’s already available on demand from Hulu or similar sites. The service might have longer windows for some shows — i.e., you might be able to watch an entire season of Lost, as opposed to just the last five episodes — but there’s limited value in that. And in a world where broadcasters are already giving their content away for free, why would I pay $30 a month to watch the same content on iTunes?

Maybe I would if I could avoid ads. But even the WSJ story points out that “some executives are… concerned that the Apple service wouldn’t include advertising, at least in some of Apple’s proposals.” So there’s a possibility that Apple might be forced to include ads anyway.

And maybe I would subscribe to the service if it included live, linear programming, but that too is unlikely to happen. For one thing, for some content that I’d most like to watch live — NFL games, for instance — many broadcasters don’t have streaming rights. And even if they did, they’d not likely alienate their advertisers by making those shows available through an online outlet that they’re not able to monetize as well.

And all of that is before trying to make the service available on a TV. To do that, subscribers will either have to hook their laptops up to their television sets, or they’ll have to purchase a piece of Apple hardware. The current incarnation of the Apple TV is $229, and a next-gen product isn’t likely to cost significantly less. When one considers the cost of a Roku box (starting at $79, but with somewhat limited content), or the estimated price of the upcoming Boxee box ($200, but with a wide range of unlicensed Internet content), purchasing an Apple TV for more than $200 just to pay an additional $30 a month for a limited library doesn’t seem like a great value proposition.

So here’s my prediction for Apple’s subscription service in 2010: a lot of hype, not a lot of content — and in the end, not a lot of value for consumers.

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