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Apple just a few years ago became the leader in online music sales by offering a cheap, easy way to purchase songs and an attractive device on which to listen to them. Now, by halving the price of TV shows sold through iTunes, Apple (s AAPL) is looking to corner the digital video market in the same way, by giving consumers an inexpensive way to buy TV shows, and with its new iPad, an attractive device on which to watch them.
When Apple first started asking its content partners to lower the prices of their TV episodes, it was met stiff resistance from broadcast and cable companies that didn’t want to cut into their (already meager) electronic sell-through revenues. But in the past three weeks, some have warmed to the idea, with the FT reporting that some TV networks have finally agreed to the price cut after months of negotiations.
So what changed? The release of the iPad, for one thing.
The iPad has some limitations, of course. Its 4:3 aspect ratio results in a tremendous loss of screen real estate when viewing video in the 1.85:1 or 2.35:1 aspect ratio in which most movies — and now TV shows — are shot. And the iPad doesn’t support Adobe (s ADBE) Flash, which has more or less become the de facto standard for video delivery on the web.
Apple hopes to circumvent lack of Flash support with the App Store, which would enable content companies to build and monetize video apps for the iPad much like they did for the iPhone, and of course, through iTunes, which would enable them to sell their videos directly onto the new device. And by tying video viewing to a download marketplace, Apple could (arguably) be providing TV networks with a better way to cash in on their video assets than through Flash-based advertising.
We’ve already argued that the iPad was designed to change the way consumers watch digital video, and lower prices on TV shows is just an extension of that. By cutting prices to 99 cents, Apple hopes that it can capture the online video marketplace in the same way that it cornered the market for sales of online music.
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