iTunes TV sales incremental, not cannibalistic | iLounge News

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iTunes TV sales incremental, not cannibalistic

Hit television shows on the iTunes Music Store will generate more revenue per consumer for content providers than is possible with the traditional on-screen advertising model, according to two analysts.

JPMorgan Chase analyst Spencer Wang says that shows such as “Desperate Housewives” and “Lost” command about $440,000 per 30-second spot, with one episode generating about $12 million in ad revenue. By comparison, “even in the worst-case scenario” with 20% of viewers opting to download from iTunes, the digital episodes can generate about $15 million in revenue.

“The main reason is that the $1.44 in download revenue per user (or 70% of the $1.99 per download) is greater than the estimated 57 cents in advertising revenue per user generated under the current model,” Wang said.

Forrester Research analyst Josh Bernoff says the same. He also notes that a popular series can generate significantly more gross revenue for a TV network from a downloading model. Bernoff estimates that an episode generates $1.20 per user, compared with 45 cents per episode per viewer generated by advertising sales.

“Even if 20% of the audience shifts its viewing from broadcast to iTunes (iPod) downloads and ad revenue drop as a result, ABC makes an incremental $1.8 million,” Bernoff said in a recent report.

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Comments

1

Jeez this just shows what a rip off buying TV shows off iTunes is. Once the novelty wears off and better software for getting videos onto the iPod is available, I think that the Networks or Apple are going to need to lower the price to $1 or less otherwise for the vast majority of Americans it will not be worth it. And if this analysis is correct, the Networks should still make more money if the shows were sold at less than $1 than if not at all and they simply wathced it on TV. Presumably the breakeven point for the networks is $0.82 (assuming they get 70% of each iTunes sale) or $1.12 (assuming the Networks get the price of the iTunes sale minus $0.55). Either way, right now iTunes sales are a rip off.

Posted by Chris on January 27, 2006 at 8:41 AM (PDT)

2

Ultimately the viewers that buy episodes of TV shows are going to be regarding as worth more than the viewer who tunes in when the show is aired on TV.

The person who buys a show has proven that they act on what the want.  They put their money where their mouth is.

The comparisons stated in the report will not be valid for long.  If theoretically the broadcast of a show only attracted people who didn’t care enough to buy the episode, then advertisers will assume these viewers are not the sector of the market that buys anything.

Networks are gung ho about making money off selling episodes now, but what about when it costs them ad revenue

And, what’s it gonna do to DVD sales?  Are the people who bought a season worth of ‘Lost’ at iTMS gonna buy the box set?  The box set will claim to have more special features, but when the sales decline they will probably offer the special features at iTMS as well.

Posted by Talking Madness in Los Angeles on January 27, 2006 at 10:47 AM (PDT)

3

coming from a guy called Spencer ‘Wang’...

Posted by jkreef on January 27, 2006 at 11:25 AM (PDT)

4

Cannibalistic?! =/

Posted by Jack Bauer on January 27, 2006 at 12:19 PM (PDT)

5

iTunes needs to start offering their content in the widescreen aspect-ratio it’s intended to be seen in for the medium to appropriately replace broadcast as a reasonable method of enjoying the shows.


M

Posted by FoolsRun on January 27, 2006 at 1:40 PM (PDT)

6

Lost - The Complete First Season

24 episodes x $1.99 per episode = $47.76 on iTunes.

Box set List Price according to amazon.com = $59.99.

I know there are MANY other factors I’m leaving out in the price of both, advantages and disadvantages of the formats, better prices for the box set, etc. (I really don’t care to go in detail because writing long, drawn out points on these bulletin boards is a worthless endeavor.) But even considering those things, it seems that you’re paying close to the same price on iTunes compared to the physical DVD set, per episode, if not slightly lower. I’m sure there’s a link to a more detailed comparison out there on the internet. =P

Posted by A-Jay on January 27, 2006 at 6:29 PM (PDT)

7

For content owners, the download model is compelling.
Suppose I own an episode of whatever (DH, Lost, some movie). The current model is to show it once (in the theaters, on TV), harvest the ticket or ad revenues, then wait for some time, and have a dvd out, or have the show syndicated for re-runs, and make some money then.
In comparsion, if the content is put on itunes or equivalent, that same content is going to earn revenues immediately, and 24/7/365 (366 on leap years).
Remember economic 101:  A buck in hand today is worth more than a buck (maybe) in the future.
Example: put “Finding Nemo” in itunes. Thousands of kids will each want to watch it way too many times. Perhaps the parent will break down and buy the DVD. Perhaps the parent will ‘rent’ it from itunes a few times before buying the dvd.
In the first case, the content owner made his buck. In the latter case he made the buck right away, and again and again…

Posted by Wiley on January 27, 2006 at 8:35 PM (PDT)

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