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Time Warner CEO says Apple 99-cent rental model 'jeopardizes' sales

post #1 of 85
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Time Warner chief executive Jeff Bewkes has warned other media execs that low cost rentals from Apple threaten sales of TV shows to branded networks.

Bewkes issued the warning at the Royal Television Conference in London, according to The Hollywood Reporter.

"How can you justify renting your first-run TV shows individually for 99 cents an episode and thereby jeopardize the sale of the same shows as a series to branded networks that pay hundreds of millions of dollars and make those shows available to loyal viewers for free?" Bewkes said.

According to Bewkes, "new entrants" like Apple need to offer up a "superior TV experience" while simultaneously supporting or improving the overall economics that make the programming possible. He remains confident that revenues are on the uptake, with the number of viewers growing, paid-television penetration increasing, and advertising and subscription revenues improving.

Also of note, Bewkes candidly admitted after his speech that the Time Warner merger with AOL was "the biggest mistake in corporate history."

Bewkes is the latest in a line of media conglomerate bosses that have decried Apple's new 99-cent rental model. Although Apple CEO Steve Jobs believes the studios will quickly "see the light" and agree to the rentals, several executives from the major studios have remained vocal in their opposition of the plan.

At last week's Goldman Sachs media executive conference, Viacom CEO Philippe Dauman called the 99-cent price "not good." "We don't think Apple has it quite right yet," Dauman said.

NBC Universal exec Jeff Zucker believes the pricing "devalues" his company's content. "We do not think 99 cents is the right price point," Zucker said.

Zucker has fought long and hard with Apple on the pricing of digital media content, but his days at NBC are now numbered. An internal document from last week states that he will be replaced as CEO after Comcast finalizes its acquisition of NBC Universal, CNET reports. Comcast is currently awaiting government approval of the deal.

Not all media execs are critical of Apple's new model, though. Fox and ABC were the first studios to agree to the 99-cent rentals. News Corp President Chase Carey views Fox's participation as a "short-term test." Robert Iger, CEO of ABC's parent company Walt Disney Co., thinks his company is better off "aligning with technology companies than fighting them."
post #2 of 85
$1.99 is too high. I can get South Park and other shows online for Free, even those Short Pixar Films that Apple sells online are available for free in HD on YouTube!
The best solution might be to run short ads like SouthParkStudios does, I don't find them annoying, I see ads as a break to run to the kitchen and reload.
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post #3 of 85
Quote:
Originally Posted by AppleInsider View Post

"How can you justify renting your first-run TV shows individually for 99 cents an episode and thereby jeopardize the sale of the same shows as a series to branded networks that pay hundreds of millions of dollars and make those shows available to loyal viewers for free?" Bewkes said.

i beg to differ. it is NOT free. myself like nearly all other television viewers pay for cable or satellite, and nearly all the programs are peppered with commercials. whether the television is on or off, we are paying for whatever programs that are sent to our reception box. again, it is NOT free.
post #4 of 85
I would prefer Apple just offered an advertising supported free service like Boxee, if only as an option. We have all lived with a few ads all our lives in TV shows. I don't know what the fuss is all about over ad free TV all of a sudden. I like my Movies ad free but my brain isn't challenged following the plots in TV shows past a quick ad or two.
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post #5 of 85
Bewkes elevator doesn't go all the way to the top floor.

99 cents is too expensive for something you can get free with your DVR.

Correction. Something you've already bought and paid for with your subscription to Comcast (or another ISP).

Apple is offering content providers extra income from viewers who forgot to set their DVR or discovered the show after it had run. This is a layer of extra income and not competition.
post #6 of 85
Quote:
Originally Posted by danielchow View Post

i beg to differ. it is NOT free. myself like nearly all other television viewers pay for cable or satellite, and nearly all the programs are peppered with commercials. whether the television is on or off, we are paying for whatever programs that are sent to our reception box. again, it is NOT free.

I agree. I pay hundreds of dollars a year to watch tv shows that are are riddled with ads.

Free would be to find them via torrents.
post #7 of 85
Quote:
Originally Posted by davesmall View Post

Apple is offering content providers extra income from viewers who forgot to set their DVR or discovered the show after it had run. This is a layer of extra income and not competition.

excellent point, and i think you are right on this.
post #8 of 85
Do they mean it jeopardizes sales for those shows that they broadcast over the air for free? Do they also realize you can just stop at the corner 7-Eleven and pick up a 2 hour movie for a buck?

Right....
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post #9 of 85
more dinosaur media ready to lose out on something that could save their own butt.
post #10 of 85
Quote:
Originally Posted by extremeskater View Post

I knew this was never going to go over well or for that matter at all because the network exec's believe their content is work far more then whats its really worth. Same issue with the movie and record industry.

Exactly. Its only a matter of time before all the regular people out there realize their content access is being artificially limited (e.g. you have to buy a cable/sat subscription to see it) and start refusing to put up with it.
post #11 of 85
People don't want to own TV shows, they would rather rent and not deal with storage etc. Networks are greedy, they don't understand elastic demand. Lower the price for rentals = more revenues.

How many movies have you rented the last 5 years? How many have you purchased?

Case closed...
post #12 of 85
Quote:
Originally Posted by davesmall View Post

Bewkes elevator doesn't go all the way to the top floor.

99 cents is too expensive for something you can get free with your DVR.

Correction. Something you've already bought and paid for with your subscription to Comcast (or another ISP).

Apple is offering content providers extra income from viewers who forgot to set their DVR or discovered the show after it had run. This is a layer of extra income and not competition.

You forgot about cable customers who were screwed over by Comcast when they decided to start deleting basic cable channels from basic cable service and moving them to higher-priced tiers that coincidentally requires using Comcast's DVR equipment, forcing you to pay them too if you want DVR. That's exactly what happened in the Houston market when Time Warner Cable sold out their cable customers to Comcast: Comcast started deleting channels like NatGeo and more recently SyFy from basic package. Fewer channels for the same price.

So, I love the idea that Apple is creating a new market for TV shows delivered over broadband. Hulu and Netflix might be in this market too. If Comcast wants to screw their customers over, then fine. I'll watch my favorite shows over the Internet (legally and on demand no less, so I can control when I watch TV).

As far as I'm concerned, Comcast doesn't want Apple to use broadband to bypass their local cable monopolies and provide programming to their customers. They don't want competition. I think they're afraid that 99 cent TV show rentals might actually succeed, and start siphoning off their profits.

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post #13 of 85
I can see three major reasons for purchasing or renting TV shows. The first, as Davesmall stated, is to catch up on a show that I missed or got into late. Secondly, it may be that it is much more convenient to view the show on computer or iOS device. I see these two reasons as covering the majority of users today. Both of these are incremental revenue for the studios and ANYTHING they get for these shows, even $0.01, is profit they would otherwise not see. It does nothing to reduce the revenue stream through their existing channels. (Well, perhaps it reduces ad revenue for shows that are available on the internet.) However, the third reason is one that should and probably does concern the studios. If the price to rent is inexpensive enough and I watch only a few series, then it may be worthwhile to kill the cable subscription. This would take significant revenue away from the studios. This is at least a couple of years away and I am still not sure how this will be economical for me. For example, if I watch 2 30 minute shows and 1 1 hour show 5 nights per week, this would be $15 per week if each rents for $0.99 each. Multiply this by 4.3 for the number of weeks each month and I would be paying about $65 per month to rent my shows. I pay the cable company less than this each month to get my shows and record them to the DVR where I can watch them weeks later. If you watch more TV than this (the average is 2.8 hours per day, 7 days per week or almost 20 hours per week) then $0.99 is too much to pay for your TV. If you watch less than this, it would be worthwhile.

Frankly speaking, it doesnt matter if the studios feel that $0.99 is too much or too little. The market will decide what the price should be. As with the music industry, if the price is set higher than what the market is willing to pay, then the market will not pay for the product - they will find a way to steal it. Set the price intelligently and the market will pay for it.
post #14 of 85
You know what's interesting Time Warner? I don't even want to pay .99 cents. I mean, I do pay $60 a month for your ISP.

Thank you ABC for letting me watch last weeks Cougar Town for free.
post #15 of 85
This is the definition of a disruptive technology, and the studios need to figure out a plan quickly. Their current syndication model won't hit the top or middle of the market for much longer. How much money will remain in the bottom third stands to be seen.
post #16 of 85
Quote:
Originally Posted by rabber View Post

... However, the third reason is one that should and probably does concern the studios. If the price to rent is inexpensive enough and I watch only a few series, then it may be worthwhile to kill the cable subscription. This would take significant revenue away from the studios. This is at least a couple of years away and I am still not sure how this will be economical for me.

Several friends of mine, myself included, have not had a cable/satellite subscription for over 3 years. I only spend 1/2 an hour a day in front of my TV so I only watch Apple TV shows and movies or DVD and Blue Rays. I don't care for TV shows anymore, they're a waste of time.
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post #17 of 85
Quote:
Originally Posted by aaarrrgggh View Post

This is the definition of a disruptive technology, and the studios need to figure out a plan quickly. Their current syndication model won't hit the top or middle of the market for much longer. How much money will remain in the bottom third stands to be seen.

You got it.

These guys - Bewkes included - are dying a slow death, and they just don't want to see it coming.

Even though inexcusable, it's understandable.
post #18 of 85
Quote:
Originally Posted by danielchow View Post

i beg to differ. it is NOT free. myself like nearly all other television viewers pay for cable or satellite, and nearly all the programs are peppered with commercials. whether the television is on or off, we are paying for whatever programs that are sent to our reception box. again, it is NOT free.

You do realize that not everyone pays for their TV viewing content, right? There is such a thing as HD over antenna and it has all the local channels for FREE, now albeit with commercials but it's still Free to me. Now, let's not get into Hulu Free versus Hulu Plus.

I still say Apple should go the route of charging a $10 a month like Netflix and stream whatever you want, it would make a lot of customers happy and the top Studio Execs since it's a constant revenue.

I still firmly believe in owning my music but for shows, a rental model works best...at the right price otherwise people will torrent the stuff. When will they ever learn. That's the problem when you have prestige grad-school Execs that have no in-touch with reality, everything is about the numbers without looking at the long term goals.
post #19 of 85
please disperse this little econ 101 tidbit to tv execs:

Demand: STILL sloping downwards.
post #20 of 85
News Flash: TV And Movie execs ignore increased revenue of Music industry. Quoting Alfred E. Newman one insider was heard muttering "What, me worry?"

The wheels on the bus go round and round...
post #21 of 85
Frankly, there is damn little network TV I care about. And I just hooked up an HD antenna to my Tivo S3 and the network (and 5 PBS stations with their sub channels - yes, I am lucky!) come down just fine. In fact, even though I have read for years how over compressed CATV is, now that i have finally been motivated enough to hook an HD antenna up, the difference is simply stunning. The cable co's should be ashamed in calling their low bit rate over-compressed crap HD

And Comcast buying NBC? The suckiest of the networks? Oooh, big threat in withholding content there, Comcast

And let them try to block ipTV - screwing with TV is the one thing that might get the average otherwise apaetic American out to vote!

Sad but true. That made me flashback to "PC: You have come to a sad realization - confirm or deny?"
post #22 of 85
What's killing sales is the studios charging more to buy a season via iTunes than it costs to buy the season on DVD.

The digital episodes require no manufacturing, no packaging, no shipping. Apple looks after the transaction details and hosting, we look after the delivery with an internet connection that we pay for, yet the studios want us to pay more than the physical product? All the studios need to do is give Apple the data and wait for the money to roll in. If anything the downloads should be cheaper!

THIS is killing sales.

I'm not even sure that I'd rent a show for 99 cents!

The studios are like the record companies... Clueless... And greedy.
post #23 of 85
Ya know, maybe Apple can entice these folks by offering to place TV quality ads in with their TV episodes and a part of that ad revenue would go to the studios. I don't mind so much in watching ads. The movie theaters place a lot of ads in before you actually watch the movie yet people still seem to go out to see the movies.
post #24 of 85
$1.99 for a "30" minute sitcom that is actually 22 minutes is a little steep, don't you think....
post #25 of 85
In this era of "cost centers", every episode must stand on its own.
post #26 of 85
I agree. It's too high. Between the web, Netflix, and Hulu, 99 cents for one lousy show is Way Too High.

That's what he's saying, right? I didn't read past the headline.
post #27 of 85
Quote:
Originally Posted by davesmall View Post

Bewkes elevator doesn't go all the way to the top floor.

99 cents is too expensive for something you can get free with your DVR.

Correction. Something you've already bought and paid for with your subscription to Comcast (or another ISP).

Apple is offering content providers extra income from viewers who forgot to set their DVR or discovered the show after it had run. This is a layer of extra income and not competition.

You might to rethink your post.

You paid for or are renting a PVR. You pay for your cable/sat that is used to pay for these huge fees they pay to get access to these channels. Then you also have commercials within these shows.

None of it is free. Dont be so myopic to think everyone could stop paying for cable, just get free downloads and the cable/sat would still be able to pay the networks for access to their content and that advertisers would still be willing to pay the same for content that could have the ads easily removed.

Where exactly do you think the profits wil come from? An á la carte service for a rented episode. No! They depend on the bulk payments from cable and sat companies. You can through out all the ifs and buts about people renting x-many shows but that is at the risk of destroying large guaranteed lump payments. No one here would be that foolish with their own finances. or maybe you would be. Who here takes their paycheck and buys lottery tickets with most of it?

What the Warner CEO is exactly what Ive been saying is the issue here and that isnt likely to change.

PS: Why do people keep comparing these services as being identical when they are very different in every expect for the fact they contain the same content. One is sent at the time of broadcast, the other can be rented at will after the first day. One is limited to your PVR, the other can be sent to you AppleTV, iDevice, PC with iTunes and moved between them with ease. If I am going on a flight and the inflight entertainment is crap (as it usually is, not to mention the horrible displays they use on seat backs) Id be happy to rent some TVs shows to pass the time. Its been awhile, but I purchased them in the past specifically for this task. Who here is going to argue that taking your HDTV and PVR on a trip is viable or that its so easy for the average person to hack your PVR, connect it to a network, convert the MPEG-2 to MPEG-4 and then add to iTunes and sync to iDevice. Get real!
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post #28 of 85
Quote:
Originally Posted by maclvr03 View Post

$1.99 for a "30" minute sitcom that is actually 22 minutes is a little steep, don't you think....

That is about what I pay for a movie at the theater, per person. Not to mention I have to buy their expensive yet crappy food, and then I cant be on my couch or in my bed. And then all those other people around me, and it starting at a time that may not be ideal for me. Then there is the inability to pause it when I need to relieve myself during the 3rd act because that 32oz soda and salty popcorn has gone right through me.

Who in there right mind would pay for that kind of hassle when they can just wait 6-12 months for it to hit RedBox where its $1 for the disc.

See what I did there? There are reasons why a service might be beneficial or not beneficial, but not finding value in it yourself isnt a reason to discount its value as a whole.
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post #29 of 85
Apple is trying to make these people money and some are balking. That makes me sick!!
And of course if others hop on board with Apple and they start making bank, then the shareholders of the networks holding back are going to demand they ride the APPLE gravy train.
And let's not forget those shows are paid by advertisers!! once they run the first time the freaking show has been paid for. So when a rerun happens that show has been paid for and is fair game. And I'm not stupid, syndication and them freaking box sets bring in a lot of cash but so what. 99cents is the magic number and millions of people will rent those shows and rent those show and buy the box stuff. And watch it when it gets syndicated.
post #30 of 85
Quote:
Originally Posted by johnfrombeyond View Post

People don't want to own TV shows, they would rather rent and not deal with storage etc. Networks are greedy, they don't understand elastic demand. Lower the price for rentals = more revenues.

How many movies have you rented the last 5 years? How many have you purchased?

Case closed...

Some people want to own some shows. I have a girlfriend who bought all of the Friends DVDs. I have stuff like Futurama and The Night Stalker and The Twilight Zone. I'll be watching some of those episodes many times. My brother, on the other hand, doesn't own any TV shows on DVD.

And my ratio of movies I purchase to movies I rent is probably 10:1 or more. Different people want different things.

So just because the economics from YOUR standpoint are obvious, remember that you're not the only consumer these networks have. It will help you to calm down a little and realize those guys might have a point. They might still be wrong, but they have a point.

The problem is that your statement "Lower the price for rentals = more revenues" may or may not in fact be true. Lowering the price will almost certainly equal more acquisition of product. But if the new price is 1/2, then it has to result in double the acquisition for revenues to be more. If the new price is 1/3, it has to triple acquisition. The networks don't think it will. Judging from the pathetic quality of most of the TV shows out there, they may actually be right. And if rentals increase at the expense of viewership, then they can't sell advertising for the same rate, so the increased rentals have to make up that difference as well.

Steve Jobs knows he's fighting a very entrenched business model. I think it could well benefit from being shaken up, and I hope he's the guy who ends up being right. But the networks do some extremely shrewd calculations.
post #31 of 85
So the interesting question that no one has discussed yet is how much Netflix and Amazon are paying the non-Apple networks per video to get the expanded access they have.
post #32 of 85
Is there any question about why people are using bittorrent to watch instead of paying $1.99? And it's Apple that's got the pricing not quite right, eh?
post #33 of 85
Quote:
Originally Posted by AppleInsider View Post

"How can you justify renting your first-run TV shows individually for 99 cents an episode and thereby jeopardize the sale of the same shows as a series to branded networks that pay hundreds of millions of dollars and make those shows available to loyal viewers for free?"

1. those networks are all pretty much cable channels which means that we have to pay to get them.

2. Lets really look at how many shows go syndie these days. Not many due to the serial nature of so many shows. Syndie deals go to shows that have great to super ratings that can be viewed in any order, even leaving out episodes that might be 'controversial' etc. So pretty much the Law and Order shows, some cheesy sci-fi stuff that was picked up straight into Syndie for something like SyFy and that's pretty much it.
3. don't all those box sets hurt potential deals.

Quote:
News Corp President Chase Carey views Fox's participation as a "short-term test."

Much better attitude. Cause then they will see that they are getting tons of rentals and zero change on the ratings since only 25k folks are counted anyway. So it's win-win. Just like it was with the day after purchasing

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post #34 of 85
They said the same thing about piracy. \

Quote:
Originally Posted by davesmall View Post

99 cents is too expensive for something you can get free with your DVR.

What is this? The early 20th century...

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post #35 of 85
These guys have their heads in the sand. Do they really get more than $0.99 for each viewer that watches every show on TV? I seriously doubt that. They will make more money renting shows in the long run.

The old model is dying. Dead already in my mind as I don't watch TV at all. All my show watching is done through Netflix streaming, Netfilx DVD rentals and soon to be TV rentals through iTunes. If I can't see a show in one of those ways, then I just don't see it. I WILL NOT watch commercials or pay exorbitant cable fees. Those days are long gone.
post #36 of 85
Quote:
Originally Posted by johnfrombeyond View Post

How many movies have you rented the last 5 years? How many have you purchased?

Case closed...

Rented about 100, purchased around 400. What was your point?
post #37 of 85
I think Bewkes' remarks make it clear that he sees his customers as being "branded networks" rather than viewers, which might explain why so much of his product blows.
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post #38 of 85
Quote:
Originally Posted by AppleInsider View Post


NBC Universal exec Jeff Zucker believes the pricing "devalues" his company's content. "We do not think 99 cents is the right price point," Zucker said.

Hmmm - BitTorrent devalues your content even more....
post #39 of 85
Quote:
Originally Posted by johnfrombeyond View Post

How many movies have you rented the last 5 years? How many have you purchased?

Case closed...

Last year : about 50 rentals and a similar amount in purchases. I actually like to have a physical support - yeah very 80s of me. But think about it this way : one day when you're old and grey and you handle your movie collection to your kid, what would you rather give - the boxes with the DVD/BR, an external Harddisk or a piece pf paper saying : My login credentials....
post #40 of 85
Quote:
Originally Posted by yensid98 View Post

These guys have their heads in the sand. Do they really get more than $0.99 for each viewer that watches every show on TV? I seriously doubt that. They will make more money renting shows in the long run.

The old model is dying. Dead already in my mind as I don't watch TV at all. All my show watching is done through Netflix streaming, Netfilx DVD rentals and soon to be TV rentals through iTunes. If I can't see a show in one of those ways, then I just don't see it. I WILL NOT watch commercials or pay exorbitant cable fees. Those days are long gone.

You could be my long lost twin. Not only won't I watch commercials, but I can't even be bothered to fast forward them. Repeat: There is nothing so good on tv to make me watch commercials or even be bothered to pick up the remote. Case closed! Well, maybe the world series or some such thing but the way Fox broadcasts it (beyonfpd horrible), I may even extend my rule to it.
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