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

Posted:
in iPod + iTunes + AppleTV edited January 2014
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."
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Comments

  • Reply 1 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.
  • Reply 2 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.
  • Reply 3 of 85
    MacProMacPro Posts: 19,251member
    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.
  • Reply 4 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.
  • Reply 5 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.
  • Reply 6 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.
  • Reply 7 of 85
    djrumpydjrumpy Posts: 1,116member
    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....
  • Reply 8 of 85
    more dinosaur media ready to lose out on something that could save their own butt.
  • Reply 9 of 85
    Quote:
    Originally Posted by speedxdesign View Post


    more dinosaur media ready to lose out on something that could save their own butt.



    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.
  • Reply 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.
  • Reply 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...
  • Reply 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.
  • Reply 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 doesn?t 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.
  • Reply 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.
  • Reply 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.
  • Reply 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.
  • Reply 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.
  • Reply 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.
  • Reply 19 of 85
    please disperse this little econ 101 tidbit to tv execs:



    Demand: STILL sloping downwards.
  • Reply 20 of 85
    docno42docno42 Posts: 3,515member
    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...
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