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Old February 23 2009, 03:02 AM   #1
Temis the Vorta
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why iTunes doesn't matter

Every so often, somebody asks why being a hit on iTunes won't save a show. Finally I've found an article that gives some context of iTunes vs DVD sales vs live TV viewing in the grand scheme of things.

Letís say that a traditional TV broadcast network strives to have a $25 CPM for its commercial spots in prime time. In other words, it wants to sell its advertising at a rate of $25 per 1,000 people. Obviously scale matters, so in this 50,000 foot view example, if 10 million people watch a show, that means the network can sell each commercial spot for $250,000.


In a typical one hour show there are 16 minutes worth of commercials or 32 or so thirty second spots. By this simple 50,000 foot view, a show with 5 million viewers can sell each commercial for $125,000. Keep in mind, that with rare exception scripted shows with less than 5 million viewers on a broadcast network would get cancelled (though those same 5 million viewers on a cable network would make it a hit show!).


Because there is such a difference in scale, we can discount the price of commercial advertising down to even $100,000 per commercial for that show with 5 million viewers just to have a nice round number. With 32 commercial spots, it would generate around $3.2 million dollars in revenue.

If 25,000 downloaded a show from iTunes at $2.00 per download, thatís $50,000 in total revenue. Or one half of what the show would make for a single thirty second spot even at only 5 million viewers. And that assumes that all of the money goes back to the network, which of course isnít the case ó iTunes (Apple) gets a cut.

...

Live viewing is still the single biggest factor, both in terms of original airings and syndication potential. DVD revenues comes next, and then very far in the distance is online viewing. In two years things will likely be different, but perhaps not very much different. Until I see a more dramatic shift in things, Iím thinking it will be at least 5-10 years before the landscape looks very different when it comes to scripted television content.


The biggest threat to scripted content hasnít been and still isnít the Internet. The biggest threat to scripted content continues to be the much more inexpensive unscripted programming. Think American Idol, Dancing with the Stars and Survivor, but also Deal or No Deal, Supernanny and Wifes Swap.


Similarly, the Internet currently isnít the biggest threat to broadcast television (ABC, CBS, FOX, and NBC primarily) viewing. The biggest threat to the broadcast networks, and the number one cause of decreases in broadcast viewing isnít the Internet. Itís competition from cable networks (this also includes viewers who have satellite rather than cable).
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Old February 23 2009, 03:26 AM   #2
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Re: why iTunes doesn't matter

Ah, right. Cool.
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Old February 23 2009, 08:11 AM   #3
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Re: why iTunes doesn't matter

Well, it's really just economies of scale - which is why, I imagine anyway, the Stargate DVDs are making money and that they are trying to pump out more of them.

I'd be curious to see how much money Whedon's Doctor Horrible made over the summer. He's probably one of the few people who could get much more than 25,000 people to pay for any content that he produces so I'm sure he made money out of the endeavor.
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Old February 23 2009, 10:49 AM   #4
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Re: why iTunes doesn't matter

firehawk12 wrote: View Post
Well, it's really just economies of scale - which is why, I imagine anyway, the Stargate DVDs are making money and that they are trying to pump out more of them.

I'd be curious to see how much money Whedon's Doctor Horrible made over the summer. He's probably one of the few people who could get much more than 25,000 people to pay for any content that he produces so I'm sure he made money out of the endeavor.
I believe in an interview he said that the budget was $100,000 with people being paid for their time, and $200,000 with everyone being paid residuals and giving people a little extra for doing it, and they're well past making that back and going in to profit.
He did say the suits aren't lying when they say it's hard to monetise the net, but it can, and is being done, and they're lagging behind when they should be championing it.
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Old February 23 2009, 10:53 AM   #5
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Re: why iTunes doesn't matter

I don't know how easy it is to make money from purely internet based drama or comedy, but it seems possible to make money out of purely internet based television.

At least, Revision 3 seem able to do it.
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Old February 23 2009, 11:28 AM   #6
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Re: why iTunes doesn't matter

I'm sick of the ad based TV revenue model. How much does something like Battlestar Galactica cost per episode? What constitutes a decent profit, and how many people paying what price would it take?

Forcing every episode to be exactly 42 minutes, with set breaks to insert ads that try to burrow into your subconscious is ridiculous. Theoretically we're watching the ads to spend more money on the product that paid for the ads in the first place, so we're already paying extra money to watch commercials. I love capitalism and all, but marketing and sales people make me want to sign up for the nearest hardcore communist party sometimes.

I've taken to downloading episodes of all my scripted shows. What's even more ridiculous is if I want good resolution (720p) the likes of iTunes isn't there to sell it to me. I don't want to flip about on a DVR while some bean counter tries to calculate how big a discount the ad should sell for when people are viewing it on 8x fast forward.

Who knows, maybe as a TV pirate, and internet ad non-clicker, morons who are distracted by 'shiny' and buy this crap are subsidizing my viewing habits and I should be thankful. But then again, it looks to me as though my kind of programming is going extinct in favor of whatever requires the shortest attention span.

Or maybe it's just late and I'm rambling semi-cohrently because there's a strange smell in my apartment that I can't pinpoint and it's keeping me from sleeping.
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Old February 23 2009, 11:53 AM   #7
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Re: why iTunes doesn't matter

People are used to their TV not costing them anything, despite the fact that it does - it just gets added on at the checkout when they buy their groceries.

I doubt any model where people just pay for TV outright is ever going to be all that successful.

For the sake of accuracy, iTunes offers many shows in HD and has done since the launch of iTunes 8.
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Old February 23 2009, 12:33 PM   #8
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Re: why iTunes doesn't matter

Hermiod wrote: View Post
People are used to their TV not costing them anything, despite the fact that it does - it just gets added on at the checkout when they buy their groceries.

I doubt any model where people just pay for TV outright is ever going to be all that successful.
Well that's discounting the fact that people already do pay outright for TV, whether that's the likes of the BBC Licence fee, Premium subscription channels like HBO and Showtime. Or cable/satellite subscriptions in general, which are subsidised by advertising, but you still don't get for free.
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Old February 23 2009, 12:38 PM   #9
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Re: why iTunes doesn't matter

Bob The Skutter wrote: View Post
Well that's discounting the fact that people already do pay outright for TV, whether that's the likes of the BBC Licence fee, Premium subscription channels like HBO and Showtime. Or cable/satellite subscriptions in general, which are subsidised by advertising, but you still don't get for free.
The amount of money you pay per month for a Sky subscription is tiny compared to the vast amount of programming available.

It's only when you go premium (with things like Sky Movies and Sky Sports) that the broadcaster starts to see more of it.

Even then, a lot of people with more basic Sky or cable packages are cutting off those off in favour of Freeview.
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Old February 23 2009, 12:40 PM   #10
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Re: why iTunes doesn't matter

The BBC License Fee is more of a tax than a fee.
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Old February 23 2009, 12:42 PM   #11
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Re: why iTunes doesn't matter

Hermiod wrote: View Post
Bob The Skutter wrote: View Post
Well that's discounting the fact that people already do pay outright for TV, whether that's the likes of the BBC Licence fee, Premium subscription channels like HBO and Showtime. Or cable/satellite subscriptions in general, which are subsidised by advertising, but you still don't get for free.
The amount of money you pay per month for a Sky subscription is tiny compared to the vast amount of programming available.

It's only when you go premium (with things like Sky Movies and Sky Sports) that the broadcaster starts to see more of it.

Even then, a lot of people with more basic Sky or cable packages are cutting off those off in favour of Freeview.
But how much of Sky/Cable would people actually watch if they could pay on a channel by channel, or series subscription basis? I know when I had Sky there was only something like 5 shows I regularly watched on channels that we're part of Freeview or broadcasting free-to-air anyway.
If I could have subscribed on a channel by channel basis, I would have only had Sky One, FX, Sci-Fi and perhaps Living or Bravo.

Also, wasn't there just a report published that almost 50% of Virgin Media customers use VOD on a regular basis, plus there's services like BT Vision which are almost exclusively VOD, I think people would likely choose to subscribe to VOD services, over pay per show, or buy the full series releases on DVD.
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Old February 23 2009, 12:55 PM   #12
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Re: why iTunes doesn't matter

^Depends on what they mean by using video on demand. People with their XL package can watch it for free and a lot of the content is free anyway - particularly the iPlayer stuff.

If people had to pay on a channel by channel basis then they would be more selective, yes. I certainly wouldn't have Liverpool.tv in my selection given then choice.

As it stands, I have to pay for all of those channels in order to just get what I do watch - namely Sky Sports.
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Old February 23 2009, 02:02 PM   #13
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Re: why iTunes doesn't matter

Yeah, I guess the point is that for 40 bucks or whatever, you can pretty much get an unlimited amount of programming... whereas that same money could only get you a season of a show.
Now, if you only watch like one TV show because you're super pretentious and hate TV, that might work out for you.

Of course, now there's streaming on demand TV so I wonder how that plays a part... One channel in Canada runs a single ad between each segment online... and I imagine Hulu must do something similar.
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Old February 23 2009, 02:09 PM   #14
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Re: why iTunes doesn't matter

firehawk12 wrote: View Post
Of course, now there's streaming on demand TV so I wonder how that plays a part... One channel in Canada runs a single ad between each segment online... and I imagine Hulu must do something similar.
I don't know about Hulu as I am not American. I imagine there are a few ads here and there. BBC iPlayer does not have ads because it's paid for by the licence fee.

iPlayer offers a 7-day catch up service for virtually all BBC programming either via the Internet (DRM'ed download or Flash streaming) or through other services like Virgin Media cable.

On the other hand, if I buy an episode of a TV show from iTunes it's mine for as long as I keep a copy of the file. It's more akin to buying DVDs than timeshifting.

While I don't "hate" TV, I only watch a limited amount. I pay quite a lot for Sky (satellite) TV because in order to receive Sky Sports (and the Premier League football that goes with it) you have to subscribe to the rest.

It's not the price that puts me off, therefore, it's the decreasing amount of television made with my interests in mind.
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Old February 23 2009, 02:15 PM   #15
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Re: why iTunes doesn't matter

ITV and Channel 4 both have catch up services that run ads, ITV has 2 short ads between sections. I don't remember on Channel 4.
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