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.
Let’s 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, that’s $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 isn’t the case — iTunes (Apple) gets a cut.
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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, I’m 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 hasn’t been and still isn’t 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 isn’t 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 isn’t the Internet. It’s competition from cable networks (this also includes viewers who have satellite rather than cable).