Apple move to sell US TV shows for $1

Apple move to sell US TV shows for $1
By Kenneth Li in New York
Copyright The Financial Times Limited 2010
Published: February 10 2010 23:00 | Last updated: February 10 2010 23:00
http://www.ft.com/cms/s/0/14856f08-168e-11df-bf44-00144feab49a.html


Apple could begin selling US television shows for $1, half of its charge on its iTunes digital media store, when the computer maker’s iPad tablet computer hits the stores.

The test, expected to coincide with the April consumer debut of the iPad, will offer some shows at the lower price as a way to test whether reducing the cost of video programming will ignite sales, people familiar with the discussions said.

Some television networks agreed to the lower prices after months of negotiations, and having initially resisted Apple’s push. Media executives are under pressure from declining DVD sales and cut-rate rental services such as Redbox, that offer rental DVDs for $1.

It is not yet clear which or how many of the US free-to-air and pay-television networks have agreed to the lower pricing. Some media executives said they have not been approached with the new prices.

Apple declined to comment.

“If you move five times the volume [of sales] at half the price, it’s a good idea,” one digital media strategist at a big US media conglomerate said. “The argument for holding the line gets bad quickly.”

One executive said iTunes’s 120m active customer accounts with credit cards on file provides a ripe ground for experimenting with changing the economics of digital media.

“It’s a good time to do it,” another senior media executive said.

Since iPad was unveiled in January, Apple has focused on improving its business of selling TV shows, said one media executive briefed on the talks.

The computer maker has not given up on earlier discussions with some potential partners about creating a “best of TV” subscription service for $30 a month that media companies fear would destroy traditional distribution relationships.

Those relationships with US pay-TV services such as cable and satellite TV companies reaped $25.3bn in fees in 2009, according to estimates by SNL Kagan, a data company.

Apple executives have been careful to avoid linking new TV services to its Apple TV device, a set-top box which connects to a television and is seen as a threat to traditional pay-television services, said media executives briefed on the talks last year.

That is partly why discussions so far have focused on iTunes’s $1.99 TV shows in standard-definition formats that would work on the iPad, rather than the higher resolution $2.99 TV shows in high-definition format that would fill up a large screen television.