What has Apple done for TV?

Ten years ago Steve Jobs realised that one way to sell more iPods was to launch a simple online storefront that allowed consumers to buy songs with a simple click. Five years ago the Cupertino-based company decided to try this same trick with TV shows and movies.

In those five years, Apple has sold almost 400 million episodes. But more importantly, it has become the dominant player in the download-to-own world,  an increasingly important part of the puzzle for international TV producers and distributors.

“They’ve made the electronic sell through and download-to-own businesses mass market. Maybe not as mass market as we’d like but they have a massive footprint of devices,” says Jason Binks, VP, digital and new media at ITV Studios, the production and distribution arm of the UK commercial broadcaster.

Apple originally set up shop in the US in 2005 and has subsequently launched its video store in Canada, the UK, France, Germany and Australia and is eyeing a full global roll out.  

In the States, the Apple store has content from all of the major studios as well as the likes of Discovery and MTV. Internationally, US content is mixed with local hits. For instance, in Australia there are local productions such as Nine Network’s Underbelly and Sea Patrol, while in Canada you can download CTV’s Corner Gas and CBC’s Being Erica. In Germany, some of the most popular shows include ProSieben’s Crashpoint and ZDF’s Die Deutsche and in France it’s Canal+’s Mafiosa and France 2’s Apocalypse.

However, there are question marks about the service and particularly Apple’s dominance and its effect on pricing. The major record labels found that once they accepted Jobs’ terms to sell music, they were under his control regarding pricing. TV distributors are finding similar problems.
“We’re paying for the legacy of control that Apple had with the record industry,” says ITV’s Binks. “The biggest problem with Apple is that because they’re so dominant and lock people in to the Apple family, it’s hard to [have any influence],” he adds.

NBC Universal removed a number of its hit shows from the service in 2008 including The Office and 30 Rock as well as programming from its Spanish-language broadcaster Telemundo because it wanted the ability to raise prices. This showdown lead to some flexibility, which allowed distributors to charge more for shows produced in high definition and also allowed them to change the price depending on the length of the show giving the ability to charge more for an hour drama than an 11 minute kids episode.

“They’ve had to be much more flexible on pricing because the big studios have forced them to be. In the past top execs were expected to doth their caps to Jobs, but this may no longer be the case,” says one senior digital executive.

BBC Worldwide found this recently when it wanted to raise the price of its Kenneth Branagh-fronted Sweden-originated drama Wallander from £1.89 to £2.99. “There is some flexibility in pricing [now], we can charge more for some content,” says digital director Simon Danker.

 But Apple has also recently stated that it wants to lower the price of episodes and announced that it was in talks with content providers including CBS. Kate Winn, director of home entertainment at international distributor AETN, can understand Apple’s desire to control pricing. “They’re the face to the consumer, so I can understand why they want consistency,” she says.

 AETN has stores in the US, Canada and the UK and is looking at Germany. One of the challenges that the company finds is that it often sells series such as Ice Road Truckers and Gangland to free-to-air broadcasters around the world. “It gets very complicated because shows might not be on our channel internationally,” says Winn.

 The company is also in talks with Apple to see if it can “double map” certain shows, allowing them to be in AETN branded store as well as their free-to-air broadcast partner’s store. This could also apply to shows that it has coproduced but doesn’t have digital rights to such as Patrick Swayze-fronted drama The Beast and Benjamin Bratt-fronted scripted series The Cleaner. Both shows aired on the A&E network in the States, but The Beast is produced by Sony Pictures and The Cleaner is produced by CBS Studios.

 Despite this, storefronts and channels become less important in the digital world, where viewers primarily search for the shows that they are interested in.

 Phillip O’Ferrall, senior VP, digital media, MTV Networks International, says that it’s less genre focused than traditional TV and that shows including The Hills and South Park are most popular. “It’s not specific to a genre, it’s all about the show,” he says.

One of the ways that Apple is expected to grow the business in the future is by introducing subscription services, allowing customers to download a certain number of episodes per month for a flat fee. In the United States, the price that Apple has been seeking is $30 per month and it is currently in talks with the studios and the networks.

MTV’s O’Ferrall thinks that subscription services are going to the future of the download to own market. “In future I hope we’ll see subscription packages,” he says.

However, there are concerns that such a move would be a direct threat to the powerful cable and satellite providers.

One thing that all of the distributors that TBI spoke to agree on is that there needs to some element of competition in the market to prevent the TV business making some of the same mistakes as the record industry.

“To some extent Apple is the only game in town and we’d like lots of routes to market,” says BBC Worldwide’s Danker.

ITV’s Binks agrees: “The problem is that there’s no competition. Amazon launched its music store in the US but hasn’t got behind video. I hope they don’t drag their feet as they did in music.”

In the UK, major supermarket chain Tesco launched a video download store last year and has a couple of major players on board and inked a deal with Warner Bros to sell series including The West Wing and Smallville. But its content offering isn’t as comprehensive as Apple’s and there are major issues with pricing; eight episodes of the original Bugs Bunny cartoon are being sold for over £30. “More competition isn’t necessarily going to take market share away,” notes MTV’s O’Ferrall.

Apple will continue to roll out its video store across the world and will carry on adding content to these stores, both from the major players as well as local, independent producers and distributors. It will likely redefine the sale and subscription of video via its iPad (see box), which was launched earlier this month, and will undoubtedly launch the next big thing – on Jobs’ timing, of course.

However, not everyone is convinced of Apple is good for the television industry. “iTunes is a loss leader to sell computers. I’m deeply suspicious about Apple,” says Dawn Airey, chief executive of RTL-owned UK broadcaster Five. TBI