Just weeks after Apple's video iPod was introduced to great skepticism (...who wants to download TV programs?), all the major studios are getting into this new business. The iPod was released with some primetime ABC shows available for download, but now CBS and NBC have announced plans to sell episodes of major shows for ninety-nine cents, bypassing the iTunes store and undercutting the ABC prices by half.
In the short term, this is a windfall for the studios. They get a one time revenue hit from the first airing of a show, and a bit more from reruns, but after that--nothing. Most shows never make it into syndication, and those that do don't always generate much additional cash.
So sticking the popular shows on a Web site and collecting a buck per download looks pretty good; you don't have to sell too many copies to start generating a significant stream of new "found" cash. Shows with a big fan base are going first, like "CSI" and "Law and Order."
I think a buck is a magic number. The shows are provided commercial-free, and the ability to watch it when you want, without commercials, is going to look pretty attractive to a lot of people. The studios win big with this, and they stand to make more, possibly, than from DVD sales.
Who are the losers? Advertisers have to be worried, as people suddenly have an alternative to "free" content. TV ads have become so long and so intrusive that paying a buck to watch your favorite show without ads could catch on quickly. And local TV stations that rely heavily on syndicated reruns may see ad revenue fizzle out as people decide to pay to watch instead.
Competition is a wonderful thing. Who would have predicted that a price war would break out this quickly over the cost of downloading TV shows? And who predicted even two years ago that all this would happen this quickly? It is another illustration of why it is dangerous to rely entirely on the past to predict where new economic development opportunities are coming from.
Updated 11/8/05:
Pixar Studios has announced that they have sold 125,000 short movies via the iTunes video store in the few weeks since it has opened. Steve Jobs, the CEO of Pixar, noted that the major obstacle to selling feature length movies is that "broadband is too slow in the United States." The emphasis is mine, but I find it interesting that Jobs qualified that statement; Pixar apparently does not see the same limitations in other countries.