Apple may sell standard-definition TV shows on iTunes for a dollar, according to Financial Times, in a move associated with the imminent launch of the iPad tablet PC. Along with recent suggestions that Apple may be flexible about iPad prices, the news suggests that Apple is very much feeling out how much to charge for all aspects of its new portable-media endeavor. E-book publishers may benefit substantially from the coming competition between Apple's iBooks online store for the iPad and Amazon.com's e-book store for its Kindle e-reader mobile devices.
Apple may soon sell television shows through iTunes for a dollar per
standard-definition episode, according to
Financial
Times, which reported on Feb. 10 that the company had been successful in
its talks with unnamed studios. The deal represents another of Apple's attempts
to corral content creators under its banner before the launch of the iPad
tablet PC at some point within the next two months.
If the $1 price is confirmed, it's also a reflection of how flexible pricing
related to the iPad and its associated content remains even as the device's
release date draws closer. Earlier in February,
Credit
Suisse analyst Bill Shope came away from supposed talks with Apple executives
to suggest that the company would be "nimble" in adjusting its price
point for the iPad; if customers decline to flock to the device upon its release,
then the cost may drop.
A
virtual teardown of an iPad by research company iSuppli found that the
device could generate a sizable profit for Apple, with the midrange 32GB iPad
with a 3G connection costing $287.15 to build and retailing for $729.
But an even larger long-term revenue stream for Apple could come from
providing content for the iPad through its iTunes store. Normally, television
shows bought through iTunes cost $2 for SD and $3 for high definition; the
combination of a lowered price and a larger iPad screen for watching media
could drive that segment to higher sales.
Apple has also been busily negotiating with publishers to port their content
to the device. Earlier in February,
Apple
CEO Steve Jobs reportedly talked with executives from The New York Times about
the iPad's functionality and opportunities it represents for traditional
publishing.
Publishers have already been putting pressure on Amazon.com, Apple's
competitor in the e-reader space, to raise the prices of e-books offered on the
online retailer's Kindle store. Starting with Macmillan, which wanted to raise
the price on its popular titles such as "Wolf Hall" to between $12.99
and $14.99 from Amazon's preferred $9.99, a number of publishers have been
attempting to gain a higher price point for their products.
"It's important to note we are not looking to the agency model as a way
to make more money on e-books," David Young, chairman and CEO
of Hachette Book Group, wrote in a memo posted on the media blog Mediabistro on
Feb. 5. "We're willing to accept lower return for e-book sales as we
control the value of our product-books, and content in general. We're taking
the long view on e-book pricing, and this new model helps protect the long-term
viability of the book marketplace."
Once the iPad is released, the potential for increased competition between
it and the Kindle may only accelerate the pace of deals with publishers.
According to a Feb. 8 article in The New York Times,
publishers have
already indicated that Apple would offer 70 percent of e-books' consumer
price as their revenue share, and Amazon.com may match that deal. Amazon.com
also acknowledged, specifically in the Macmillan case, that it would eventually
need to accede to publishers' requests for higher price points.
Although negotiations with movie and television studios have been less
high-profile, the dollar-per-episode news implies that negotiations between
Apple and those entities are also proceeding apace.
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