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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.