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BoSacks Speaks Out: What do you do with the perverbial 800 pound gorilla, who is mightily shaking your tree and starting to take all your fruit? Do you negotiate, capitulate or pretend it is not there and hope that it just goes away. This is a serious problem for all of media. This article is a reaction about the new version of Apple TV, which is a revised Apple process to sell TV shows for 99 cents.
The best quote from the article I think is the following observation:
“This is a plan that is designed to sell iPads, iPods and iPhones. It is not a plan that is designed to appropriately value content.”
And that, I think, is great wisdom. Steve Jobs doesn’t care about magazines, TV, books or any other content provider. He cares about selling hardware and making a profit in the transaction of getting someone else’s content into his hardware. This is a formidable new business plan. In the old days when you bought a Sony TV, your arrangement and association with Sony ended when the TV got home. They didn’t have a plan to make 30% on every show you watched.
Not so Mr. Jobs. He not only has a plan, he is succeeding in its implementation. Sell the hardware and make sure you get a profit on its use. From a publisher’s perspective I think it is rather diabolical. He has created a business jig-saw with interrelated and profitable components.
We have all heard about Time Inc.’s battle for the right of subscription continuity. We have all read of book publishers being dictated to by Mr. Jobs about the price and value of their products. And now it is TV’s turn. The world is,indeed, turned upside down when a content creator has to bandy business plans with a widget-maker. But he seems to have the sorcerer’s stones, and that the powers of Disney, Time, and all the other magicians cannot deflect his ascendancy to attack and control their profitability.
“It is a paradox that every dictator has climbed to power on the ladder of free speech. Immediately on attaining power each dictator has suppressed all free speech except his own.”
Herbert Hoover (American President, 1874-1964)
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Media Congloms Fear Losing Control to Apple
By Jennifer Saba and Yinka Adegoke
NEW YORK
http://www.reuters.com/article/idUSTRE6807V620100902
(Reuters) – Apple Inc introduced a new version of Apple TV on Wednesday with shows from just two networks, underscoring its struggles to win over a media industry worried about losing control over the pricing of its programs.
The new $99 Apple TV will allow users to rent TV shows such as “Glee” and “Modern Family” for 99 cents thanks to partnerships with Walt Disney Co’s ABC and News Corp’s Fox.
But several other media conglomerates, including General Electric Co’s NBC Universal, CBS Corp, Viacom Inc, are notably absent from the roster.
Chief among concerns in the entertainment industry are the terms Apple is seeking for rental deals, according to several media executives familiar with the matter. In its discussions, they said, Apple is asking for deals that would allow it to keep 30 percent of the rental fee.
That revenue-sharing breakdown is similar to agreements Apple has struck for TV show and movie downloads from iTunes. But executives point out that iTunes downloads are priced at $1.99 to $2.99 and say they are hesitant to replicate those deals at prices of 99 cents.
“Steve Jobs’ thing is if we lower the price point we’ll sell more stuff,” said one media executive close to the talks.
Another said: “This is a plan that is designed to sell iPads, iPods and iPhones. It is not a plan that is designed to appropriately value content.”
Still, analysts believe other media companies might feel pressured to strike deals if the 99-cent rental proves popular with consumers. What is more, Apple co-founder Steve Jobs has been proved right before in forcing through business models for media companies, in particular with the music business.
As for the media companies, they worry they could find themselves in the same company as the book and music industries struggling to cope with a downward spiral on pricing.
Evercore analyst Alan Gould, in a note, wrote: “Getting the consumer used to a 99 cent price for a TV show (rental or sale) and further empowering Apple as the ’800 pound gorilla’… is unwise.”
Another industry-watcher, Larry Haverty, a Gabelli funds portfolio manager who owns media stocks, said even the current download deals on iTunes have likely failed to significantly help the bottom line for entertainment companies.
“My guess is that the revenue streams from the existing $1.99 downloads aren’t particularly significant,” said Haverty.
Viacom, CBS and NBC declined to comment.
When it comes to 99 cent rentals, another major sticking point is that broadcasters and producers worry the rentals will further undermine DVD sales. In the past, they have made millions of dollars licensing entire series and packaging them into DVD sets.
“We don’t think of TV as an episodic pay-per-view model which is what 99 cents rental is,” one of the media executives said, who spoke on the condition of anonymity because of the sensitivity of talks with Apple. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
