Argument over 99c TV downloads: when will they learn?

According to this report in Variety, Apple wants to reduce the price of TV episode downloads from $1.99 to 99c. It seems, however, that the studios aren't too keen on the idea - one argument being that downloads would then be cheaper than DVDs and may impact on DVD sales.

Sometimes it seems we lurch from exciting new initiatives to reactionary fear of anything that shakes up the existing models. When, oh when, will content owners realise that:

1. Consumers can get anything for free anyway, so to compete with free you have to work on a low price/high volume model.

2. Consumers aren't stupid. They know that the costs of servicing a download transaction are far less than the costs of producing a DVD, packaging it, shipping it to retail outlets and absorbing unsold stock.

3. It's better to develop a wider customer base, perhaps spending less on the initial product but becoming lifetime customers of a franchise and potentially customers of related products and services including merchandising, than stake everything on them buying the DVD box set. Anyway, that's why there are extras and special packaging in box sets.

4. One of the great things that the internet allows is market testing, with the opportunity to produce and analyse different approaches based on the huge amount of measurable data available. Try it on a limited basis, and see how it pans out.

Apple, of course, while being right on this point, is being mischevious as usual. It wants to pull the strings but is inflexible itself when it comes to differential pricing. As I've said before, the single price approach was right when the market needed simplicity and clarity to encourage new customers, but now a more sophisticated approach is needed.

Sort yourselves out, all of you...



I've been reading the news on this topic with a similar amount of wearisome head-shaking. There's two additional things at work here, by my reckoning:

1. The download market is a *lot* less price sensitive than people would have you believe. £1 vs £2? I really don't care and neither does anyone else when it comes down to it. Certain bloggers might make a bit of a fuss over a few cents, but the public at large will buy it anyway.

2. The whole retail industry (on and offline) is missing the point when it comes to digital entertainment. The cost and pricing structure that iTunes has standardised was built on the fact that iTunes is a value add to a hardware business, not a stand-alone business. Once retailers start treating their digital attempts as a way to drive other, more profitable areas of their business, there'll be less bellyaching about iTunes' perfectly understandable pricing policy.

And that, ladies and gentlemen, is my two cents.

Dan :: October 1, 2007 10:27 PM

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