iTunes doomed!

Roughly Drafted has a marvellous piece on the latest nonsense about video downloads. It quotes the geniuses at Forrester thusly:

“Television and cable networks will shift the bulk of paid downloading to ad-supported streams where they have control of ads and effective audience measurement.” McQuivey wrote. “The movie studios, whose content only makes up a fraction of today’s paid downloads, will put their weight behind subscription models that imitate premium cable channel services.”

This is so stupid it hurts the Macalope’s furry head.

Forrester’s fallacy is in not realizing that iTunes downloads are not a replacement for broadcast or cable television.

They’re a replacement for DVD sales.

Yes, iTunes downloads are different in that you don’t have to wait months for the DVDs to ship and they don’t feature the extras the DVDs do. But they are alike in that you can time-shift your viewing, you can repeat your viewing as often as you like, they’re portable to a variety of devices (albeit Apple-only except for iTunes on Windows) and, most importantly, there is no advertising.

It’s as if Forrester doesn’t know that people go to Target every day and buy DVDs of TV shows and movies.

Ad-supported content online is the replacement for broadcast and cable television and these two things are not the same.

It seems like every year some brilliant think-tank issues a bone-headed report that says ad-supported X will replace its for-fee equivalent.

And it never happens.

Because people hate ads.

  • John Schank:

    Hi there, Actually, iTunes MIGHT replace cable TV. Consider: I pay $60/month for cable TV. At current iTunes prices, thats about a season pass and a half per month. So if I watch less than 18 shows regularly in year. I come out ahead by cancelling cable. AND I get rid of ads and all that. I’ve been very seriously considering doing this, as TV shows are tending to suck more, and as I get tired of skipping commercials.

  • i think you’re right that the video on the iTunes store is meant to replace DVD sales and not as a replacement for broadcast or cable TV. but only mostly.

    becuase think about TV shows for a minute. yes, it’s like buying a DVD for all the reasons you mentioned, but in my experience, the TV shows on iTunes are, in users’ minds, a replacement for broadcast and cable TV. i don’t know many people (anyone really) who’s bought a back catalog of a season of TV shows on iTunes, but i know a ton of people who’ve, say, missed an episode or 3 or 5 of the Office or Lost, and then bought it on iTunes to catch up. they might even watch it again and again. but they buy them instead of watching the broadcast. i know my experience is limited, and i’m sure there are plenty of people who do buy TV shows on iTunes instead of buying the DVDs. but if the networks started offering on-demand, high quality, ad-supported streams of TV shows, new episodes being made available at the same time they’re currently made available on iTunes, i wouldn’t be surprised to see iTunes’ TV show downloads go down because those people who use it as a catch up (i think there are a lot) would go the free route. yes ads suck, but people are often willing to put up with them in a limited manner.

    the high-quality is the big issue though. right now nbc and abc offer quite a few ondemand adsupported shows on their websites, but you have to watch in a tiny box and they hang up sometimes.

    with movies i think it’s unequivocal and you’re right. it replaces DVD sales of movies, not cable on-demand or rentals even, because of the cost. but with TV shows i think the line is a lot less clear.

  • John Muir:

    Good to see the Macalope is a fellow Roughly Drafted reader. Always insightful commentaries, with the occasional well aimed shot of invective once the reasons are complete.

  • Dave:

    Typo alert: “fallicy” should be “fallacy”.

  • Gary Patterson:

    Analysts who claim that a free version of a movie, with advertising included, is going to be more popular than a paid version with no advertising just don’t understand what movies are about.

    Think of the first time you watched Psycho. The woman’s in the shower and the camera creeps in. You know something terrible is about to happen. The music swells, and you’re on the edge of your seat. Suddenly the curtain is ripped back and…

    You’re in a carpark, and Crazy Joe is yelling “You’ll go psycho when you see our prices! Whee whee whee!” (mimes stabbing motions) “Crazy Joe! Where we’re just nuts for customers like you!”

    … and you see Vivian Leigh screaming, the knife flashes down and you just don’t care anymore. The moment’s gone, the dramatic tension lost.

    That’s the world these analysts believe is better. The world where money trumps all, even the experience being paid for, where people will slavishly go for the cheapest option rather than the one they might want.

    Think of your favourite movie. Now think of it stuffed full of advertising. Now imagine what’ll happen if the revenue stream slows down – more ads in every feature!

    I’m sticking to buying DVDs. I’ll try Apple’s movie store if it ever comes near Australia. Free movies with advertising are too expensive for me.

  • mark:

    Errol D, you do realize that in the US, all the broadcast networks are streaming ad-supported shows the day after the show airs on broadcast. And those shows include Lost, Desperate Housewives, Grey’s Anatomy, Heroes, and the like. And yet those shows are still showing up in the top 10 or top 100 lists on iTunes. So yes, some people are going ad-supported, but many are still buying from iTunes. How do you explain that? Two reasons: iPod for easy on-the-go and AppleTV for easy large screen TV.

  • Mr. Blister:

    John Schank, if you, like me, get broadband services from your cable provider, then those bass tards have outsmarted you… When you cancel your tv service, they raise your broadband rates by 50%, cutting your savings in half.

    Seems like the cable companies are second only to cell providers in alienating customers with outrageous pricing schemes.

  • Kim Helliwell:

    Errol D:

    You can count me as one person who has bought back catalog of several shows: Battlestar Galactica, Lost, Commander in Chief, Kyle XY, Stargate (both of them…), House, Grey’s Anatomy.

    I’d buy ER and Smallville (season passes, at least) if they were available.

    I have season passes to about 6 shows right now.

    So I guess I’m one of their better customers.

    And yes: I hate the ads. $2.00 per show is a small price to pay to avoid them.

  • All the shows on iTunes are completely ad-free. Really. Large corporations with Steve Jobs as their largest shareholder would *never* stick ads at the beginning or end of, say, episodes of Mickey Mouse Clubhouse. At least they’re not in the middle of the show…

  • John C. Randolph:

    Did anything get announced at CES that actually matters?


  • Phil:

    I think iTunes is at least an optional service that competes with DVD sales, cable, and hire.
    The big difference is that with the shift to high end user generated content and sponsored content, it is the video podcast that makes iTunes a serious competitor.
    There is a big difference between TV and Hollywood and it coulb be that iTunes can “be” TV broadcast now.
    There may be some requrement for heaps more bandwidth before iTunes is looked at seriously as a competitor to DVD’s and HD DVD, but that will only take a handfull of years.
    No ads and DRM free content will sell, and sell big time.

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