Prices for TV and movies are out to lunch, and it is very sad. This is a good step in the right direction, but we have a long way to go.
The math is easy to do. On average people watch 150 hours of TV a month. On average, a cable bill is 50 bucks. This is subsidized with commercials. This is where all the disagreements will come in. But triple the cost without subsidies seems very fair in my mind. So 1 dollar for 1 hour of TV from iTunes. Remember, a show like house is 45 minutes. So it should be 75 cents per episode. Anymore then that, and it doesn't add up.
My family watches (per member) about 60 hours of TV per month, usually a bit less. At that, we're include two hours every single night (some nights we watch more, some night less). These are "true" hours, meaning 3 "hour-long" shows, sans the hour of commercials (or slightly more) that would have been included in those shows' normal runs.
Yes, when we had DirecTV we had the TV going pretty much all the time, but this was "time filler", not truly watched content. For that, the monthly bill was $85. Not sure what you get for $50/month, but the local cable provider here advertises that as a "first six months" deal for their $100-120/month packages. We'll take the relative bargain of $85/month for DirecTV as the basis, though, to skew conservative.
If we bought all those 60 hours of television on iTunes, we'd be spending around 90*1.99 or $180/month. That's obviously a lot more than DirecTV was asking, and would require that everyone watch the same 60 hours of content. In truth, we have about 90 hours of content being watched between the lot of us, which ends up at $210/month.
But then, we look at the various shows we watch.
1. Kids' shows can just be watched on Hulu or NickJr. I know, I hate the ads too, but the quality of the streaming doesn't matter to them, nor the commercial breaks.
2. "Fluff" shows can also be watched on Hulu. These are shows where if we miss a week we don't really care. When watching these shows, we all generally have some other device (iPad or laptop or book) within easy reach to fill the 5 minutes or so of commercials.
3. Episodic shows where visual quality isn't critical also can be watched on Hulu. If we miss too many weeks we might catch the non-Huluable episodes on iTunes, or we might just watch what's there and fill in the gaps ourselves.
4. Half-hour shows ... well, those go to Hulu because the price-per-minute is twice as much as hour-longs
I suppose technically a really engrossing 30-minute show might warrant iTunes purchasing, but I haven't seen one of those in a long time.
That leaves pretty much nothing but "serious" shows for us to buy on iTunes. We spend about $20/month on iTunes shows. Leaves a good chunk of our former "entertainment budget" for use on things besides sitting in front of the TV (and also gives us a lot of flexibility to forego the TV episodes some months, etc).
In exchange, the 10 hour-longs we watch from iTunes are commercial-free, higher visual quality than 90% of what we got from DirecTV (and MUCH higher quality than we see in friends' houses who get cable), can be rewatched by everyone in the family, and can be watched on any screen we own inside or outside the house (from the 50" TV down to the iPads ... technically iPods/iPhones as well, but that's just masochistic unless traveling).
For 1/4 the cost, a significantly better experience? Makes sense to me. Would be a lot harder sale if so much of the "cable fluff" wasn't available streaming on Hulu et al, but as things stand it's a good deal.