NBC Universal Unlikely to Join Apple's 99-Cent TV Show Rental Program

[err404]

Well NBC just made a deal with Netflix.

http://gizmodo.com/5646874/netflix-...kking-battlestar-galactica-to-watch-instantly

Next-day showings of this season's SNL, and up to last season of Office/30 Rock.

Something tells me they won't be getting $0.69/view from all the folks on the $8.99 Netflix plan. What a weird way to do business.... Devalue the content, my rump. I could easily see many folks renting more than 9 NBC/Universal shows/episodes per month from TV.

Plus this makes all the content available on TV anyhow.

B

While popular, SNL is not a primetime show. It's already in a lower tier for advertising charges, so there is nothing to devalue.
Also prior seasons of shows doesn't displace current season viewers, so the primetime broadcast airing is not devalued.

NBC experimented with primetime streaming a couple of years ago when they aired current seasons of Heroes and 30 Rock next day on Netflix. It failed to increase revenue and they pulled it the next year.

This talk about the Network execs "not getting it" is ridiculous. They have researched this extensively and come to a sound business decision in avoiding next day rentals. It sucks and I wish it wasn't so, but the truth is for primetime shows, they can not risk cannibalizing broadcast viewers.

 

[macfan881]

So 99 cents is to cheap but free is ok ? is NBC on crack?

 

[err404]

So 99 cents is to cheap but free is ok ? is NBC on crack?

What first run primetime content is being given away for free? The NBC/Netflix deal is very careful to avoid any content at risk of advertising devaluation.

A lot of shows are good candidates for a rental model, but first run primetime content is risky.

 

[Tilpots]

Zucker to Leave NBC Universal

Jeff Zucker, the President and Chief Executive Officer of NBC Universal, said Friday that he will step down as the head of the media giant when Comcast assumes control of NBC.

Funny how things work out, isn't it?

 

[alent1234]

So 99 cents is to cheap but free is ok ? is NBC on crack?

netflix pays them

the goal is not to make apple too powerful. going through netflix means you can still play it on the appleTV but you don't give control to apple and itunes

 

[err404]

the goal is not to make apple too powerful. going through netflix means you can still play it on the appleTV but you don't give control to apple and itunes

Their is no conspiracy to stop Apple. It's simple accounting (ok, it's complex accounting).
Maximizing the number of viewers who watch the live broadcast is critical to NBC's business model.
If TV rentals are successful and a large enough number of viewers (let's assume 4 million) stop watching the live broadcast and instead pay the $1 rental fee to Apple, the following would happen:
Apple cuts NBC a check for $2.8M (4M viewers x $.70)
NBC loses $3.5M from advertisers due to the shows drop in ratings. (this is due to complex rules on advertising pricing lowering the "value" of every remaining viewer)
Net result is a financial lose for NBC.
Rentals could be made profitable if done in conjuncture with a complete overhaul of ad pricing and ratings measurements, but that's a more long term and industry wide proposition.

 

[balamw]

What first run primetime content is being given away for free?

I can watch last night's episode of The Office on Hulu right now. I just can't do it on TV. Do you really think NBC's share of Hulu takes in $0.69 per view from the advertisers I have a hard time believing that.

So let Apple get the back catalog and rent that for $0.99/episode. I'm sure plenty of folks would watch Seinfeld or Cheers re-runs.

EDIT: I can also buy the same said episode for $1.99 from iTunes. I still think that more than twice as many people would rent than buy if it was made easy... So now I have lots of options. Get it "free" OTA or cable (advertisers pay, I assume <0.70/view), get it for "free" on Hulu (advertisers pay I assume <0.70/view), get it for "free" from the dark side of the 'net (no-additional revenue) OR I can get it for $1.99 ($1.40 for NBC/Universal) on iTunes or Amazon and watch it as many times as I want.

EDIT 2: Said 4 million viewers drop OTA/cable and watch on Hulu. Let's be generous and assume that they all sign up for Hulu+ at $9.99/month and watch only two shows per week. That works out to $1.25/show in revenue to Hulu. Doesn't sound too far from $0.99, does it.

B

 

[err404]

I can watch last night's episode of The Office on Hulu right now. I just can't do it on TV. Do you really think NBC's share of Hulu takes in $0.69 per view from the advertisers I have a hard time believing that.

I don't think that the networks take Hulu seriously. There are artificial road blocks that hinder Hulu's growth on TV or mobile markets. They block devices like the PS3 web browser and Flash enabled phones in favor of Hulu+ which requires a $10 monthly fee and includes LESS content on these platforms. Sure you could hook up a HTPC (I do), but most people wont. The end result is Hulu serves as little more then the Networks putting their toe in the water of digital distribution.

So let Apple get the back catalog and rent that for $0.99/episode. I'm sure plenty of folks would watch Seinfeld or Cheers re-runs.

B

^that is a good idea with very limited risk.

 

[err404]

EDIT 2: Said 4 million viewers drop OTA/cable and watch on Hulu. Let's be generous and assume that they all sign up for Hulu+ at $9.99/month and watch only two shows per week. That works out to $1.25/show in revenue to Hulu. Doesn't sound too far from $0.99, does it.

If you look at the numbers, the shows would be far more profitable if all users switched to rentals or Hulu+, but let's be realistic, that's not going to happen overnight. It's only in the hybrid scenarios where you have ~1/3 of users dropping broadcast where they get nailed and only for prime time shows.
Anything other then primetime isn't an issue.

 

[balamw]

I don't think that the networks take Hulu seriously.

But Hulu is the networks. (at least NBC/FOX/ABC).

I know at least two families that have given up cable and watch plenty of content on Hulu on their laptops, and the TVs are limited to DVD playback from NetFlix/Redbox.

ABC and Fox will both be able to tell which venture (Hulu) or Apple will ultimately make them more $.

Based simply on the data at hand: http://seattletimes.nwsource.com/ht...011517934_bthulufuture05.html?syndication=rss

One can extrapolate from that article that ~12 billion annual video streams is worth about $200 million. (903M streams in January 2009, $100M revenue by mid-year). That's a penny and a half per stream. I couldn't find current or even firm estimate of the number of Hulu users, but it seems like somewhere around 10 million i.e. a few % of the US population. http://informitv.com/news/2009/05/15/huluinhulaballoo/

Who's devaluing streaming TV again?

EDIT:

If you look at the numbers, the shows would be far more profitable if all users switched to rentals or Hulu+, but let's be realistic, that's not going to happen overnight. It's only in the hybrid scenarios where you have ~1/3 of users dropping broadcast where they get nailed and only for prime time shows.

Realistically TV rentals would first start taking people away from Hulu (as they are already techies), as well as some of the folks who leech of torrents. A $0.99 rental would provide 40x the current revenue (and most of the expenses would be from Apples part of the pie) from watching a show on Hulu per stream and infinitely more than someone who pays NBC nothing.

B

 

[err404]

...Who's devaluing streaming TV again?

It's not about the value of streaming. It the value of the broadcast space. That's the bread and butter for the networks

I just want to point out; I want AppleTV to succeed and am playing 'devils advocate' to better understand NBC's position.

I am a heavy user of Hulu. Given the artificial hindrances imposed on Hulu and it's content, I don't believe that the Network are serious about pushing it as mass market alternative to broadcast TV. In fact, I find that the service has gotten worse this year compared to last as many shows stopped adding new episodes, reduced to random clips or were dropped altogether.
They treat it as little more then an experiment targeted to reduce online torrents, while not significantly impacting broadcast airings. 10M total users is nothing compared to the 150M households viewing broadcast TV simultaneously every night. Those number simply aren't large enough to affect drastically compromise advertising rates.
Frankly the new AppleTV is unlikely to grow large enough either, but the networks not having control equals increased risk.

AppleTV targets everyone, not just techies. The techies are happy to continue the way they have and save the dollar. I have the original Apple TV and it's easy to use for anyone. A Tivo seems complicated next to one. The issue is the $3 price for HD shows. A simple to use, cost effective set top box is far more attractive to your average user then Hulu.

EDIT - Besides, all that really matters is how many broadcast viewers can NBC sacrifice before impacting the ratings enough to hurt ad dollars? It doesn't matter which service pushes them over the edge.

 

[balamw]

It's not about the value of streaming. It the value of the broadcast space. That's the bread and butter for the networks

I just want to point out; I want AppleTV to succeed and am playing 'devils advocate' to better understand NBC's position.

I understand that, and I do also know that nothing in business is done entirely for the bottom line. So my arguments are also somewhat one dimensional.

Clearly NBC/Universal is in a weird position since it also doesn't want to devalue KableTown^WComcast's cable TV business.

TV isn't an iPod/iPhone yet. It doesn't differentiate itself all that well from all the random Blu Ray players that support streaming and other more direct competitors like Roku or WD TV Live. That's why I say it will initially remain the domain of techies.

Zucker's the one who says that $0.99/view "would devalue our content", but when the alternative for the user is to watch it free on hulu.com or nbc.com it is already without (value to the user).

EDIT - Besides, all that really matters is how many broadcast viewers can NBC sacrifice before impacting the ratings enough to hurt ad dollars? It doesn't matter which service pushes them over the edge.

Do they still have any room to let the ratings go lower? I still watch 30 Rock and the Office and maybe the occasional SVU, but none of them live. Always on TiVo.

B