HobeSoundDarryl
macrumors G5
What is "a lot of money"?
For many around here, a lot of money is maybe 2X or 3X what Netflix charges because we view the value of ALL video content through a Netflix pricing lens. Some of us will even toss around the idea of Apple buying Netflix, believing that if that happened, Apple would leave Netflix pricing where it is (the Apple target margin is not baked in already) and maybe offer more content via Netflix.
From my perspective, we can look at traditional cable/satt as a guide to a definition of a "lot of money." Last I checked the national average cable/satt monthly bill was about $73/month. If that buys the much slung 200+ channels with about 18 hours of programming on them each day: 200 times 18 times 30 days = 108,000 hours of programming for that $73 or so monthly bill. Cable/Satt also generally offers some VOD as part of their subscriptions but I'm not factoring that in.
Does $73/month buy ready access to about everything in the iTunes library? No it does not. For that you would need to add on movie channels, add on new release VOD, add on regional sports, etc. That can make a cable/satt bill rise up above $120. Is $120/month a "lot of money"?
Last I checked commercials basically cover a other-peoples-money subsidy of about $54 per month PER HOUSEHOLD. This dream of an iTunes everything offering generally means commercial-free everything. Yes, I want commercial free too but do we want the starting price of a "lot of money" for zero programming to be about $54 per month to make up for all that lost revenue that doesn't even come out of our pockets?
What we tend to do is imagine that there is going to be an iTunes video version of Music at a relatively dirt cheap price. However, that would basically slash the revenue throats for pretty much everyone else in the chain. Even Apple would make much less than they would make by getting a piece of something more traditional (and traditionally priced). In short: not gonna happen.
Now, if a "lot of money" is up in that well above $100/month range, there's potential for something like that. Perhaps you personally would even equate "lot of money" to north of $100/month. But to be a worthwhile foray, lots of other people would have to do that too. Would they? Most of these threads dreaming about an Apple cut of a Netflix-like subscription service and/or an Apple cut of a PS Vue-like subscription service revolve around a delusional price point of $10, $20, $30 and maybe $40 per month. It's unusual to see anyone showing much enthusiasm for pricing of some iTunes everything offering at much above those levels.
All of the other players in this chain want changes to how they offer their products to yield MORE money, not less-to-substantially-less. The cable company (which is also typically the broadband company) doesn't want to take the hit on lost cableTV revenue, so they can just flex their broadband monopoly/duopoly to make up for any cableTV subscription losses with higher broadband rates. Apple wants it's 30% on the highest monthly rate it can sell, not the lowest possible price point that we consumers believe this kind of stuff should cost. In other words, there's no motivation anywhere else in the chain to make a "lot of money" = $10, $20, $30 or maybe $40/month.
Conceptually, if the average cableTV revenue flow is indeed about $73 and commercials running on channels "I" watch and channels "I" don't watch toss in about $54 per month per household more, $127/month is about the bottom of what makes it all run now (plus broadband fee). Any "new model" replacement is motivated to replace it if it shows all the players how more than that $127 or so is going to be realized. Else, why should they be interested? Any "new model" that has the source of the bulk of that money- us- dropping their contribution from about $73 to about $40, $30, $20 or $10/month is likely DOA (especially if we also expect to suck $54/month out of it by it being commercial free too)... which is why we've been whining for it for what seems like 7+ years and still don't have it.
Some cord cutters are indeed beating $73 or $127 right now, while sacrificing simplicity (having to hop app to app or even box to box), dolby digital surround sound on any of the cableTV-like services, real DVR functionality, etc... or just by doing without some desired programming and/or being satisfied to see some content a day or more after others have seen it. But that won't work should the masses move on it. As soon as there is enough cord-cutter profit pain, prices will rise to make up for the shortfall. Look around already. Disney is exiting the Netflix deal seeking more money. Starz already existed their Netflix deal seeking more money. There's only more of this to come as more people cut the cord.
Where does it lead? I suspect in the end the cord-cutting option will have cord cutters paying about the same or more for access to considerably less, probably not getting some of what they used to watch when they had cable or satt. Then, cue whining for more content/channels eventually giving way to talk about the "good old days" when one could get 200+ channels- most in HD with surround sound- in one package with a real DVR and unified on-screen guide for about $73 or so per month... heavily subsidized mostly by commercials running on 180 channels that "I" never watch... and not burning a byte off of ever-tightening broadband caps.
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