Hollywood insiders sharpen claws in battle for iTunes revenue

If Steve Jobs thought negotiating with the record industry was tough, wait until he goes head-to-head with Teri Hatcher and Eva Longoria. The "Desperate Housewives" stars are just some of the Hollywood insiders who are more than a little peeved about the backroom deal the Apple CEO cut with new Disney chief Bob Iger to get ABC TV programming included in the iTunes Music Store (not that the 'wives need an excuse to get all hot and bothered). Apparently, the unions representing actors, writers and the other folks who actually make the programs Jobs is hawking for $1.99 per episode, weren't consulted before he started ripping the shows to QuickTime and pitching them online. And now that the shows are being downloaded, the unions are sharpening their claws for a battle with ABC execs, who want to base payouts on the model currently used to pay DVD royalties — in which 20% of revenues is divvied up among writers, actors and the rest of the creative team — while the unions are pushing for a payout system based on the cable TV model, in which percentages are handed out based on total revenue. And while 3.6% of each $1.99 — the amount the Screen Actors Guild wants — may not sound like much, it can add up pretty quickly, if videos on iTunes do even a fraction of the business music has done. One thing is certain: Apple will continue to make most of its money on hardware, with the Hollywood types squabbling over the bulk of the entertainment royalties. That, and it might be a while before Stevie J. gets invited out to lunch at the Palm again.

[Thanks to everyone who sent this in.]

[Ken @ Dec 19th 2005 1:37AM]

im first! greed is good! here we go again!

[Killian @ Dec 19th 2005 1:37AM]

I'm sure there's plenty of money for everyone to make here... As long as they have a good selection of shows (That's So Raven??)

[Shane @ Dec 19th 2005 1:37AM]

What's the big deal. For 4 dollars more you can usually get the full season dvd at Amazon (for now at least). I don't think iTunes' episode offerings are going to canabalize dvd sales. It possibly might increase dvd sales due to enhanced exposure.

For network shows like Desparate HWs, it seems like most people would turn to the itunes store to snag an episode they mis-Tivoed or just missed. Seems like a completely new revenue stream. They just sound desperate to get in on the potential action.

For cable shows though, iTunes can be more like a-la carte show service. That would be competing with cable. If they offerd the Daily Show, I'd have no reason to have cable.

[the other steve jobs @ Dec 19th 2005 1:37AM]

Well, it seems like the RIAA and now the F.A.G. appears to be trying to also steal defeat out of the jaws of victory. When the demand for content causes a gut reaction by the content makers to be "no, we don't want to sell our stuff" - its just proof that they don't have a clue - and explains completely why it took Apple to come up with how to make all this online purchasing of content actually work.

[ArC @ Dec 19th 2005 1:37AM]

Ken, are you talking about the entertainment industry megacorps or the unions?

[XenoCorpse @ Dec 19th 2005 1:37AM]

I think that if shows continue to be available online, the Nielsons will be completely unnecessary. Why take a cross-section sampling like the Nielsons when you can find out EXACTLY how many people watch a show by the number of downloads it gets? Network execs could use this technology to figure out which shows are doing great and don't deserve to be cancelled, despite the few Nielson families not showing good ratings.

And the cable ala carte thing is such a good idea you know it will NEVER happen.

BUT... I'd love to see the BBC make a deal with Apple to make the new Dr. Who episodes available this way.

[ArC @ Dec 19th 2005 1:37AM]

Why are people so hard of reading? The gut reaction isn't "don't sell our stuff", it's "don't sell our stuff without giving us a cut."

[Wordly @ Dec 19th 2005 1:37AM]

Geez people think ahead!

If creative-folk don't negotiate contract details in the early days of technology change, they'll be screwed when consumers are downloading everything to their phones, PSPs, TiVos, or Whatevers, and their old contracts won't cover those new distribution channels.

Are you on the side of media conglomerates making more money for less work, or on the side of the creative community who actually "create" the shows & films you pay to watch?

[eric @ Dec 19th 2005 1:37AM]

We techno-rati forget that the bulk of people who will buy these shows are normal people who like the show.

Mis-Tivoed? Half the people I know who still watch TV don't have a Tivo, or a DVR. But they would part with 1.99 for a show. In fact, some of the fanatics I know who are hyped about reality-tv-shows would pay out much more than it costs on DVD just to get the show, now, now, now.

[Jim Bug @ Dec 19th 2005 1:37AM]

Isn't that ABC and the union's business; Apple has already made its deal. I think it may be up to the union/actors and ABC to work out how much of the pie goes to the actors. That's Bidnesss!

[Shane @ Dec 19th 2005 1:37AM]

Good point. Isn't it ABCs role to contact the unions about the deal? Did they expect Jobs to sent out a special event postcard to them?

[mcloki @ Dec 19th 2005 1:37AM]

The one thing Apple is delivering is fans. And fans with money. Bittorrent may deliver fans but they are non paying fans. I don't see that changing anytime soon. And at the end of the day. How many botox injections will that buy Teri Hatcher. Apple means paying customers, and that above all else is what Hollywood wants. For that matter Apple could fill their servers with Bollywood titles and as long as people download the files. Apple could turn out to be great for old shows and independants.

[Samuel Lago @ Dec 19th 2005 1:37AM]

Stop watching that US BS and they'll soon shut up.

[CeAsE @ Dec 19th 2005 1:37AM]

Heh, everyone always forgets to check with SAG.

[mike @ Dec 19th 2005 1:37AM]

Actors are just paid meat.

They should only be allowed to speak when someone yells action.

[http:financenstuff.blogspot.com @ Dec 19th 2005 1:37AM]

Well paying for shows on itunes beats the hell out of paying monthly fees for cable channels I don't want imo. Pay for only what you want is the iPod way.

[Reid Bode @ Dec 19th 2005 1:37AM]

Ok, Apple wanted to keep this a secret right?
So they can't go and tell everyone involved with 5 different shows!
That's be hundreds of people, and leak would have been guaranteed.

[John Smith @ Dec 19th 2005 1:37AM]

HUGE CORRECTION!!!!!

Writers, directors, actors etc DO NOT SPLIT 20% of royalties!!!

I am a writer. WE DO NOT SPLIT 20% of DVD profits with the other guilds as you write.

In fact, the Writer of any project is entitled to 2% of Producer's NET, which is defined as 20% of producers gross. It's complicated, and designed to screw the writer.

We get a piece of the 20%, yes. We get 2% of that 20%. Which translates to......

Menaing we get 2% of 20%.

For every dollar the producer makes in DVD profit, we writers get 2% NOT of that full dollar, but of 20 cents. Let's see.... 2% of 20 cents is.... not much.

For a DVD that makes $1,000,000 profit.... we make 2% of $200,000. We don't even make 2% of the million bucks. We make 2% of 20%, which in this case would be.... $4,000.

Big difference from the $200,000 (20%) you suggest.

The actual percentage is so much smaller than 20%, I don't know how to figure it out.

[Morwan @ Dec 19th 2005 1:37AM]

John Smith:

.02 * .2 = .004.

You get .4% of the profit.

That kinda sucks.

[Paul @ Dec 19th 2005 1:37AM]

yeah that does suck, get a new job dude

[John Smith @ Dec 19th 2005 1:37AM]

That's why I am a writer-- can't do math for sh*t....

[John Smith @ Dec 19th 2005 1:37AM]

so, on 1.99 download... the writer gets...... .796 cent. Not even a penny.

WOW!!!! I'm rich!