Switched On: Why it's time for an iTunes TV subscription
By Ross Rubin 
posted March 4th 2010 11:32PM
posted March 4th 2010 11:32PM
Each week Ross Rubin contributes Switched On, a column about consumer technology.
In the 10 billionth song that Apple sold through iTunes, Johnny Cash's "Guess Things Happen That Way", a man other than Steve Jobs famous for black attire bemoans the happenstance of his romantic misfortune. But nothing could be further from the story of iTunes, in which Apple's meticulously crafted ownership of the end-user experience led to a dominant position in music sales. Now, on the dawn of releasing a new device that could be to television shows what the iPod was to music, Apple has an opportunity to create as commanding a lead in TV distribution -- if it is willing to again capitulate to consumers' media consumption habits.
Apple has enjoyed great success with iTunes in part because it adopted the purchase-to-own model that had been so successful with CDs and records before them. However, Apple didn't simply mirror that model. By allowing consumers to purchase the vast majority of songs as singles, it provided better perceived value, Such an option was also a natural fit for the iPod, where playlists made it trivial to create the digital equivalent of "mix tapes." The iPod's capacity for thousands of songs was also no match for most albums that typically had a dozen or so songs.
When Apple moved into movies with iTunes and then Apple TV, it first stood fast to the purchase-to-own business model that had worked for music. But as it launched the second major release of the Apple TV software, it acknowledged the popularity of rentals. Again, Apple merely offered a means of consuming media familiar to what consumers had adopted at video rental stores and video on demand. And again, the move complemented Apple hardware, in this case Apple TV, which brought iTunes movies to their best consumption environment within the home.
In addition to the more than 12 million songs and 8,500 movies Apple now offers through iTunes, it has a catalog of more than 55,000 TV show episodes. And just as music has the pocketable iPod and movies have the big-screen capable Apple TV, Apple is on the verge of releasing a device that is a perfect match for them in iPad. While the company played up the slate's content convergence capabilities at the iPad's launch, video remains the medium at the intersection of popularity and purpose for the iPad -- as Switched On discussed last April. No 3G? No Flash support? No interest in reading? No gaming skills? No problem.
But to really exploit the TV-on-iPad opportunity, Apple needs to again optimize its content distribution model. By creating an unlimited option for TV show rentals, Apple could not only compensate for the current lack of Hulu on the iPad, but position for a competitive edge against Hulu's future, which is likely to include HTML 5 and subscriptions. It has been said that Apple has an aversion toward subscriptions, but the company offers two of its own in MobileMe and AppleCare, and the success of cable and satellite providers as well as Netflix provide ample evidence for consumer's acceptance of TV subscriptions.
Once again, Apple would be doing no more than offering the dominant consumption business model, but optimized for one of its platforms. Furthermore, the company would have incredible pricing leeway given that open access to the iTunes buffet would include many of the advantages of a DVR subscription. And if Apple really wanted to avoid subscriptions per se, it could offer pre-paid access as it has for 3G on the iPad, with a lower fee offering a limited number of TV episode rentals per month and a higher number offering unlimited rentals during the month.
One open question, of course, is whether networks would agree to such a plan given potential coercion by cable companies that account for the overwhelming majority of their income. Indeed, there would be both similarities and differences when compared with the Hulu-on-Boxee conflict. But at least Apple, unlike Hulu, isn't owned by the studios, and so is therefore less likely to bow to their whims so readily -- as NBC likely well remembers. And Apple has vast financial, legal and lobbying resources that make it a far less vulnerable competitor than Boxee.
Finally, with a TV show rental plan, Apple could certainly continue to sell TV shows a la carte as it does with songs and movies. Some might opt for this as an alternative to purchasing TV shows on DVD. And faced with this new option, that business would likely be cannibalized. But the overall effect would be to greatly expand the appeal of using iTunes for TV as something other than a hangover remedy, easing the pain for those who forgot to set their DVRs, or the forgettable bit breeder filling the hard drives of avant garde cable cord-cutters. Apple is about to ship a device that could redefine the TV set. Now it just needs to redefine TV service.
Ross Rubin is executive director of industry analysis for consumer technology at market research and analysis firm The NPD Group. Views expressed in Switched On are his own.
Apple has enjoyed great success with iTunes in part because it adopted the purchase-to-own model that had been so successful with CDs and records before them. However, Apple didn't simply mirror that model. By allowing consumers to purchase the vast majority of songs as singles, it provided better perceived value, Such an option was also a natural fit for the iPod, where playlists made it trivial to create the digital equivalent of "mix tapes." The iPod's capacity for thousands of songs was also no match for most albums that typically had a dozen or so songs.
When Apple moved into movies with iTunes and then Apple TV, it first stood fast to the purchase-to-own business model that had worked for music. But as it launched the second major release of the Apple TV software, it acknowledged the popularity of rentals. Again, Apple merely offered a means of consuming media familiar to what consumers had adopted at video rental stores and video on demand. And again, the move complemented Apple hardware, in this case Apple TV, which brought iTunes movies to their best consumption environment within the home.
In addition to the more than 12 million songs and 8,500 movies Apple now offers through iTunes, it has a catalog of more than 55,000 TV show episodes. And just as music has the pocketable iPod and movies have the big-screen capable Apple TV, Apple is on the verge of releasing a device that is a perfect match for them in iPad. While the company played up the slate's content convergence capabilities at the iPad's launch, video remains the medium at the intersection of popularity and purpose for the iPad -- as Switched On discussed last April. No 3G? No Flash support? No interest in reading? No gaming skills? No problem.
Apple is about to ship a device that could redefine the TV set. Now it just needs to redefine TV service. |
But to really exploit the TV-on-iPad opportunity, Apple needs to again optimize its content distribution model. By creating an unlimited option for TV show rentals, Apple could not only compensate for the current lack of Hulu on the iPad, but position for a competitive edge against Hulu's future, which is likely to include HTML 5 and subscriptions. It has been said that Apple has an aversion toward subscriptions, but the company offers two of its own in MobileMe and AppleCare, and the success of cable and satellite providers as well as Netflix provide ample evidence for consumer's acceptance of TV subscriptions.
Once again, Apple would be doing no more than offering the dominant consumption business model, but optimized for one of its platforms. Furthermore, the company would have incredible pricing leeway given that open access to the iTunes buffet would include many of the advantages of a DVR subscription. And if Apple really wanted to avoid subscriptions per se, it could offer pre-paid access as it has for 3G on the iPad, with a lower fee offering a limited number of TV episode rentals per month and a higher number offering unlimited rentals during the month.
One open question, of course, is whether networks would agree to such a plan given potential coercion by cable companies that account for the overwhelming majority of their income. Indeed, there would be both similarities and differences when compared with the Hulu-on-Boxee conflict. But at least Apple, unlike Hulu, isn't owned by the studios, and so is therefore less likely to bow to their whims so readily -- as NBC likely well remembers. And Apple has vast financial, legal and lobbying resources that make it a far less vulnerable competitor than Boxee.
Finally, with a TV show rental plan, Apple could certainly continue to sell TV shows a la carte as it does with songs and movies. Some might opt for this as an alternative to purchasing TV shows on DVD. And faced with this new option, that business would likely be cannibalized. But the overall effect would be to greatly expand the appeal of using iTunes for TV as something other than a hangover remedy, easing the pain for those who forgot to set their DVRs, or the forgettable bit breeder filling the hard drives of avant garde cable cord-cutters. Apple is about to ship a device that could redefine the TV set. Now it just needs to redefine TV service.
Ross Rubin is executive director of industry analysis for consumer technology at market research and analysis firm The NPD Group. Views expressed in Switched On are his own.
@cherryboom how are you wrong about so many things? PSP is a 16:9 screen. if the movie is 2.35:1 you can choose to retain that aspect ratio or crop it to 16:9. both superior to ipad
stfu before you embarrass yourself some more.
@omegaslast
You can also do that on an ipod touch so I am guessing you could do it on the ipad as well.
If you're really into artists intention then you better watch every movie on Blu ray in your movie theatre, like compressed mp3, watching a movies on an handheld device is a compromise the consumer has made. I'd rather watch the movie in it's original aspect ratio in my home theatre, but on my ipod touch or any mobile device I'd rather it use the whole screen real estate.
PSP and UMD is a total failure as a mobile video format - at least in the US. ipods with itunes is much better for the avg. consumer. Does PSP even have an online video store it connect to?
I seriously do not understand this obsession with a tv subscription. Maybe if you're a diehard couch potato who watches everything, from Legend of the Seeker to 30 Rock but I think most iPad owners watch like 5-7 tv shows religiously enough to pay money for them. (Daily Show, The Office, the usual suspects).
Also you're forgetting that the iPad is for when you're outside the home, because why would you watch shows on your iPad instead of that giant flatscreen you have in your living room? So if you're outside with the iPad you're not going to watch a boatload of tv shows unless you're that rare homeless iPad owner, you're going to be watching in the subway or airport.
Finally you are barking up the wrong tree. If this year has proven anything it's that live events are king in television. Look at the ratings for the Grammys, NFL games, Olympics. Live tv is the key, so what the iPad needs is a constant live stream of television not a tv subscription.
well. for one. it's competition with cable services. in many areas there's only one provider so they can charge crazy amounts and get away with it.
plus many folks don't work 9 to 5 and/or watch multiple things that air at the same time.
with a 'rental' scheme one might be able to cut that higher cable bill and watch shows when it is convenient. even in the lunchroom at work.
"Now, on the dawn of releasing a new device that could be to television shows what the iPod was to music, Apple has an opportunity to create as commanding a lead in TV distribution..."
Although I was tempted to stop reading right there, I didn't. My fault.
Sorry, but the only people who think that the iPad can be to TV what the iPod is/was to music are those who need to fill some virtual ink. Thinking that the iPad can do this is wrong headed on two accounts...
1) who wants to PAY for the privilege of watching TV on a tiny screen, when there's computer monitors or HDTVs everywhere?
or
2) dock what is ostensibly best suited as a couch surfing device to watch on the big screen, thereby negating the best use of the iPad?
It's all really counter intuitive really.
Besides, a $300 ION PC with a $60 tuner has no problem recording OTA HD & runs Boxee, all controlled with a universal remote. No monthly subscription required.
@Alan Strangis Man, it seems like all you have to do is hate on the iPad to get voted up on this board and disagree with anything realistic or practical.
I agree that it's better to watch TV shows on an actual TV, but it's superior to be able to do that PLUS watch your shows on-demand wherever you go. I used to commute to work on a 1/2 hour train ride, and having video on my iPhone was great.
If I could pull up shows from the cloud at the touch of a button, save my spot where I left off, then come home and finish it all on my TV, that would be a great, convenient, robust experience.
As it happens, Apple has devices that compliment this system, with portable devices like the iPad to watch content on the go, the Apple TV to watch content on your TV, and even apps like "Remote" to let you control the TV with a touch of your i-Device.
It's MUCH better than scheduling your day around a network's live schedule and ONLY being able to watch on TV.
Eventually studio networks will have to sell they're shows ala carte,people just want their shows when they want, no one cares about the "politics" of networks/cable companies etc..With studio quality camcorders/cameras etc available to the public nowadays you will see independent studios/actors continue to grow, and sell they're content directly to people who want it. The same will happen with all sports nfl,nba,mlb, ufc etc..imo
I don't understand how Ross came to the conclusion that the iPad is a better device for watching tv shows than a television. I also don't know why Ross implies that Apple's success with music and the iPod was matched by that of movies and the Apple TV after they added the ability to rent them. The Apple TV and their movie rental service is not a success by any stretch of the imagination. It couldn't possibly be, considering almost nobody owns one.
i was never intrigued by the motion of renting physical movies anymore after trying rentals from iTunes on my Apple TV... but I finally tried Netflix for Blu-ray's and figured it's much more cost-effective to go the Netflix route for seeing movies month in and month out.
$10 a month (on average) gets me two HD rentals on iTunes; each only being able to be viewed for 24 hours. $11 a month gets me (in theory) up to 10+ movies with better picture quality at the expense of waitiing/mailing/waiting and having to deal with inserting discs... But that's negligible in my opinion. My Netflix trial subscription ends in a couple of weeks, and after being on the fence for a while, it's safe to say I'll be keeping it. For the past two weeks, and for the time being, Apple has officially lost me as a rental customer. I can't wait for them to get with the program and introduce a subscription model. I'm sick of $5 for 24 hours at that quality, even if it does means I don't have to leave the house to obtain a flick.
@TJM My issue is I don't have a lot of free time and when I want to watch a movie it's usually "right now" and can't leave the house because my kids are sleeping.
The restrictions on rentals suck, I definitely agree, but the convenience of the on-demand model is pretty compelling in my opinion.
If pricing got better or moved to a subscription model, that would be great!
Why are some of you thinking that this iTunes tv subscription would only work on the ipad? I'm pretty sure that if apple comes out with an iTunes tv subscription, the shows would be watchable on MacBooks, iMacs, iPhones and Appletvs...it wouldn't be confined to the ipad.
The first gen ipad is not going to be anything to TV like the ipod was to music.
Most people have larger TVs than 9" already.
And with no dock apparent and not ability to push the content at high res anyway.....
... this simply is not going to compel tv viewing.
Not in big numbers like ipod/music... which was providing something without cutting huge corners in the experience.
@savagemike
Really? Bigger than 9" TVs? Amazing.
Honestly I don't think the average Techie on Engadget is ready to think outside the box on this one...
I would gladly pay $0.99 - $1.29CDN per episode or even $20-30CDN month for unlimited TV episode downloads. Hell, even if it were 6 shows max or something I would still consider it.
Convenience is the name of the game. Tech Geeks, net-nerds, and torrent trolls need to understand how many people out there would benefit from and gladly take advantage of a subscription because of how seamlessly and safely it integrates with their home "techosystem". (Especially for Mac users).
For PC users, the "free" alternatives are high risk if you don't know what you're doing. (And even if you do know what you're doing, there's still risk). People are willing to pay to eliminate the risk of viruses, and have ease of use through a one-stop-shop for their media. iTunes proves this, and a distribution/consumption method adjustment is well within reason.
"Apple is about to ship a device that could redefine the TV set. Now it just needs to redefine TV service."
Terrific article.
@Nate
wait, don't tell me, you didn't read it.
Could this article be blowing Apple any harder? Congratulating Apple for their iTunes business is like Congratulating the mob for coming up with "protection" rackets.
@Bananarama
Well ... if it works, it works.
On the iPod Apple didn't force you to transcode all your existing content unlike Sony at the time and that's how they captured Market share. You already had a lot of content in the form of mp3 by the time you bought your iPod. Now they are not supporting any of the video codecs people have most of their content encoded in, which translates in inconvenience, hence, slower adoption...
iTunes made people with huge pirated collections start paying for content. Enabling xvid would do the same for video.
@Ictiosapiens
They didn't MAKE them do anything, they just gave the the possibility to easily do it.
Once they move out of their mom's basement and can afford to pay ten bucks for an album.
What apple needs to do is partner with Directv and bring portable television to the masses. THAT would be fucking awesome!
it would be good if zune had a subscription tv service just like their music service
You know what would be even more logical that an iTunes TV subscription model for the iPad? A TV Subscription model for the AppleTV! Apple let that product flounder into it's notoriety of worthlessness explicitly because they refused a subscription model.
MP3 players (pretty much all non apple version ones at least) have had subscription models to compete against the iPod, yet Apple did not cave on that strategy either. My guess is that TV subscription content coming from Apple is nothing more than wishful thinking until people start abandoning Apple en masse and Jobs needs to pull a new "One more thing" out of his hat to liven up the brand. For now the iPad has generated enough hype for just having an Apple logo, that it doesn't need anything else for it to sell.
If you want a subscription TV plan, Netflix is almost there, they just need a few more networks to hop on board. They currently have numerous streaming shows the day after they air, and you can watch back seasons, and it works awesomely from a remote control on your game console (which is already plugged into your TV). Also Netflix is likely to work with Windows Phone 7, so there will be at least one phone platform with it working. I am sure someone can get an Android version spun up soon enough.
Anyone who is bagging on AppleTv probably hasn't used one. I am overseas stationed military and I love my AppleTV so much I bought a second one.
First off, I dont have access to regular cable, i have crappy armed forces network TV programming, which airs stuff from 2 seasons ago or in the case of some live shows a week after they air in the states.
On AppleTV I can get them the next day. A season pass for most shows i watch is about $20. It's worth that for me to not waste hours downloading and finding good quality torrents and eating
all my bandwidth while I wait for it to download. the apple TV allows me to
watch the show while its downloading. Plus it automatically downloads the
shows i have a season pass to as soon as they are available, while I'm at
work without me having to do torrent search.
Xbox live, playstation network store, Hulu, Netflix, and all the network
websites tell you to pretty much go pound sand if you're using a foreign IP address, Apple doesn't care where you download from as long as you have a US credit card and Itunes account.
I own a ton of movies on bluray. none of my family has bluray players, so when I go home, I transfer a bunch of stuff to the appletv, (which is about the size of maybe 4 DVD cases in my bag) and hook it up wherever i am.
Oh, movie rentals? I pay $2.99 for SD and 3.99 for HD. how much does blockbuster charge again? oh, let's not forget the $1 per movie out at a time fee that netflix charges you to maybe once a month receive a movie on BluRay.
I buy a movie or show on Itunes, I already have half a dozen portable
devices I can play it on when I fly somewhere without having to do any
conversion whatsoever.
I am actually considering not getting Cable/Satellite service at all when i return to the states and just using Itunes to replace my cable bill. A subscription model would be ideal.
Oh, and I hate Macs, they are overpriced outdated pieces of crap, so it's not like I'm an apple fanboy by any stretch of the imagination. I'm just a convenience fanboy.
Being in the film/television industry I find that taking samples of my work on an iPad would much more efficient than bringing a DVD or showing on my iPhone. Not to mention sharing photos with family. After that, I feel the perks of watching a TV episode, movie, reading a book, email, web browsing, right before bedtime enticing. For $499.00, the book reader alone might just bring me back to reading more. So please all you negative Apple haters, just let us people that could benefit from this device enjoy it and you can go on to do what you do best, "Complain about anything Apple!"
I could see Apple breaking into digital video content for portable devices, but that market will be niche at best. Most people don't care about portable video because connectivity is becoming ubiquitous and you can live stream almost anything you want off of a laptop.
Companies like McDs and Borders are finally giving connectivity away, and Wi-Max may work someday.
No what is needed are higher levels of connectivity in the devices we have. Amazon, Netflix, Hulu and (insert new company here) will do the rest.
This article is silly anyway. The iPad is going to fail miserably. Then Jobs will say it wasn't a device we were 100% behind, or that it is a hobby.
On a side note I have not touched my music library since I got Pandora and Slacker on my Palm Pre. I don't know what that means but life is just easier.
@glamajamma
Wait I know what that means. It means the concept was more than adequate for me, the problem was Clearchannel radio stations just suck.
@glamajamma
This thing (iPad) needs to be able to stream what you already have and play whatever you have without any nonsense. This is why a MacOS based iPad would have been so cool. You would be able to install Plex or extra codec plugins for quicktime and it would be a much less closed device.
It would be like an Archos but without the tendency Archos has for managing to screw up a good idea.
AppleCare isn't a subscription. You pay for it once when you buy your Mac. Neither is MobileMe that much of a subscription - you only pay once a year. I think Apple is very much against the subscription model. They need to focus on linking in more effectively to broadcasters services for TV
@bpme if you have to pay once a year, every year, that sounds an awful lot like a subscription to me
You know, I have noticed the recent quality increase in the grammar and diction in Engadget posts. It really makes it stimulating to read, and I thank the posters and editors for this improvement! It makes the wit all the more sharp.
This is a gay article. the device has no flash...all of our favorite sites require flash for viewing tv shows. and who the fuck wants to pay for a download of ONE show anyways? torrents FTW.
@DoctarPeppar Glad to see the intellectuals have finally found a spokesperson.
I get the feeling that a lot of folks here are focusing on the iPad portion of this particular post. Honestly, I doubt I'd get one, considering I have no idea what I'd use it for. I'd be more inclined to use it as an ebook reader than as a video watching device. I could just as easily use my Macbook for that. But, that doesn't make the iTunes TV subscription idea any less interesting to me.
This is a gadget forum... don't a lot of you have a HTPC or something hooked up to your TV? Just install iTunes on the HTPC and download whatever shows you want off iTunes. It's not like Apple would somehow limit the content to an iPad.
I also get the feeling that a lot of posters here aren't actually the ones paying for their household's cable/satellite service. At least a few of you have made the argument that regular TV is free and therefore superior. How? Are you somehow forgetting that cable or satellite service costs like 50 bucks a month?
@floobie
If I had to pay the iTunes price for what's sitting on my PVR right now a very conservative estimate would be $2000. A cable subscription pays for a LOT of "downloads". There's lots of stuff that you might never see (but still interesting) that you wouldn't otherwise if it required pre-payment for every single bit of content.
Music purchases depend on radio for exposure and trial use.
Cutting that completely out of either Music or Video probably won't work in the long run.
Apple may be able to eliminate the need for DVR's with that, but they won't compete with the cable companies yet...they need to offer high def live sports coverage....I'm looking at you MLB.tv, and NFL network pony up already.
aw yes, the iPad will revolutionize television! you know, with it's 16:9 aspect ratio, ability to stream HD flash video, and HDMI/video outputs
oh wait
Yeah, I'd would love to have Apple (Jobs) control what I watch on tv, sounds like heaven on earth!
FORGET this idea!! Subscriptions/monthly payments are things we should try to avoid/minimize. This is the problem with everything today. It's how companies make all their money of the average (not rich) people out there. They offer a "low" payment/fee for a service and people never look at the big picture. They just look at it like.. oh, it's only a payment of $X.XX/month, I can afford that. No, you really can't in the long run. It all adds up, but the average person just doesn't see it. Think about this... you have some monthly payments you cannot avoid (assuming you live in a house/apartment/condo) such as your water bill, heating/cooling, trash removal, and probably your rent or monthly house payment. Now, let's start looking at other payments: for the ones who have payments on their cars (or even worse, they lease), car insurance, cell phone bill, cable bill, telephone (if you still have a landline), DVR (or Tivo) bill, Netflix bill, gym memberships, magazine subscriptions, and probably the biggest of all credit card(s) bills/payments (since the average person typically charges/spends more than they can really afford to pay off each month, thus they make a payment on their card(s) and therefore end up paying a fee/charge for this). This is how the "average" US person thinks & it's why we're in the hole (debt). So, to keep this from becoming a book, the last thing we "need" is an iTunes subscription! Enough with payments/subscriptions that we don't "need"! But, I know I'm a rare breed and that the average person out this will not understand a word I'm saying, and if/when Apple offers a monthly iTunes subscription for $X.XX, they'll jump on it as if it's the best "deal" they've ever seen. It's actually kinda sad/depressing that we live in such a world.
I haven't had a cable subscription since 1984 when I figured out I was paying an absurd and ever-increasing monthly fee for the privilege of watching commercials anyway on most channels, and watching endless repeats at awkward times on the "premium" channels. Too much money, too little return. Fortunately, video rental stores, then Netflix, and now Hulu, came to my rescue with the ability to choose the exact shows I want, the exact time, and best of all the ability to pause and rewind as necessary.
That having been said, I'd jump on subscription TV on an iPad.
Why?
Well, Hulu has gotten popular enough that the commercials are getting annoying. I'd glady pay 99 cents for quiet viewing of my cheap thrills.
In terms of premium content, I think I'd go as high as $1.99 for Dexter, the Sopranos, True Blood, a recent movie, etc. Currently I wait for Netflix DVD's to watch these - and it is a a LONG wait in some cases.
Why isn't Netflix an alternative for me now? Answer: have YOU ever been satisfied with Netflix quality? It's been abominable for me, half the perceived quality of Hulu.
Also, getting 720p from iTunes would be much better than watching 480p from Hulu on my computer.
I do find it terribly ironic that the "next step" in home media for me isn't going to be to a bigger, flat-screen, 1080p monitor with 5.1 surround and a kick-butt subwoofer - it's going to be to a 10.1" handheld with earphones.
But Jobs is right - the portability of of the experience is central. My family no longer gathers around a single flat screen so we can all watch the same media together. EVERY member of our 5 person household wants to watch something different! Wow, social expectations have become re-ordered.
Sorry Ross but you've got some poor reporting here.
1. Apple ain't offering anything 3g for the ipad. prepaid or otherwise. That ATT
2. You missed out on exactly why the networks won't go for this. Money.
first cause of issue of how much
second, cause of the fear that it will erode their precious ratings numbers.