The Price is Right, iTunes...sorta

NBC Universal is offering uninterupted sneak preview of new drama, Conviction on itunes. Cost is free for the pilot, but normal downloaded video programs cost $1.99. It got me thinking, is that price reasonable?

Yes, it is, kind of. Doing some nerdy media math, advertisers in the aggregate pay a cummulative total of $.90 per hour to reach each individual (36 :30s per hour long drama x an approximate $25 CPM / 1000). Assuming, NBC wants their cut ($.90) and iTunes wants their cut ($1.00), it seems that $2 for an hour program is fairly reasonable.

Interestingly, however, is that instead of getting rid of the middle man in this instance (what online has long promised), it's actually adding a distribution layer, making it less efficient for the consumer than the status quo.

As proliferation of on-demand and sole partner underwriting deals continue (a la Ford offering uninterupted 24 season premiere), it's interesting to note the cost: assuming 10MM viewers, the opportunity cost for a network is ~$10MM in lost ad revenue per hour (although network goodwill of uninterrupted programming and unsold inventory, um, I mean, network promos undoubtedly discount that total).

As we continue to see the shift from standard :30s to more programming "brought to you commercial free by...", smart content integration, & exclusive underwriting deals, it's nice to have some idea of what revenue is required by the networks to justify the deals.