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Wednesday, March 01, 2006

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.

1 comment:

Lachlan said...

The whole ricky gervais podcast thing will be interesting to watch... it's now $1.99 for each episode (40mins audio only) Not a great value comparison to TV shows at $1.99... but fabulous content, Seeing how it does at that price will be a pretty interesting test of people's price threshold.