Warner Bros says No to Apple TV Rentals. Avoiding the inevitable?

Posted by Gianluigi Cuccureddu SMP in Writers on September 20, 2010  |  0 Comments More from this author  |    |  Follow Gianluigi Cuccureddu SMP on: Facebook | LinkedIn | Twitter |

Apple wants to disrupt the TV industry just like it did with the music industry, doing this by offering TV episodes for 99 cents via Apple TV.

Like Google, Apple faces challenges when it comes to securing content partnerships with TV networks and the fierce competition of new entrants and those who approach the market differently.

Warner Bros. Entertainment Chairman Barry Meyer, unlike Walt Disney Co. and News Corp., isn't hooked -yet- on the Apple TV proposition.

Meyer says to the LA Times:

"We just don't think the value proposition is a good one for us."

Meyer rather sees whole seasons licensed rather than renting episodes at the low price.

The reason, also shared by NBC and CBS for instance, is:

Like many producers, Meyer's worries are that rentals -- or at least rentals at the price Apple is offering -- could undermine the potential long-term value of Warner Bros. shows.

Of course, DVD sales of shows have proven to be a new revenue stream that has not necessarily harmed the market value of reruns for shows, as evidenced by Warner Bros. own recent sale of "Big Bang Theory" to TBS at a price tag of about $2 million per episode.

In terms of short-term objectives I understand this decision of not endangering these "secure" revenues.

But when it comes to the long term vision and the transformation of the TV industry, it's ignoring and sliding forward this challenge to next generation executives.

Customer-centric?
No, in a modularized society where on-demand fits very well, not offering this possibility is not customer-centric and it's not meeting the needs of TV viewers.

Exploring new revenue models
Distribution is key, and with Apple the TV networks can have a valuable partner. Look at the music industry and the power and impact of the iTunes store.

Some of the iTunes figures presented at Apple's event:
* 11.7 billion downloaded songs.
* 450 million TV episodes.
* 100 million movies.
* 45 million books.
* 160 million accounts.

When accumulated the individual revenues, the total is amazing.
The global long tail can account for a viable and new revenue stream, whereas the fat head accounts for the current secure stream but is under pressure due to the digitalization of the TV industry.

A lower price doesn't neccesarily have to mean a lower absolute revenue. Because of the low price, volatile purchases will occur.
Steve Jobs rightly said that even if you rented multiple times a TV show, a person is still better of than buying.
Customers' money can be spent on much more things than now.

Why not trying to exploit this opportunity?
Of course more efforts need to occur to earn the same amount, but it will have a long term focus and it will be customer centric.

New marketing propositions
Together with the exploration of new revenue models comes the exploration of new -holisitic- marketing propositions.
In order to remain keep securing the reruns of shows of DVD/Blu Ray sales, additional value must be added to these offerings.  Opportunities can be sought in Transmedia, IPTV and the Social Web, creating an offer that is sequential and prolongues the connection and interaction with the TV show and its fans.

Value Innovation
It's all about Value Innovation, creating differentiated new values for (new) customers. Trying to compete with the best-practice rules in the TV industry is a short-term non-sustainable strategy.

Just as the known revenue streams (reruns and DVD's) are the secure head, the digital world opens up a can of new possible value innovations that is able to reach and target the global long tail.

Wait for the industry and conventional distribution to even further decrease?
Cable subscription is decreasing and time-shifted and on-demand content is rising.

Or pro-actively seek for new value created by the many new technology innovations?

Internal and external factors play a role in decision making, it will be very interesting how a key player like the Content Provider will adapt to the digital transformation.