Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

Summary: Apple and Google are preparing a full frontal assault on the a-la-carte broadband premium TV content business. But can their offerings really upset the Cable and Satellite TV status quo?

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Apple and Google are preparing a full frontal assault on the a-la-carte broadband premium TV content business. But can their offerings really upset the Cable and Satellite TV status quo?

Next week, on September 1st, Apple is holding their yearly "Special Event" at the Yerba Buena Center in San Francisco. As of yet, the company hasn't given any indications what products might be introduced.

While it's likely to be the next generation of iPods and perhaps even new iPads, there are some in the industry who believe that it will include a complete refresh of the Apple TV, reborn as an iOS device, complete with App Store and $1 per show pricing model as the "iTV".

I'm not going to speculate precisely on what products are going to launch, and what features they will have, because I really have no idea. However, the concept of a la carte content for TV shows and movies -- much like the way music is sold today for $1 per song on iTunes and Amazon MP3 today -- that would compete with the traditional offerings from Cable and Satellite providers is intriguing.

Apple's iTunes, which already serves up movies and TV episodes for purchase on iTunes for Macs, PCs, their iOS and Apple TV devices is a good revenue generator for the company, but at their current pricing structure of $2-$3 per show and $5-$10 per movie, it can really only be a supplementary service to existing home TV content consumption.

According to AC Nielsen, Americans consume on the average about four hours or more of television per day. At $50-$60 per week or even half that amount to satisfy an iTunes video habit, it's still way too expensive to dump your Cable/DVR service and use Apple TV as it ships today as your exclusive content consumption platform, even if you don't watch live or recorded television such as sporting events or nightly news programming.

In my home market of Northern New Jersey, local Cable services are provided by Cablevision/Optimum Online. "Basic" cable which replicates broadcast TV sells for $15.52 a month, and the "Family" plan, which has all the Tier 2 content plus the broadcast, sells for $55.95 a month. If you want all the HBO, Cinemax, TMC and Showtime premium channels, you'll pay about $100 per month.

This type of pricing structure is consistent with many of the Cable and Satellite providers nationwide. If you want to be able to record your programming, many consumers opt for a DVR device like the TiVo (which goes for about $300.00 plus an annual fee of about $130) or pay approximately $10 per month from their provider which activates DVR capabilities in the Cable or Satellite set-top device, which may or may not have upfront costs associated with it depending on the promotion at time of sale.

Also Read: Pondering an Apple Entry Into The Live TV Market

Also Read: Conan vs. Leno, The Last Great TV Scheduling War

Even at a reduced rate of $1 per TV show, the theoretical "iTV" consumption model as it has been presented still doesn't work out when compared to the maxxed-out $100-$120 per month cable and satellite packages, let alone the $60 family "Broadcast Plus" plans. Who wants to spend $30 per season of The Suite Life of Zack and Cody for their kids, let alone at the insanely ridiculous price of $86.00 it sells at now?

Arguably, these shows are currently sold as purchases, and not rentals, as they can be viewed over and over again, but it's still too much money. At a reduced price of $1 per show, Apple would likely be using the rental model like they do with their movies -- which requires that the content be viewed in its entirety within 24 hours after hitting the "Play" button.

For those of us with reduced attention spans or busy lives, that's a major disadvantage from traditional DVR services like TiVo, which sets no limit on how long the programming can be retained once you've begun to watch it.

None of this also accounts for the fact that a device like Apple TV is a 100 percent broadband dependent product. You'll still need a very fast Cable modem, DSL or Fiber-optic connection to make a service like iTV work effectively, even if it is smart enough to download everything you want to watch when your connection is idle, such as in the wee hours of the morning.

This also doesn't take into account that many customers tend to go the "Triple Play" route, where Cable TV, Broadband and VOIP services are offered at a reduced "bundled" price, often with a reduced first year promotional rate which then increases but is still discounted than if ordered a-la-carte.

But let's play with the numbers. If you decided to reduce your overhead by going with say, a $30 per month basic broadband, $16.00 per month Basic Broadcast cable, a TiVo at the yearly rate, and your 1 or 2 hours of Premium shows a day from Apple at the theoretical $1 per show (or $1 per hour, assuming half hour shows are 50 cents and not a full dollar), you would  come in at around $87.00 a month, assuming you bought only one $1 iTV show a day.

You can knock off $16.00 on the Cable part if you're in an area with strong broadcast reception and you can install a Over the Air antenna on your roof, but in a lot of areas, DTV signal is weak, especially if you live in multi-family dwellings or apartment complexes, where Cable is essentially a requirement for basic TV.

However, with a family of four, it's much more likely you'd buy at least two shows a day, which would bring you in at around $117.00 a month, less taxes. At three shows you're at $147.00. At four, you're at $177.00.

That's still more than a CableVision "Gold" package with all the premium programming, Cable Broadband a la carte, and their $10 per month DVR service. It just doesn't add up.

Oh, and if you think Apple's going to pull the commercials from the $1 per play programs, you can forget about it. It's going to be subsidized up the whazoo with advertising dollars to be able to compete at that rate.

To truly compete with cable and satellite, Apple is going to have to move towards more of a subscription model, which would have to be considerably LESS expensive than what Cable offers today, with much more flexibility on a-la-carte channel/content source bundles. I'm thinking around $50-$60 per month all inclusive for a typical premium package that would match a Cablevision "Gold" offering. And I'm not really sure that's doable, even with Apple's reach.

What about the other guys? Google has already stated that it intends to enter the TV market, with it's Google TV. However, rather than act as a single content delivery source, such as the theoretical iTV with iTunes and App Store, Google TV is more of a platform for the cable companies/satellite providers and set-top manufacturers, like Android is for Cell Phones and Tablets.

As such, it's designed more to integrate and consolidate the Web and Google's properties such as YouTube with your existing Cable and Satellite, DVR and On-Demand content packages (such as NetFlix and other PPV offerings) rather than to replace it. And it's this kind of model which I think makes the most sense.

What sort of pricing model would encourage you to replace your current Cable/Satellite content infrastructure with a Pay-per-show or subscription broadband-based service from Apple? Talk Back and Let Me Know.

Topics: Google, Apple, Hardware, Mobility, Networking

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

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46 comments
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  • you are forgetting the broadcast still exist.. and now in HD as well..

    with SD and HD broadcast available this sufficiently supplements our TV watching. We've dumped cable more than a year ago, i'm mostly a Movie watchers, my wife movies plus watches lots of series and to get the right plan for us we were over $150 a month for cable. iTunes + broadcast + $1 rentals & rip for us anyway is WAY cheaper than cable..<br><br>the only gaping hole that i see in what Apple offers is live sports and live events unless they are on local broadcast (olympics was.. ).. i'm having to go to the bars to watch my ppv boxing matches.. but that's fine.. little socializing is good... other stuff i try to find online with is not ideal..<br><br>also on iTunes.. <br><br>- you get a discount on shows if you purchase the series rather than show by show..<br><br>- from an appleTV you don't have to wait for a show to download.. you can stream it on demand.. this actually replaces DVR functionality.. typical wait for me is about 10 seconds to watch (7Gb/s).. 20 secs for HD.. and you can watch anything on demand at any time.. don't have to worry about storage space etc.. anything they have can be streamed at an instant right away..
    doctorSpoc
    • RE: Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

      @doctorSpoc Broadcast is not an option for many people as DTV signals in certain areas can be very weak, even when using Over The Air antennae. Not everyone lives in a major metro area.
      jperlow
      • Here is an example.

        @jperlow I live in a smallish city of 15,000 but our "local" TV stations are in the big (compared to us) city more than 50 miles away. You can receive over the air DTV but not very well and almost everyone has cable or direct TV. The other thing is that the only two broadband alternatives available to us are 1.5 MB DSL or up to 50 MB via cable modem. I chose the 20 MB level of service through the cable company and also get my voice phone service from them at a significant discount compared to the local phone company.

        But if I were to ditch the cable TV, the price of my phone and broadband would go up because I would no longer have one of their discounted bundles. That means that besides being cheaper than cable, Apple TV or any similar service would also have to be cheap enough to make up for the increased costs of broadband and phone service.
        cornpie
      • RE: Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

        @jperlow Over The Air TV Antennas, high defination or standard defination, can be used practically anywhere...greater than 70 miles in some situations! The technicians at Solid Signal will give you the best recommendation for your area.
        solid signal
      • RE: Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

        I LIKE GO http://goph3r.com/29d
        Really good
        lincc256
    • RE: Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

      @doctorSpoc
      The one thing I've been curious about with streaming tv such as Apple TV is buffering. When streaming do you get any buffering? I've been to a few sites like Hulu and YouTube and even Joost, all had their share of some buffering issues. Playback was going to fast for the downloaded content. Probably more of an ISP issue but until that gets resolved I'm not keen on the idea of streaming tv.
      Loverock Davidson
      • RE: Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

        @Loverock Davidson - rock solid.. have not had any problems at all.. as i've written.. a SD program buffers for about 10 secs.. an HD show for about 20-30secs and then plays with no sputtering at all.

        apple has a networking test that sends your info to apple.. this helps apple build out it's distributed media sever network for better download speeds.. i have not had an issue with buffering though... have seen some with issues on the apple forums, but honestly, very few..
        doctorSpoc
    • RE: Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

      @doctorSpoc
      K Dub
    • It doesn't sound like a good idea for families

      While it may be perfect for a one or two person home, for many the drawbacks would likely be having to do the controling for the kids in the house. If they don't like it or want to watch something else, you have to stop what you're doing and pick thru the list again, ect.

      It might get quite tedious after a while.

      Also you would want to know what it is you want to watch.
      As it is now, I can skip thru the channels until I find something interesting, or just record what I want to watch later. I'd hate to be paying for TV shows that turn out I wasn't interested in once I started watching them.

      We have the basic cable package, 130 channels, for approx 59 dollars a month. Will we watch 59 shows a month? Probally not, but that 59 dollars does cover 4 TV's (1 Cable Box, 3 DTA's) and the choice to jump around untill we or the kids find something we want to watch. If it's a specific thing, then we can "on demand" it if we want.

      Nothing against the concept, just that there are easier ways of doing things worth paying for.
      John Zern
  • RE: Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

    I'm still not sold on the whole internet TV thing just yet. I like watching TV in real time for the tv shows. No need to wait another day for them to be put on the internet. For movies I do the mail thing to get the movie fix, watch it, mail it back and get another. I will admit the one thing keeping me on cable tv is the price. I have the family plan which is your local channels plus a few DIY channels for $14/mo plus $7 box rental. So that's $21 for tv. That price is worth it to me. Also, if I pay per show or season I don't know when I'd get around to watching them. Could be money wasted if I never watch it.
    Loverock Davidson
    • RE: Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

      @Loverock Davidson - when we got a DVR our TV watching habits became completely asynchronous.. we recorded shows and then watched them when we had some time... two small kids..<br><br>now we've even gone one step beyond that.. now we've been buying series that we never watched or stopped watching on broadcast because we could never keep up LOST, Heros, Prison Break, 24 and go through the whole series maybe 1, 2, 3 (if just can't wait) episodes in a day.. watched 6 years of Lost in the past 6mths.. i found that is the best way to watch a series.. just banging them off one after another.. after a while it's like.. who cares when it aired.. i haven't seen it, it doesn't change the quality or enjoyability of it whether i watch it now or a year from now or 6 years ago in the case of LOST.. man was he ending of LOST a copout by the writer! reminded me a little of the season of Dallas.. don't want to spoil it for anyone who hasn't seen it yet.. lol..<br><br>anyway, i think you adjust.. i actually like it better.. broadcast doesn't work for us at all, we don't have time to be watching shows when they are broadcast with two young kids.. DVR is fine but iTunes/appleTV is like having a DVR with everything under the sun recorded on it..<br><br>on thing nice about living in Canada is that we have 48hrs instead of 24hrs like in the states to watch a rental after you start watching it (much better for people with kids) .. you have 30 days to start watching it.. actually if you just press pause and don't watch anything else on your appleTV or iOS device you can stretch out the time 'til forever.. the file deletes itself only when you stop or watch something else..
      doctorSpoc
    • also...

      @Loverock Davidson - we don't buy everything from iTunes store (maybe 10-25%).. it's much more convenient from iTunes, but some of the series we rent and rip because it's much cheaper.. have a system down pat for that takes a few seconds.. as i sit down to check email or browse something, i just throw a few disks in (i can do 3 at a time), meta data, artwork gets added with metaX.. literally with a couple clicks to the whole batch of shows.. same with movies.. we have a $1 rental box in the grocery store.. rent and rip.. watch when ever on appleTV.. kids movies that get watched 50 bazillion time.. that is So worth it..
      doctorSpoc
      • RE: Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

        @doctorSpoc
        Thanks for the insights, Spoc. Not sure if I'll ever go fully streamed tv but I wouldn't doubt if in the future I gradually adopt it more and more.
        Loverock Davidson
  • RE: Apple, Google TV: Does Pay as You Go Make Dollars and Sense?

    I suggested dropping the tv service portion of our cable, keeping the internet, and subscribing to Hulu Plus and Netflix, but my wife went into a panic, afraid she wouldn't be able to watch CSI: Wichita
    R.L. Parson
  • The big advantage is seamless transportability

    Where an Apple-centric media purchase and viewing system really starts to shine is for those with "reduced attention spans or busy lives" who should easily be able to buy content on one iTunes connected device, start to watch it on another, and when the invariable interrupt comes be able to continue viewing on another iTunes connected device. You select something from your iMac in your den, it starts downloading and you begin to view it on your AppleTV driven big-screen in the living room, but you don't finish it. Later you can pickup where you left of watching on you iPad in bed or using your iPhone on the morning BART trip into work. In a way, Apple is appropriating Microsoft's famous "3 screens and a cloud" approach, but is making money on the hardware, software AND content!

    And, let's not forget, Google is an advertising company, not a hardware, software or content creator. GoogleTV will be a way for them to inject ads into content that doesn't already have them, [i]additional[/i] ads into the content that already does , and the standard Google treatment of your search for media (i.e. tracking, parsing and targeting of your queries).
    matthew_maurice
    • yeah, googleTV is like boxee.. it's a concentrator of existing content..

      @matthew_maurice - it's not adding anything new... it's not a device or a content distribution service, but simply a concentrator of existing services.. <br><br>but i don't want a bajillion services all linked up together.. i want cheaper access to stuff.. either i'm going to take cable/dvr or i'm going the internet tv route.. if if have both i'm not saving.. googleTV links cable and internet tv.. that's not really doing anything for me i.e. saving me money.

      and as you say it's not helping me bring my content to any screen that i have in front of me at the time... to put a couple of TV shows on my iPod or phone so i can watch it on the commute into work or for my kids to watch their shows in the car etc.. i'm really not warming that much to the googleTV thing.. other than allowing google to track you and target ads to you better i'm not sure what googleTV is doing for me.. don't get it.. i see another google wave type incident on the horizon here..
      doctorSpoc
  • Economic reality kicked in for us.

    Premium cable went out the door for us earlier this year, as did movie theater and sports tickets. I kept basic cable, broadband, and Netflix with their online service. Wife and kids are all indoctrinated now with the concept that you don't have to watch something the minute it gets released in order to enjoy it. Hollywood and the media cartels make so much of their profit because people don't have the least little bit of discipline and self-control anymore.
    terry flores
  • 180 bux

    Internet + Digital Cable + HBO + HiDef + 1 DVR = over $180/month. I just can't watch anything in standard def anymore! Comcast is really hanging me out to dry - and I have no other alternatives (living in High Rise facing North).

    I would LOVE to change my situation - but I require Big10 network (for my alma matter Michigan) for football. If one of these companies can provide sports online - then the cable monopoly could finally be broken.
    Roger Ramjet
  • No, Pay As You Go Does Not Make Financial Sense For The Consumer

    At $0.99 for each viewing of a TV show it would cost between $12 and $24 for a day's programming (12 hours of viewing). That works out to over $350 per month. Maybe as much as $800 for the month. No friggin' way. Count me out. I want a package price. And I want it to be cost competitive with cable and satellite.
    sismoc
    • you watch [b]12hrs[/b] of TV a day???

      @sismoc - you need to get out more man.. lol..
      doctorSpoc