I was reading the blogosphere today and stumbled upon a great article from NewTeeVee. Their article discussed how Apple may change the TV industry as the iPod did for the Music industry. It got me thinking about the numbers behind TV shows which I’ve decided to share here.
Disclaimer: These numbers are all that I could scrounge off the net, if anyone has more accurate numbers contact me and I’ll update the post.
I watch a lot of TV. Enough TV that my Cable bill minus High Speed Internet comes out to about $110 a month. Which means I’m spending $1320 a year on television…WOW. To break it down for you, the shows I keep up with regularly include:
Lost, Rome, Family Guy, The Riches, Heroes, Studio 60 on the Sunset Strip (cancelled), Entourage, Nip/Tuck, The Office, The OC (cancelled), Curb your Enthusiasm, The L Word, Carnivale (cancelled), Weeds and Dexter. This comes to 15 shows a year that I watch. This doesn’t include random flipping through the channels watching the Discovery Channel or the History Channel when they have interesting stuff on. This also doesn’t include any sports of any kind (I try to keep up with my Longhorns).
Assuming I buy an AppleTV, cut my cable subscription, and can get all of these 15 shows via iTunes, what will I save? A season pass on iTunes costs $35, I watch 15 shows which brings us to $525. That’s a savings of $795 a year. I wouldn’t be able to watch my Longhorns on ESPN, but I can go to a bar and spend some of my savings on that. I also wouldn’t have mindless entertainment like infomercials and those occasional cool shows like “Battleground: The Art of War” on the Discovery Channel. But I can buy these types of shows one by one if I choose once iTunes broadens its reach. I can also surf the limitless Video Podcasts that spring up day after day.
I don’t know about you, but that sounds like a great deal to me. Even better, I get to keep these shows once I’ve seen them and bypass purchasing a season I like on DVD for an extra $60.
What about the cash flow for the industry? From the shows I could find, Rome’s first episode pulled in 3.8 million viewers. Let’s pretend they kept all their viewers and sold all of them $35 subscriptions to the show instead. That’s $133 million on a show that cost roughly $100 million to make. Not a bad profit on a high budget series. Heroes brought in 14.7 million viewers last week. Cut those viewers in half and sell them each a $35 subscription…$257 million.
I’m not in the industry, but that is a lot of dough. If they can figure out how to squeeze a few extra dollars with product placement, we have ourselves a nice little business. Knowing that this kind of money can be made through iTunes in the next five years, will we begin to see companies popping up that create great shows but never release them on any network other than iTunes? I don’t see why not. We as the viewer will get the best of both worlds, more quality programming at a cheaper cost.
AAPL is a major buy in my book…
Chad Sakonchick 
Great article and analysis, Chad. I think a lot of people are going to be running those types of numbers and coming to a similar conclusion. What is unknown is how people will think about the inconvenience cost of actually ordering the shows they want to see. It certainly will involve more work than just changing the channel. On the other hand, Apple may have some new services up their sleeves that will make viewing your favorite shows no more complicated than changing the channel. We’ll just have to see.
Carl
I’m doing the same calculation myself, though without Apple TV (my plan is to directly connect a new iMac to the TV, once the new iMacs are released). (No harm to Apple – they get a $1,500 sale instead of a $300 one.)
One thing I think people underestimate, though, is the impact of the iPhone, for similar calculations. Once the iPhone is out, I plan to not only switch to AT&T for mobile phone service, but actually switch from Directv to AT&T’s offering (Dish?), and AT&T’s DSL offering for internet. (Unless, of course, I drop broadcast TV altogether, though it may be too premature for that.)