Love it or hate it, Apple (Nasdaq: AAPL) is often a powerful agent of change. Deeply rooted business practices and decades of tradition tend to evaporate when Steve Jobs and his gang move into a new industry. And even when it isn't much of a catalyst, the company often acts as a useful tool for gauging the winds of change.
The latest example
This week, The Wall Street Journal reports that the movie industry is deeply divided over what the redesigned Apple TV box means to their business models. I think it's instructive to look at what the studio heads say about this trinket, because it speaks volumes about their chances to survive in the digital millennium:
- Philippe Dauman, CEO of cable conglomerate and Paramount parent Viacom (NYSE: VIA), hates it: "The 99-cent rental is not a good price point. It doesn't work for us." In Mr. Dauman's view, Apple doesn't appreciate how much Viacom's content is really worth.
- Outgoing NBC Universal CEO Jeff Zucker would agree with Dauman. NBC has a long history of squabbling over episode rental prices in Apple's iTunes media store, and the company won't be a part of the Apple TV platform at launch.
- Neither will CBS (NYSE: CBS) -- but CEO Les Moonves doesn't take a hard line against Apple: "There are two networks in and two networks not in. Let's see what happens and maybe we'll talk again in January, maybe we'll talk again next year."
- News Corp. sits in almost the same boat; the company is somewhat skeptical of the Apple TV business model but will make content available from the start. Why? Because "we have to be willing to test some things."
- It should come as absolutely no surprise when Walt Disney (NYSE: DIS) throws support behind Apple's new living room project; Steve Jobs is the company's largest shareholder and sits on the board of directors. What might surprise some is that Disney's commitment to a digital future goes back further than the Pixar acquisition. CEO Bob Iger notes: "We made a decision five years ago -- actually, when I got this job -- that we would be much better off aligning with technology companies than fighting them. You can't will technology away. It is real. It's here."
What are we looking at?
If it weren't obvious on a first reading, let me explain that the studios above are listed in strict order from least to most receptive of new trends. Time Warner (NYSE: TWX), which isn't huge in television properties, but certainly casts a wide shadow in the media landscape, would fit in between News Corp. and Disney by my estimation. Several of its executives have shown signs of digital life for a long time.
NBC and Viacom come across as tone-deaf and insensitive. If the pricing model needs work, that's something to figure out after the launch. I don't imagine that either content providers or consumers sign perpetual contracts with payment terms and selection policies in blood, after all. Prices change all the time; why would a brand-new device and its equally newborn service be any different?
Apples and pomegranates
I can see how some executives might bristle at putting the same $1 price tag on an expensive episode of "Lost" as on the latest ear-candy opus from Britney Spears or Jay-Z. The audiovisual extravaganza of a scripted TV series takes longer to produce, costs more, and involves more people behind the scenes than a simple song.
But then you're thinking like a producer, not a consumer. You buy songs to consume over and over again in your iPod, car stereo, home entertainment system, and anywhere else you can think of. If you forgot to set your DVR for "Lost" one week, you probably just want to watch it once. Only the truly rabid fans of a particular show will do repeat viewings. From this perspective, consumers already pay a premium for TV rentals when compared to the much longer legs under a piece of music.
Change or die!
It's in all the studios' best interest to take the consumer-centric world view and start selling their content on terms the average viewer would agree to. Disney and Warner are already there; News Corp. and CBS just need a friendly nudge in the right direction; and I think the glory days are over for NBC and Viacom, unless they have radical makeovers at the top.
If Apple doesn't force a change by itself, Google (Nasdaq: GOOG) will pile on with its Google TV project this fall. Netflix (Nasdaq: NFLX) is getting the revolution off to a good start with a strong streaming business. The winds of change are already blowing hard, and only the strong studios and networks will survive.
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