Apple (Nasdaq: AAPL) is in a pricing battle with its content providers again. It just can't seem to convince everyone that $0.99 is the right price for television rentals on the new Apple TV, and I can't say I blame media for putting up a fight. This is the same problem Apple had with the music industry as the iPod and iTunes grew to dominate the industry, but this time around Apple is only a small player in the media business.
Apple's problem right now is the litany of options content providers and consumers have in the television business. There's not only the normal network feed but also online shows, DVDs, and streaming content from partner/competitor Netflix (Nasdaq: NFLX), etc. That leaves Apple in an unfamiliar underdog role; short of the smashing success we're accustomed to seeing from Apple.
Apple has signed up Disney (NYSE: DIS) and News Corp.'s (Nasdaq: NWS) Fox for Apple TV rentals, but even those wins come with an asterisk. Steve Jobs is Disney's biggest shareholder and Fox views the Apple TV deal as a test-run.
GE's (NYSE: GE) NBC Universal, CBS Corp. (NYSE: CBS), and Viacom (NYSE: VIA) are having a much harder time being persuaded to join Apple. When talking about the $0.99 price point, Viacom's CEO simply said, "It doesn't work for us." This may not close the door for any of these companies, but Apple may have to be more flexible with price or offer a subscription model to persaude more content providers to hop aboard the Apple TV bandwagon.
Apple doesn't have nearly the bargaining power this time around that it did when the iPod ruled the music world. Media companies have other distribution channels and some appear entrenched against Apple's one-price model. Eventually, Apple gave in to the music industry, offering three pricing options. Could this be a similar roadmap for compromise with Apple TV?
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Fool contributor Travis Hoium watches too many movies on Netflix and does not own any company mentioned here. Walt Disney is a Motley Fool Inside Value recommendation. Apple, Walt Disney, and Netflix are Motley Fool Stock Advisor selections. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days.
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