Apple is prepared to start selling TV shows for one dollar to build interest in its celebrated new iPad. Today, television shows on iTunes sell for $2.99, but Apple is hoping that the reduced price will either juice interest in its new shiny hardware and/or stoke overall TV episode sales.
But this is about more than TV. Apple is starting a small revolution in three big categories.
The first is with the e-reader market. Apple’s competitive advantage in
this world is not books — Barnes & Noble and Amazon have been in
the book business a lot longer than Apple — but entertainment.
To be successful to potential e-reader buyers, Apple will market the
iPad as an all-encompassing entertainment hub that, oh by the way, can
also read books. That means building an e-book platform but also the
apparatus for consuming music, television, movies and forthcoming
digital platforms. The e-reader world is responding. Amazon recently acquired a touch screen technology company and is
rumored to be building a color screen in response to the iPad.
The second level Apple is testing is the TV market. Having
revolutionized the a la carte music market by selling individual
songs on iTunes, Apple is moving on to the a-la-carte television market
by selling individual TV shows on iTunes for a dollar. This will be a
fascinating move to watch because the TV market has long been the
opposite of a-la-carte. On TV, it’s all about bundling: cable charges
viewers for access
to thousands of shows at one flat rate. Even Netflix, which rents and
streams TV shows and movies, charges a monthly fee for X number of
rentals rather than charging individually for specific shows. People are used to
paying for television, but (unless they’ve been downloading TV episodes
from iTunes already) they’re not used to paying for individual pieces
of TV content. We’ll see how this shakes out.
The third level Apple is challenging is the computer market. The Apple
iPad is a simple personal computer. It can run Microsoft Word*, it can
access the Web, and do other computery things. But the Apple iPad can’t multitask — not yet anyway — so it
cannot be a first-order work computer. The difference between the iPad
and other personal computers — and I think this is key — is that most
PCs are work machines on which you can procrastinate, whereas the iPad is an entertainment machine on which you can work. That’s a big difference and the iPad’s profit margin relies partly on consumers’ willingness to move into the second category.
*As commenters point out below, Apple has not announced that the iPad will run Microsoft Word, only that it will be compatible with Word.
