Why some TV networks are unhappy with Apple TV

by Phil Hornshaw

For Time Warner Cable’s programming, Apple TV’s 99-cent rental fee is too low. And Time Warner isn’t the only company that thinks so.

Jeff Bewkes, Time Warner’s CEO, said the price doesn’t make sense when he spoke at the Royal Television Conference in London this week, according to cnet.com. And he went even further to say such a low price point for first-run shows could jeopardize the release of shows to TV viewers for free, because it could undermine the sale of those shows to networks.

So Time Warner, and by extension its television networks including HBO and CW, are out (at least for now) of Apple TV distribution. You won’t be renting episodes of True Blood or Supernatural on Apple TV (and that’s a serious contribution to my not buying one). And NBC is out, too – cnet reported last week that CEO Jeff Zucker said at the Goldman Sachs investor conference last week that a 99-cent rental fee would “devalue our content.” Oh, and Warner Bros. Entertainment CEO Barry Meyer also has expressed his dissatisfaction at the rental price.

A disruption to the traditional TV business model

The business of TV shows is a little complicated. Often a studio, even if it’s also a network itself, will make a show and sell it to another network, which will run the show and make money off selling advertising. The studio that made the show doesn’t usually start to see a return on its money until it can sell the show in other markets a few years later, like overseas or in syndication.

Basically, Bewkes thinks making TV available for so cheap can hurt the selling of shows, which could also hurt the making of shows. Network contracts usually last for years when a show starts up, so studios legally can’t sell their shows elsewhere until a certain amount of time has passed. But if services such as Apple TV make getting to TV shows so cheap and easy, it could undermine syndication sales – why bother to buy and offer episodes if they can be snagged early and often for cheaper from Apple?

ABC and Fox aren’t in the same boat as Time Warner and NBC, however. Those networks’ content is available on Apple TV right now. And the question of price doesn’t necessarily mean Time Warner and NBC are out of the loop for good – Apple TV could easily make a syndication deal with both companies just like any other network, which would allow Apple TV owners to rent and stream older episodes of hit shows. But first-run content seems like it’s not going to happen for a number of great shows when it comes to Apple TV.

Or does it?

Apple TV is more than just TV

We speculated yesterday about the kinds of apps companies might offer using the new AirPlay software that makes it easier for Apple products to communicate and share content with each other over a local Wi-Fi network. This same connectivity means we might soon see some third-party (and less-than-authorized) streaming and content apps meant to get around the NBC and Time Warner restrictions.

DVR services, obviously, are a possibility for TV-to-computer connectivity, but NBC and Time Warner’s own web presence might work against them. Like the other television networks, NBC offers a lot of content online at NBC.com and you can usually find the last four weeks’ worth of a currently airing show available for free, online. The same is true for Time Warner’s CW network website at thecwtv.com. All that’s necessary is an app that lets users stream these websites from a networked computer to Apple TV.

And both companies offer some first-run shows for free on Hulu, which can be streamed to devices such as the Xbox 360 and Playstation 3 for a price using programs such as PlayOn (and PlayOn already has an iPhone app – Apple TV functionality isn’t probably far off). Hulu Plus, an expanded subscription service, has an iPhone app and could easily bridge its functionality straight over to Apple TV. Or Apple could just add an AirPlay function in which Apple TV becomes your computer screen during web browsing. Debate over.

If NBC and Time Warner don’t offer their shows to Apple TV users, and Apple TV becomes as popular and connected as it could, expect to see the Internet finding a way to make those shows available to users who want them. NBC and Time Warner could nip this by offering connected apps that make their shows available (an HBO app selling season passes, per show, would be pretty brilliant for Time Warner and probably drag in lots of money among people who don’t want a whole cable subscription), but it’s more likely that a combination of free services, connectivity apps, and file-sharing will end up spreading these shows to Apple TV regardless of what the networks think.

It’ll all depend on whether Apple TV blows up or not. Instead of encouraging a bunch of innovation, increased availability, and diversification of TV services – which would be great, especially for those of us who opt for streaming and Netflix over a cable subscription – Apple might just cave, make deals with the networks, up its TV rental prices and increase its subscription options.

Stay tuned.