The test, expected to coincide with the April consumer debut of the iPad, will
offer some shows at the lower price as a way to test whether reducing the
cost of video programming will ignite sales, people familiar with the
discussions said.
Some television networks agreed to the lower prices after months of
negotiations, and having initially resisted Apple’s push. Media executives
are under pressure from declining DVD sales and cut-rate rental services
such as Redbox, that offer rental DVDs for $1.
It is not yet clear which or how many of the US free-to-air and pay-television
networks have agreed to the lower pricing. Some media executives said they
have not been approached with the new prices.
Apple declined to comment.
“If you move five times the volume [of sales] at half the price, it’s a good
idea,” one digital media strategist at a big US media conglomerate said.
“The argument for holding the line gets bad quickly.”
One executive said iTunes’s 120m active customer accounts with credit cards on
file provides a ripe ground for experimenting with changing the economics of
digital media.
“It’s a good time to do it,” another senior media executive said.
Since iPad was unveiled in January, Apple has focused on improving its
business of selling TV shows, said one media executive briefed on the talks.
The computer maker has not given up on earlier discussions with some potential
partners about creating a “best of TV” subscription service for $30 a month
that media companies fear would destroy traditional distribution
relationships.
Those relationships with US pay-TV services such as cable and satellite TV
companies reaped $25.3bn in fees in 2009, according to estimates by SNL
Kagan, a data company.
Apple executives have been careful to avoid linking new TV services to its
Apple TV device, a set-top box which connects to a television and is seen as
a threat to traditional pay-television services, said media executives
briefed on the talks last year.
That is partly why discussions so far have focused on iTunes’s $1.99 TV shows
in standard-definition formats that would work on the iPad, rather than the
higher resolution $2.99 TV shows in high-definition format that would fill
up a large screen television.
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