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Does Disney, Apple Deal Foretell The Future Of TV?

Posted by inet - 2005-10-19

Apple's announcement last week that it was launching a new version of its popular iPod that includes a video screen may have larger ramifications for the media industry beyond the world of consumer electronics. That's because of the potential impact of Apple's deal with Disney to offer five of its shows for sale through Apple's iTunes software, including hits Desperate Housewives and Lost.
 
This marks the first real opportunity for consumers to buy episodes of premium prime-time shows during the season they first air—in this case, 24 hours after broadcast.

"I think it's the most intriguing part of the deal," said Nitin Gupta, an analyst at the Yankee Group.

Intriguing for its certain effect on the TV distribution business. Sources say that both NBC and the WB have already held discussions with Apple about distributing programming via iTunes, but that no deals are imminent. While none of ABC's competitors would comment directly on any potential discussions, there were no flat denials. At CBS, spokesman Dana McClintock said, "Certainly we are talking to all imaginable Internet and digital companies. There are all sorts of ideas for distributing our content on various platforms."

Meanwhile, Deborah Reif, president, NBC Universal Digital Media, issued a similar statement: "NBC Universal Digital Media is having conversations with many top players. Our goal will always be to make sure that the consumer has a great experience, and that our content is well-protected."

Reif's statement implies that piracy concerns may be holding some networks back from executing similar deals.

Already, TV fans regularly trade episodes of shows using peer-to-peer file-sharing services. But it's that dynamic that may have prompted ABC to act.

"The beginning of a legitimate service would be filling a consumer need," said Gupta, who speculated that ABC is addressing that need before they determine how to make money. "I don't think $1.99 is a compelling business model. ABC is trying to gauge the market."

Added Jeffrey Logsdon, senior research analyst at Harris Nesbitt: "Consumers are still in their infancy when it comes to becoming a subscriber [online] or buying la carte. Right now, these are not significant revenue deals."

As for advertising, some are surprised that ABC's shows will be sold without commercials. But Apple may not be ready to test consumers' tolerance on a device that thus far has been ad-free.

"Consumers are not going to be looking to iPod for more commercials," said Logsdon.



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