Apple (AAPL) is at work on a experiment to offer users of its iPad, and perhaps its iPod, American TV shows for $1 per download, according to several media sources. This is a 50% discount on the current price of $2 per show that iTunes currently charges. The consumer electronics giant has deals with several television networks and is in talks with others.By most accounts, the test is simple. Apple and its content partners want to know if there will be a spike in demand for TV content if the prices of the programs is cut in half. If there is, both Apple and the content companies that do business with iTunes would have greater total revenue for their digital download businesses. The FT reports that, "Media executives are under pressure from declining DVD sales and cut-rate rental services such as Redbox, that offer rental DVDs for $1."
The plan has a drawback for TV networks that may lose control over the pricing of their own products. Their counterparts at music publishers already resent the fact that Apple is so powerful in the digital song and album distribution business that it can set prices on content. The music companies believe that, in many cases, they could command higher prices for the work of their artists.
The objections to Apple TV price plan is not unlike the battle that eventually developed between Amazon (AMZN) and book publishers over $9.99 e-book prices. Publishers would like to charge amounts closer to $15. Their battle with Amazon is ongoing, although the e-commerce firm seems to have settled price point differences with large book publisher Macmillan.
Once Apple begins to sell TV shows for $1, the networks may not be able to put the genie back in his bottle. Consumers, who will grow used to the low price, may not accept a $2 charge any more.
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