Canadians Now Offered Less for a Lot More on iTunes
Last week, iTunes music store started carrying shows from major Canadian broadcasters. First to the party are CBC and CTV. Finally, Canadians have a choice of where to get their video entertainment besides buying it from the Devil (Rogers) and his much-less-hip cousin, Bell.
Someone wants this to fail.
I was curious about the quality, pricing and experience, so I bought an episode of The Dragon’s Den. The specifications are 500MB, 45m, 640×320, 1.5Mbps (approximately).
Anyone with any experience with DIVX would expect the quality to be fantastic, but they would be wrong. I suspect the video was encoded in a single-pass instead of a two-pass, because the compression artifacts were quite apparent. Top marks for the oft-overlooked audio quality, however.
So after being somewhat under-whelmed by the video quality (and quite enjoying the show), my first reaction was that I would buy the next episode.
Then I got to thinking.
$1.99 for one episode? Or $19.90 for the 10-episode season? What a deal.
Let’s break this down.
Let’s say there was enough tolerable content on Canadian iTunes to justify watching one episode of one show per day (not even close, but bear with me).
That would cost about $60 per month, plus my Internet service.
Many of these are shows that can be captured at better quality with rabbit ears – for free (but not for long 1 and 2).
How much does it cost to deliver this content?
Taking Dragon’s Den as an example (a 45 minute programme).
Let’s say they are using Amazon S3 for storage and distribution.
Amazon charges $0.15/GB of storage and $0.20/GB for data transfer.
Therefore the cost of digitally distributing Dragon’s Den is about 17.5 cents, plus the time/cost to encode the video.
How about a 21-minute Comedy Central stand-up bit? About 8.5 cents.
Now, let’s assume (because data for video is not readily available) that the pricing model is similar to music tracks.
Needham’s Charles Wolf claims that,
“on a 99 cent single, Apple pays about $0.65.”"Apple incurs three variable expenses in delivering songs. One is the cost of servers. A second expense is bandwidth,” he says.
“The third major expense for Apple is credit card charges. Credit card companies charge 25 cents for each transaction plus 2-3 per cent of the amount charged.”
No doubt that the banks are bigger pricks than Apple, but if the video system works like a podcast, the broadcaster hosts the video and pays for delivery. Either way, the cost should be similar.
$0.25 (cc) + $0.06 (cc%) + $0.17 (storage & delivery) + $0.60 (Apple’s Cut)= $1.08
That makes CBC’s cut on an episode of Dragon’s Den $0.91.
So they make about a buck per episode. Nice margins.
If you buy the season:
$0.25 (cc) + $0.60 (cc%) + $1.70 (storage & delivery) + $5.97 (Apple’s Cut) = $8.52
That’s a sweet $11.38 for 10 episodes of Dragon’s Den. That’s free money!!! No DVD, no artwork, no shrink-wrap, no truck, no gas, driver, no warehouse dude, etc…
And the media industry wonders why people steal.
Maybe Apple is screwing the broadcasters, maybe the broadcasters are trying to screw me, but no matter how you slice it, I am not paying through the nose for low-quality shows.
I guess we’re just not there yet.
