Because everyone is actually willing to pay for content, if the price is right, and it is sufficiently easier than the free alternative.
Case in point: TV shows. You can either click a single button and download the TV show from really fast servers, be notified of new episodes (and even auto-download) automatically...
or you can go to a shady torrent site with porn popups all over the place, install a torrent client (and set it up, which behind a NAT is non-trivial for most laymen), find a good torrent search engine, download your torrent, and curse your machine because public trackers are full of leechers who don't upload.
Exactly. Where are my $2 episodes that I can download legally?
A decently popular cable show probably has around 2 million weekly viewers. Make it super easy to get the episodes in 720p for $2, and that is $4 million a week in revenue, or $80 million for a 20 episode season (plus merch and dvd collections afterwards). I'm not sure what a season of a given cable show costs to make, but I'd be surprised if it was $80 million.
From the consumer's perspective, we are used to paying $60-100/mo for cable. If episodes cost $2 and we watched four a month, that is $8 per show per month. Our normal $60-100 would buy us 7-12 shows, which I imagine is more than most people follow anyway.
Same could be true for sporting events. I'd gladly pay $4-5 to watch streaming high def games. The company would make a killing off me in March, but I'd still pay it because it's worth it to me to not have to buy a whole cable package just to watch one month of basketball.
Where are my $2 episodes that I can download legally?
Amazon On Demand, I think they call it these days.
It has, quite literally, every American TV show I have watched in the last 2 years.
The player is terrible, and throws up 3 prompts to escalate every time I open or close it on Vista. The download speeds are slow. The quality is unexceptional. But darn it, TV for $2 an episode -- I'm there.
(I'm not the world's best spokesman because I live in Japan, all of their stuff is licensed for the US only, and I get it by using a proxy on my server in St. Louis to defeat their geocoding. If the rights holders really want my yen instead of my dollars dupe this in Japan and you've got them.)
I don't want to watch it on some crappy player in my browser (although I love Hulu and am willing to do browser + commercials for free content), I want to download a DRM-free 720p video file. Basically I want the same quality I can find on TPB, and I'm willing to pay a couple dollars an episode for it.
Make it easy to get (rss feed of torrents so I can just set it to automatically download) and I'd gladly pay to support a show I liked.
(And really it doesn't have to be a torrent if that word scares the networks. I was just suggesting that because it'd save the provider A LOT of bandwidth.)
Internet distribution is also a good way for studios to try out riskier ideas. The problem with the broadcast TV structure right now is that nobody dares put an aggressively creative show in a prime time slot - it's money on the table basically. So great new shows that may have attracted a solid fan base get thrown into suicide time slots, and inevitably fail.
With TV-on-demand (in all of its forms, not just the pay-per-episode format) you can do two things:
- Make risky shows just as accessible as the top blockbusters, giving them a real shot at success.
- Play with your price point. People may be willing to pay $2 an episode for Lost, but maybe they'll pay less for a more obscure show? Who knows, maybe you can charge more.
Up here in Canada Apple doesn't offer most of the shows that I follow, or I would be a regular customer... Neither does Hulu or Amazon... a bit of an untapped market I think, especially given how high cable rates are around here...
The thing with $2 per episode is that once I watch an episode, I don't really want to watch it again (at least for a month or so). $2 per show is too much for 1 watch. Subscriptions are a better route IMO. I could watch whatever I want (new and old) whenever I wanted without commercials and on demand. ATT Uverse has something like this: We pay for the monthly access, and I can watch VOD (Video On Demand) - both movies AND tv shows, and I'm mostly happy with it. Hulu is my favorite option right now, but I can't go back and watch older shows.
Our cable bill is like, $80 and that includes internet. So maybe $40 of that is for TV.
And I watch a bunch of different shows. CSI x 3, Law and Order, Bones, House, NCIS, Fringe, The Mentalist, Psych, Criminal Minds, Numbers, Law and Order, Lie to Me.
At $2 a show, per week, that'd set me back.. about $110 a month!
Simplicity: Each purchase represents a discrete function users require in a package that doesn't have a steep learning curve.
Value: Customers are leveraging the wisdom of crowds (aka popularity) to help them choose an application (aka functionality) via Apple's App Store.
Barrier to Entry: The implementation promotion game includes the developer application process and cost, and the price point of the application.
Not-Quite-Open Platform: at&t and international cellular providers' customers aren't limited by enterprise inefficiencies or by the device manufacturers; customers can upgrade their iPhone with ease.
Leveraging Free Software: Apple is leveraging a customized version of BSD with a GUI brand/standard optimized for a single device (assuming cellular data technology is just a feature) instead of a product line.
Operational Excellence: Apple is easing into the mobile market instead of throwing a bunch of devices at customers and seeing what sticks; that's expensive.
Good Luck and The Global Economy: The iPhone was an investment during good times; customers are saving money and not looking to upgrade right now.
Ecosystem: Customers are building systems that compete with the established software companies and service providers in each vertical by blending mobility with simplicity. Oh, and the Apple iPhone experience is good with the PC... it is better with a Mac.
They're willing to pay more for a better experience; that's why they bought the iPhone.
Apple made their side of the buying process really wonderful, and the content providers did the same, and the buyers have had generally positive reactions so far.
I'd pay for convenience, but most pay sites ask for my money PLUS they reduce convenience.
For more free content, I can just click and get it. But when I want paid content, I have to fill out a form + get out my credit card + create a password.
It's something I can hold in my hand. It instantly crosses the barrier from "that's something I've seen on the internet" to "that's something I can show you in my hand right now" without having any duplication cost. All kinds of win.
iPhone owners tend to be better off, at least in my experience, than the average web surfer. Not a big surprise here that they would spend more money. Still, Apple had to create this success, it wasn't thrown at them.
People who bought the iPhone have already bought into the notion that paying a premium you into a tier of exclusively higher quality experience. Paying for content once you have the iPhone is just an extension of, and in fact, a way of reconfirming and validating the decision to pay all that money for the iPhone to begin with.
It will be interesting to see if as time goes by the quality of iPhone apps decreases and tarnishes the expectations of quality or not. For now i think the gloss of quality from the iPhone carries over into an expectation about the apps themselves, so people are not nearly as wary of iPhone apps as say, I am about all the random shareware floating around in the PC market in the same price range.
For me, it's that I forget how many I've already bought and the developers and apple have done a sufficiently good job at making the "lite" versions seem uncool. Kind of like being the kid in school that always has the second hand stuff. People want to pay for the real thing.
One way of getting stuff that I've wanted for a while is to be able to pay for a series up front + maybe a bit extra, download it as they come out, then at the end of the series get the dvd/blueray box set.
Case in point: TV shows. You can either click a single button and download the TV show from really fast servers, be notified of new episodes (and even auto-download) automatically...
or you can go to a shady torrent site with porn popups all over the place, install a torrent client (and set it up, which behind a NAT is non-trivial for most laymen), find a good torrent search engine, download your torrent, and curse your machine because public trackers are full of leechers who don't upload.
Yeah, I'd pay for the former too.