But the revenue generated by Apple’s downloads is insignificant to the studios compared with advertising and cable revenue.
Still, Apple is already providing a carrot -- a way to monetize with direct purchases by the user. What they have not done is apply the stick. Yet.
Apple sells Apple TV. Most pundits also expect Apple to sell an actual TV set. These TV products enable you to buy TV shows via Apple, and download shows, movies and videos from the Internet. But most of the options are offered either by somebody else’s agency model, or by somebody else’s advertising model.
I believe the Podcasts app holds the secret for Apple’s whole TV strategy: Nudge content creators away from other models and toward Apple’s agency model. Apple will boldly create a way to make TV advertising optional. By doing that, they will “starve” content creators while simultaneously offering them sustenance in the form of selling their content on iTunes.
Once Apple attains significant market share for the TV market, they could enable viewers to skip TV commercials. They may even automate the process.
Apple didn’t invent the idea of skipping commercials. Others have tried it, most recently Dish Network, which rolled out its AutoHop feature on a new super DVR called the Hopper. The DVR can record all the major network shows simultaneously, and after a day, erase all the commercials.
The problem with Dish Network’s ad skipping is that it’s a losing proposition for the studios. Dish uses network programming, but denies the networks full monetization. Dish’s proposition is: Just make less money.
Apple, on the other hand, offers a superior alternative: Studios would be able to charge whatever they wanted to charge. They could make more money.
In addition to podcasts and TV, the magazine industry will be targeted next by Apple’s nudging toward the agency model on iTunes. And newspapers.
Again, I think this will be a nudge, not a radical shift. Apple will probably allow an easy way for subscribers to optionally skip ads, while giving publishers freedom to set prices.
So the question is: Does Apple’s agency model represent a business model for selling content that is superior to the advertising model?
The answer is: Probably.
TV, newspapers and magazines all have one thing in common: Their business models are in trouble. All these industries are facing certain decline, dwindling revenues and unrelenting competition from Internet-based alternatives.
Something has to change, or these industries will die.
Apple’s agency model is attractive because advertising is an unreliable and unpredictable and constantly declining source of revenue.
If my prediction is right, Apple would offer content creators a predictable and constantly rising source of revenue. Every new subscriber, in fact, increases revenue. The growth model is to simply grow subscribers.
Content creators would still sells ads elsewhere. But on Apple platforms, the content would be generally ad-free.
Ad-free content is attractive to consumers. Apple’s platform gains viewers and subscribers. And Apple’s agency model takes over as the main source of revenue for TV studios, newspapers and magazine publishers.
It could happen. And I think it will.