Apple Gambles On TV Episode Rentals: Does This Change The Game?

Apple Launches Upgraded iPod

This is the new, smaller, cheaper Apple TV that will let you (among other things) rent episodes of television for 99 cents. Is that the wave of the future? Justin Sullivan/Getty Images North America hide caption

toggle caption Justin Sullivan/Getty Images North America

The new Apple TV that Steve Jobs announced yesterday will do a bunch of different things. It will let you put Netflix streaming content right on your TV, which you can already do with various TVs, gaming consoles, DVRs, standalone boxes, and Blu-ray players, meaning this is not an innovation so much as something that would sink the Apple TV as a competitor instantly if it weren't offered. It will let you rent HD movies without acquiring a physical DVD — which is something you've long been able to do in a variety of places, from iTunes to Amazon to the "On Demand" button of your cable remote.

But the most genuinely novel thing Apple is doing in conjunction with the release of the new Apple TV is changing the basic iTunes approach to selling TV shows from two or three dollars per episode (HD costs more) to 99 cents — in return for the fact that it's not a purchase; it's a 48-hour rental.*

Apple has only ABC/Disney and Fox on board right now, along with BBC America — the vast majority of television isn't included in the rental project anyway. But Jobs is confident, he says, that they'll come around.

Why This Isn't Like Music

By invoking the 99-cent price, Apple undoubtedly would love to suggest similarities to the massive quake it caused in the music industry with its 99-cent price for downloads of individual songs. But for several reasons, that's not a particularly apt comparison.

First and most obvious is the fact that with that model, you paid 99 cents and got to keep the song. Here, you pay 99 cents and once you start watching the episode, it's gone in 48 hours. Certainly, songs and shows are different in that people may listen to a song hundreds of times, but only the most hardcore fan would ever watch television episodes that often.

But there's also absolutely no history of people paying to rent television episodes on a per-episode basis. The new online models that have done the best job of changing the way people watch TV have either involved purchasing episodes or full seasons, much as they'd purchase a DVD, or have involved giving an all-you-can-eat selection either with a paid subscription (Netflix) or with ads (Hulu). People bought music before iTunes, but people have never regularly rented television episode by episode with no ability to record it or save it for later. This will require a substantially larger shift in consumer habits than buying 99-cent songs did.

Why Episode Renting Isn't Ready To Replace Cable

So let's assume Steve Jobs is right. Everybody gets on board, you can get all the shows you like via episode rentals, and everybody has an Apple TV in their home. Could this arrangement take the place of the much-maligned current cable structure?

If it does, it probably won't be soon, and it may not come without tweaks to the model.

One issue is convenience. How often does one member of the family watch a show at one time, and another one pick it up off the DVR at another time? Will all those families want to coordinate, with one eye on the clock, to make sure everybody catches up with the show within 48 hours of when the first person started watching it?

And then there are the kids. Yes, adults will tell you, "I only watch every episode of an average TV show once anyway; what are the odds I'm going to want to watch The Big Bang Theory again? Renting seems fine." Kids, on the other hand, can be relentless with beloved episodes, recording something and then watching it over and over without ever getting bored. You want to break it to your kid that that episode of Phineas and Ferb that you owned two days ago is gone now? Do you want to dish out 99 cents every other day until she gets tired of it? Even for yourself, do you want it to cost extra money every time you want to zone out in front of something relatively mindless? (Spiritually, perhaps you do, but will the TV-watching population make that choice?)

Finally, the 99-cent price point may strike consumers as a little high just for the right to watch an episode of television for a 48-hour period, if you compare it to what it costs to buy shows on DVD — where you can own them forever, loan them to others, get all the extras, not rely on your Internet connection, and so forth. It's even harder to justify if you compare it to what it costs to buy seasons on some other streaming sites — Amazon, for instance.

To give one example, you can purchase the first season of Modern Family in HD on Amazon for $31.99. For that price, you can keep it in your library and watch it, commercial-free, as often as you like. It would cost you $23.76, on the other hand, to rent it from Apple for 99 cents an episode and then lose it forever. You save money, sure. But do you save enough? Might you decide instead to do without HD, in which case you can actually acquire it from Amazon for $23.99, 23 cents more than it would cost you to rent it for 48 hours from Apple?

BUT WAIT. It gets better. ABC and Fox, the two partners who have signed on to rent episodes through Apple for 99 cents, are now currently selling episodes at Amazon for ... 99 cents. Apple has the advantage of hooking you up with its hardware — there are currently fewer ways to watch Amazon's Video On Demand than Apple downloads, certainly — but right now, that's the trade-off: with these shows, you can own the episode from Amazon or rent it from Apple, for the same price. It's the Wild West out there, people.

Why Episode Rentals Will Probably Catch On Anyway

The fact that we're nowhere close to a rental model replacing cable doesn't mean there's not a place for it. If you consider this as a nice extra option, and you don't try to envision it shaking up the entire industry and becoming the standard way people watch TV any time soon, it's easy to see the appeal.

Missed an episode of something you don't care about that much, and can't find it online at the network or at Hulu? (And who knows how long those options will be available anyway?) Can't stand to watch the ads that free options require you to endure? Well, sure, then, 99 cents to rent it is much better than two or three dollars to own it when you don't need to. When you envision episode rentals as a convenient supplement to the models that are already out there, they make all kinds of sense.

Moreover, the more respect television gets, the more there's a certain amount of television that appeals to people who, in general, don't like television. These are the people who genuinely only watch, say, Mad Men and 30 Rock. (This is, as a side note, a much smaller population than the number of people who will tell you that they only watch Mad Men and 30 Rock. Their TVs see them when they're sleeping, they know when they're awake, and they know they watch The Dog Whisperer.)

These are the people who have, in many cases, already dropped cable or perhaps never had it, and who get the TV they do watch from Netflix and existing online outlets anyway. For them (if all the providers get on board someday), this could be a very good deal indeed; cheaper than buying, faster than waiting for DVDs, wildly less expensive than springing for cable.

Does the concept of the 99-cent rental change everything? Not yet. Does it demonstrate that the shifts in the way television is sold and distributed continue, and that Apple is absolutely committed to having its beautifully contoured plastic fingers all over every possible emerging model? Absolutely. And the history of Apple suggests that whether what it's offering is especially novel or helpful or not, the company is pretty good at getting its customers on board.

*Yes, download "purchases" carry limitations and are not real purchases, just licenses, but they feel like purchases to buyers, so let's leave this distinction for another day.



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