The present and future of post production business and technology

I was reading this post at Video Insider and something struck me as really, really wrong with the numbers. Not that the math was wrong, just the return from the audience seems incredibly bad.

An audience of 15 million people (impressions) brings in the grand sum of $330,000! The top rates network show last week America’s Got Talent has an audience of under $12 million. Now I don’t know the budget of America’s Got Talent but it’s probably over $330,000.

The top rates hour-long production is apparently CSI Miami. Again I don’t know the income or production numbers, but typically the budget for “high production value drama” is usually $2-4 million an episode.

The difference is, of course, that we’re not looking at a 44 minute “hour long” production on the web. But even so, there’s something to be learnt from the numbers. That short video on the web is getting about $20 for every thousand people who are exposed to the ad. If we work on the long term average for hour long shows - about 65c per viewer - and convert it to CPM equivalent, we get a CPM for Primetime on CBS of about $650!! That’s approximately $5,322,200 in gross revenue (plus reruns, DVD distribution and foreign sales.)

Now Smallville manages to have high production values with a relatively small audience of just 1.736 million. Obviously that’s not costing as much to produce with estimated total revenue (let’s say a $500 CPM) of $868,000. Heck Jim Kramer’s show remains on air (on cable) with an audience of around 160,000. Even if the “CPM” held at $500 (unlikely), the total revenue for that show would be well under $80,000 per show.

On the other hand you have shows like The Guild rely on donations from their audience of around 30,000 to fund their (roughly) $250 an episode hard, physical, must-pay-out costs. (Cast and crew currently come for nothing.) No advertiser has been forthcoming.

Or consider Break a Leg, a high production value comedy produced with full crew in HD. With audiences on YouTube (2 million views as a partner), Blip.tv (500,000 views) and Metacafe (front page and a contest winer but only 100,000) the show grossed $2,500, or a CPM of $0.96 - 96 cents per thousand views.

Advertising works to fund video production on TV - networks and cable - with varying degrees of success, but it does not appear to work for web shows. Even Hulu, considered to be a success these days, is only getting CPM of $25 for the same content they’re getting $400-650 CPM on broadcast. I can understand why their emphasis not on Internet distribution!

Does this mean that the whole “democratization of distribution” is a over? That only big media will do at all well. It does if we are going to continue to put new wine into old wineskins. Advertising was absolutely the way to fund “free to air” television, which most people now pay for additionally with cable or satellite. But it is incredibly unpopular.

According to Yankelovich Research,

“Seven in ten Americans would pay money to block or skip advertising and marketing messages.
Almost six in ten consumers go ‘out of their way’ to avoid brands that overly market their products and services.”

Even if you find an audience…

In an online survey of 2,600 respondents, about 53.6 percent of online video viewers recall seeing in-stream - either pre-, mid-, or post-roll - ads attached to some form of web programming. That’s the good news. Not too surprisingly, more than three-quarters (78.4 percent) of respondents said in-stream ads are intrusive and fully one-half (50.4 percent) say these ads disrupt their use of the internet.

And from that same survey:

When it comes to streaming ads, half (50.7 percent) of the respondents said they stop watching an online video once they see an in-stream advertisement. Two-out-of-five (43.2 percent) do stay on to watch the rest of the online video. While only a small percentage - 15.3 percent - said they immediately leave the site once they encounter an in-stream ad, about half (49.7 percent) said the such ads’ presence alone makes them less likely to view other online videos.

The only good news for advertisers was that the 18-24 year olds surveyed didn’t mind the advertising…

Over one-half (57.6 percent) will watch an an online video ad and not become too annoyed to finish viewing. However, the report says younger viewers also have fairly low recall rates.

I’ve always wanted to either turn my audience away, and annoy them with ineffectual advertising. That sounds like a winner. Not.

If Break a Leg got only a single cent each for those 2.6 million views over nine episodes, they would have banked $26,000. At a more-reasonable 10c, that’s starting to cover expenses with $260,000 (about $29,000 an episode). If the audience were fans maybe more, maybe 25c an episode then the show would likely be profitable with $72,000 an episode. That’s a much bigger audience than Jim Kramer and higher production values!

With all the research at my disposal, I cannot find a single instance of where new media (podcasts, online, etc) is producing a good return for its producers from advertising. Like 70% of Americans I’d prefer to pay to get rid of advertising, assuming the cost to me (and return to the producers) is the same as it is now. We just need to get rid of the middle men - the network programmers - who are only interested in the advertisers, not the show, the producers or the audience.

Boy, it’s dusty in here!! Been busy with lots of things, including just this week releasing The Hd Survival Handbook, but there was one thing from WWDC that caught my eye.

Using media technology pioneered in OS X iPhone™, Snow Leopard introduces QuickTime X, which optimizes support for modern audio and video formats resulting in extremely efficient media playback. Snow Leopard also includes Safari® with the fastest implementation of JavaScript ever, increasing performance by 53 percent, making Web 2.0 applications feel more responsive.*

Now, I’m surprised at myself for even bothering to attempt to second guess Apple by hypothesizing wildly, but that doesn’t stop my friend James Gardiner so it won’t stop me!

There are few clues and most of my usual sources are cold. There’s the rub, anyone who has Snow Leopard is under NDA and won’t talk. Anyone who is talking is guessing - we should keep that in mind.

Tim Robertson hopes that “modern codec support” would include .AVI, which is funny because .AVI has not been developed since being abandoned by Microsoft in 1996 - 12 years ago, just after QuickTime was introduced! James Gardiner thinks it might be a Flash/Silverlight competitor. Who knows they could be right as we’re all guessing wildly.

In Apple’s world “Modern codec support” means H.264 in .mp4 wrappers, and just maybe H.264 in .mov wrappers but that’s depricated as they say. (You can still use it but it’s not the recommended method.) Apple have totally moved away from all the rich interactive features that attracted me to the technology in the first place. (Much of what was added to Flash 9, was available in QT3 but never pushed by Apple.)

Then there’s this on Apple’s Snow Leopard page

Using media technology pioneered in OS X iPhone…

The media playback support on iPhone is very basic: H.264 video, AAC audio, MPEG-4 Simple Profile video, mp3 in .mp4 containers with limited support for .mov playback of those codecs. That’s it. A simplified form of media player with none of the older codecs not supported by MPEG-4. None of the wired sprite features, no VT objects or panoramas. A simple, lightweight media player that developers can draw on. (I should note that Flash Player and Adobe Media Player now support those exact same codecs.)

Looking also at what Apple have been doing with Javascript, and knowing there’s already limited Javascript support in QuickTime, my further guess is that QT X will be very open to Javascript, Apple’s new favorite browser language thanks to Sproutcore and the new Webkit Javascript engineSquirelfish. It’s interesting that Apple announced QuickTime X and the new Javascript engine for Safari in Snow Leopard in the same paragraph. Other features went into separate paragraphs.

So my guess is that QuickTime X is a newly optimized media player engine with hooks to good Javascript for interactive programming. Perhaps even to Ruby/Ruby on Rails since Apple’s also adopting that.

But who knows for sure? Only those who can’t tell.

AT the Boston Final Cut Pro User Group on Thursday February 21
Details at the Boston FCP User Group website.

Saturday February 23rd in New York. Distribution Workshop.

Hope to see you there

A story that came through my newsreader last week You Don’t Understand our Audience and summarized by Ars Technica resonated with some of my thinking around a book I’m working on.

The way the United States system was set up was an attempt by the Founding Fathers to avoid the perceived problems of the English and French political systems of the day. Congress balances the Executive Branch while the Executive Branch balances Congress. The Judiciary is there to ensure that Laws are Constitutional and that the actions of the President are Constitutional. The press - the so-called “Fourth Estate” - reports on, exposes flaws and generally keeps the rest honest.

At least that’s how it’s supposed to work. Avoiding the political commentary on the first three “Estates” (Executive, Congress and Judiciary) it’s clear that the press and media have failed us completely. The linked article begins to explain why but one thing that’s not noted there is that “the press” has changed significantly since the days of the Founding Fathers. Then, there were hundreds of small, independent (and local) newspapers - not a very limited number of very powerful “media corporations”. The White House Press Corps are intimidated and will never call out the press secretary when they are clearly, obviously and provably lying; or where other lies can be easily proven by playing back a tape. But they don’t and they let the people down when they don’t. They know their job requires access to the press room and they too scared to do their job.

But they fail America because of their timidity. With so few media outlets obvious lies do not get exposed by timid “journalists”. We need a return to hundreds of independent voices uncovering lies and doing real journalism.

I hate to say it but it seems the blog-o-sphere is our last chance to save democracy and “keep the bastards honest” to quote Don Chip - a now-dead politician in Australia who led the third party trying to break the duopoly of political power that exists there (and in the US).

So, Netflix and LG announce yet another set top box. Well, actually they announced that LG would include the Netflix service on “selected devices”. Best guesses are that the service will be added to a dual mode (HD DVD and Blu-ray) player, or even the Television itself.

Here’s the problem with this: it’s Netflix on LG devices and only Netflix. No slight on Netflix, the service is good and the company needs to provide for a non-disc future. However, the industry should be gathering together for a single standard for delivering from the Interent to the lounge room, not proprietary deals with single suppliers. If we want movies from Apple then it’s another set top box (Apple TV). Vudu have their own movie service and their own proprietary box. Tivo is a little more open - it has an API for programmers - but it’s still another box on top of the cable or satellite box you’ll probably still have.

We need a single standard or interoperable standards for delivery of “Internet TV” to Televisions. It has to be simple. TV would not have caught on if we’d needed separate Television sets for CBS, NBC and ABC - but that’s exactly where these companies think we’re heading.

It won’t work. Any device(s) that link the Internet sources with a TV are good, but it needs an open standard - perhaps that’s what google are working on, but even then it won’t help integrate with cable or satellite boxes unless those providers have a significant change of heart.

Apple TV, for all the people who claim it to be a “failure” is the leading device to connect computers and televisions. While its sales are disappointing by Apple’s mega-hit standard, it’s estimated to have about 800,000 units sold in 10 months (took Tivo 4 years to get that far) and it’s way ahead of the competitors, other than Xbox or PS3 which both act at media extenders.

My mantra for 2008 - proprietary bad, open standards (even from one company) good.

If there’s one thing that’s very clear over the last decade, is that the tools of production have become cheaper. But so far only the tools of production - cameras, edit gear, accessories, color timing suites, et al - but for craft skills there seems to be the same dichotomy of old: work for next to nothing in “Indie” production, or hang out for one of the few really well paying (Guild) jobs in the traditional production system.

Neither option is particularly suited to emerging “new TV” or “new media” production.

There is justification for extremely high salaries in broadcast: a popular show makes good money for a network and if paying the stars of, say friends $1 million an episode (as they did in the final year) means they get another year of high-value advertising slots to sell, makes sense. But $6 million an episode (plus the actual production cost for equipment, sets, studio and crew) is not going to fly for “niche” programming, in a 10,000 channel world. Frankly, as actors they were competent enough, but it wasn’t the talent that made the show in the first place. Writing, talent, the way the ensemble works, direction et al all had a lot to do with the success of that show.

At the other end of the equation you have shows like Goodnight Burbank where some of the people make some money off the advertising revenue blip.tv secures for the show. There has got to be a middle ground, where profits can be made by the producer and everyone involved gets a decent living. I’m wondering if a return to the studio system of early Hollywood isn’t on the cards?

In that system, actors, directors, cameramen et al were employees of the studio on fixed salaries. Generous salaries for the day, for sure, particularly for the most bankable, but salaries none-the-less. No $20m payments for “stars” that don’t actually contribute to the profitability of the movie. They may make it easier to market, but the studios today do not get payback or value from the huge sums paid to “stars”. The downside of that system is that the studios (vertically integrated businesses including the cinemas in those days) made outrageous profits off the backs of their employees, leading to United Artists and talent as independent contractor.

It seems to me that there is going to be some sort of structure - cooperative, studio, whatever - that allows a minimum of a decent middle class income for everyone involved, but retains control of the show through the newly democratized distribution system. It would have to have far more transparency in accounting than is common in the current system, so that profits are shared *fairly* with those who are responsible for creating the value.

Yeh, utopian, and probably unrealistic, but I can visualize a system where creative talent gets to do what they love (perform, edit, direct, shoot etc) and get a decent income, in the face of ever more fragmented viewing habits. A hit show today wouldn’t have even been in the top ten 20 years ago and yet, shows are still made and people in the industry still seem to live from their work - those who get to work that is. The systems and methods that worked for 3 channels may not be as suitable for a 500 channel or 10,000 channel world.

What do you think?

Seth Godin has written a reprise of an old article of his called Monopolies, seven years later, which I heartily recommend.

The recording industry once had an important role that justified its monopoly, as did Broadcast Television stations and other limited outlet industries. But inevitably the monopoly is broken - by legal fiat in some cases, but by technology in a whole lot more cases.

It’s hard for a monopolist to give up the position because monopolies are very, very profitable. Sad to think that a company that was once raking in multiple millions of dollars every year, for many years, suddenly has to compete on the quality of their offering in a completely changed market where they are no longer a monopoly. This is why the music industry (concert tickets, merchandise etc) is doing very well while the recorded disc business is slowly fading away.

Some of the time monopolists don’t realize what business it is that they are in. Railroad companies apparently thought they were in the railroad business, rather than the transport business, so when their long-haul monopoly was threatened by trucking, they didn’t respond fast enough, and faded in importance to society. Record companies think they’re in the disc business, when they’re really in a promotional business. That’s probably the only role left.

Other times, industries lose relevance because technologies bypass them. This is the position that broadcasters and cable channels are facing right now: they had an effective monopoly (mandated by the government in the case of broadcasters) because they had access to limited resources - broadcast licenses and access to cable distribution. However when we don’t need those limited resources to get entertainment “out there” to the viewer, what role is left? Finance company? There’s lots of competition there.

And finally, industries lose out when they focus on the wrong customer. Broadcasters and cable programmers have the wrong focus. They believe that their customer is the advertiser, and they are correct in an advertising supported entertainment model. However, the producer’s customer is the viewer and is often in conflict with the broadcaster’s customer.

Losing a monopoly is inevitable. You can avoid fading into irrelevance by focusing on the core value of your business to the customers and to keep focused on the customer’s needs. Unfortunately, the more broadcasters do that, the faster they’ll fade from relevance because they are unnecessary in an unmediated marketplace.

There’s a couple of reasons why viewers haven’t turned to online video as a mainstream Television replacement: lack of selection, DRM and restrictive viewing windows among them, but the real reason it’s not taking off is that it is, simply put, grossly overpriced. The networks and studios, on behalf of program producers, are unrealistically pricing themselves out of a market they don’t want to succeed, because it would challenge their existing business.

Putting aside the stupidity of refusing to adapt to changing business conditions, and the inevitable problems that will cause them in the long term, the way that iTunes, NBC, et al are pricing for downloads or rentals, is completely out of whack with the revenues received from existing distribution.

So when NBC complains that Apple wouldn’t let them increase the already usurious $1.99 per TV show (or about 68c for the limited number of shows available with a Multipass that actually discounts from the $1.99 rate) it shows just how out of touch NBC’s Zucker really is.

So what is the “real” pricing? What is a nominally 30 or 60 minute TV show worth? Market economics tells us that it’s worth whatever the market will pay, but as the existing power players are competing with free and the marginal cost of the goods is close to zero, traditional market economics do not come in to play. As I’ve pointed out before NBC has taken $50 million in income from the iTunes store from paying customers, even while every program on the ntwork has been available free via various bittorrent sources. Without commercials. That’s $50 million they would not have had without a relatively simple distribution method like iTunes.

That’s $50 million of over-priced content. At $1.99, based on available information, Apple takes about 20% to cover the iTunes store, payment processing and content delivery leaving $1.60 for the program owner. Or for a 22 minute Multi-pass purchase of The Daily Show at 68c, Comedy Central takes 55c a show. Why is this unreasonable?
If I were to subscribe to Cable or Satellite Comedy Central would get about 60c - $1 per month for my subscription to that service. That’s less than $1 a month for 168 x 4 hours of programming, not one episode of The Daily Show. OK, Comedy Central also get advertising revenue, and they certainly don’t produce 672 hours of original programming a month, but I’ll address both those issues later in this post.

So what is a fair price? First, let’s consider a case study: my TV viewing habits in October. I’m far from typical for two reasons: we watch relatively little Television and we get it all through the Internet. We have no cable connection, no satellite dish and no over-the-air antenna. Walking the talk, so to speak.

In October 2007, we watched 86 shows, including one movie that we haven’t watched before. Because these came via the Internet they were without commercials so the 36.85 hours of actual viewing time, equates to about 50 hours of regular, advertising filled, Television. (I haven’t included the benefit to me in 13 hours extra time in the month, but it has to be substantial, but peripheral to this discussion.)

Looking at the iTunes Store, where most of the programming is available, and interpolating prices where it was not, the “rack rate” would be $155.26. Taking advantage of Multipasses for The Daily Show and The Colbert Report (the only shows that actually gave a discount for multiple show purchases) that drops to $112.55. For less than 2 hours TV viewing a day. This is against a US average of between 4.5 and 8 hours a day (depending on which source you ask). Scaling up the numbers to match the 4.5 hours a day viewing, would make the “best price” replacement cost for cable or satellite a mere $303.27!!!

Compare that with 100 channels for $55 as a previous Dish Networks customer, where (theoretically) I had access to 24 x 7 x 30 hours of content a month should I want it. Buying individual programs is 6x more expensive for an average viewer than a cable or satellite subscription. Something is definitely “out of whack” here for sure.

One way to compare would be to work on an average cost per minute of programming. While some content is definitely premium, and disposable content like The Daily Show probably should be priced at a discount to the average, it would balance out over a month, so a per minute average is, I think, useful.

My ‘best price’ buy averages slightly over 5c a minute based on 2211 minutes and $112.55 cost.

Dish Networks, watched 24/7 would be 0.15c/minute.

Dish Networks watched 1.67 hours a day would be 1.83c/minute. At average viewing of 4.5 hours a day 0.7c/minute.

This is all for content with commercials and calculating with commercials in place. I am prepared to pay a slight premium for no commercials but I’m not prepared to be charged more than 7x the price! We do have another data point in Premium Cable channels that run shows without commercials.

Assuming 8 hours a week of new content on, say, HBO, and a $12 a month subscription fee for that content, then we’re at around .5c/minute for premium Television content. That’s a long way from 5c/minute.

What’s Fair
Over the time I’ve been running the “Internet TV only” experiment I’ve generated a feel for what I’d be prepared to pay for certain content and it basically works out at an average of a penny a minute: still nearly double what I could get Television for via more conventional means. At that rate my monthly spend would be $23.94 and that would be $23.94 more than the networks and studios are making from me now because I won’t be raped on pricing just to watch TV. (I would prefer to pay this fair price to those creating the content if there was a system available to do that.)

More relevant though, is how this would compare to what the Networks are getting now (and presumably smaller cable networks are getting less). Typical revenues from advertising per viewer per show are between 25 and 65 cents per viewer for the whole show. The absolute best advertising revenue per show is 95c per viewer from this year’s “Big Game” broadcast in early February.

At 25c per viewer for a 22 minute “half hour” show, we’re around that penny-a-minute mark. At 65c per 44 minute show, around 1.5c/minute but that would be for high-value premium content. Lesser shows on smaller networks are probably closer to the 0.5c/minute in advertising revenue per customer.

Long term, I believe the real cost of content will trend toward an average of a penny-a-minute with many shows being priced below that because they have no repeat viewing value, and premium shows that bear repeating slightly above average.

And that would be fair.

The presentation I gave at the October 24 meeting on Preparing for Online Distribution is now available for download. This is an Apple Keynote file compatible with Keynote 4.

The presentation is also available as Preparing for Online Distribution is now available for a PDF

In case anyone missed it, there has been a war of words this week between Apple and NBC Universal that ended with Apple refusing to put any new NBC shows in the iTunes store because NBC are withdrawing from the store at the end of the year. That’s all we really know to be factual, although Apple asserts that NBC wanted to “double the price” of their TV shows to force a “$4.99″ per episode show, force bundling of shows, and insisting on beefed up DRM.

Could NBC be more idiotic and go more against the obvious trends? Is the management of NBC as Fake Steve Jobs points out:

They’re all buffed and polished and about a hundred and fourteen years old. They look like cadavers who’ve been done up by the world’s best funeral home makeup artist. A lot of them are just GE lifers who did time in plastics and then airplane engines and then somehow got dropped into the TV group.

That whole article, actually penned by Senior Editor at Forbes, Daniel Lynons who writes Fake Steve Jobs, is well worth a read. He says it better than I can. I think it’s reasonable to assume that none of the executives or board at NBC watch their own network as broadcast or have ever downloaded shows from the iTunes store and are really, really out of touch with changes in digital distribution. Otherwise they would not have moved 180 degrees contrary to every trend!

Let’s consider the three points that supposedly lead to the falling out between Apple and NBC. Because I want to address pricing in most detail, I’ll go in reverse order. It’s worth noting that NBC denied that they pushed the “$4.99″ pricing, but in a very carefully worded press release, that really does little to deny the accusation.

More DRM

Allegedly, NBC wanted Apple to “beef up” DRM beyond Apple’s Fairplay. Now, I’m no fan of DRM because the concept of “keeping honest people honest” is so stupid that no-one with intellectual integrity could possibly hold that thought in their head without it exploding. You actual, paying customers, are the very people who are honest: didn’t they just pay real money for the product? DRM does not prevent piracy (otherwise why would every NBC show, including those they don’t sell on iTunes, be available much more easily on bittorrent sites?). Even with free content available, customers chose to pay money, so why treat them like potential criminals?

Commercial piracy is a crime and deservedly so. Content creators need to be compensated for their work. That’s a given. What is fundamentally stupid is adding more and more egregious DRM that simply does not prevent piracy. See above - everything is already available free, and yet in 18 months NBC has taken $50 million in income from the iTunes store from paying customers. DRM does not prevent piracy. DRM causes all sorts of complications for customers and devalues the content. To even contemplate adding more DRM is counterproductive at best.

To do what NBC allegedly were pushing Apple to do - to ONLY allow DRM’d content on an iPod - is mind numbingly, absolutely, without doubt the most stupid idea to come out of a dinosaur’s mouth since the advent of mammals. Have these people not heard of “Fair Use Rights“? (BTW, Defend Fair Use is a new website by the Computer & Communications Industry Association, which is backed by Google, Yahoo, Microsoft and others.)

What about family videos or personal recordings or podcasts? NBC would want Apple to ban all from iPods? Legitimate, legal rips of purchased CDs would also be banned? Yeah, right. If that’s what NBC were asking for, see comments above about levels of stupidity never before experienced by mankind!

Bundling

I guess I can understand why NBC might think bundling was a good idea. After all it’s the only business they know! They bundle shows together and sell advertising against it. That’s been the Broadcast Television model since it started. However, it’s over. Gone. Finished. The Television Mk II era of VCR/Tivo/PVR/many channels appointment television (watch it at our schedule or not at all) is going the way of the dodo.

Increasingly we’re moving toward a program-oriented model. I’ve said it before: people watch programs, not channels. At a time the FCC are pushing for unbundling of cable channel packages NBC wants to go the other way and push packages of programs when customers want their own choices?

See above comments on levels of stupidity!

Increased pricing for TV shows on iTunes

At least now we can get away from blind stupidity and get to egregious greed! At $1.99 per show Television shows are grossly overpriced. Even the season pass price is on the high side. If I were to buy all the programs we watch via the iTunes store, my TV viewing bill would be around $200 a month. Compare that to Cable or Satellite at $55 a month (my most recent Satellite bill.)

NBC are simply being greedy. Networks like NBC look to get 25-65c per viewer per show in advertising revenue. Even the most popular show on American Television, the Super-Bowl, brings in only about 95c per viewer. Let’s say the average is 50c per viewer (on the high side - my research suggests 35c per viewer is a more likely average) from advertising revenue. For the networks to receive the same revenue per viewer for their premium content sold through iTunes, then that 50c would translate to about 75c per show. That assumes that Apple make the same percentage gross margin on TV shows as they do on music, out of which they pay the credit card processing costs and the cost of bandwidth for delivery.

So, at $1.99, a TV show is already over-priced. There’s another benchmark to consider and thanks to John Gruber for pointing this out: TV shows released on DVD average out to around $2 an episode but for that you get a physical disc, packaging, liner notes, extra content and marginally higher quality. You also have a tradable asset thanks to the First-sale Doctrine. You get none of that with DRM-infested digital downloads, so the purchase is of much lower value.

Another way of looking at price is to compare buying two shows - The Daily Show and The Colbert Report - from iTunes on Season Passes (20 shows each) when the total for these two Comedy Central shows is $19.95 per month. Subscribe to cable or satellite and Comedy Central will get 60c to $1 from your Basic Cable subscription, at best. Sure, there’s advertising support but that Basic Cable subscription gets you access to view (and record) the entire month’s content on Comedy Central. Not just two shows! Sure, the Daily Show and Colbert Report are advertising supported on Comedy Central - not only do you have to pay to get the cable channel but you have to also pay with attention to commercials (or not).

What would be “fair” for those shows? Exact numbers are a little hard to come by, but even taking Jon Stewart’s reportedly $5 million a year salary, it’s hard to imagine that each episode having a budget over $60,000 an episode. (Mr Stewart’s salary breaks down to around $32K an episode based on 40 weeks of shows a year, 160 shows, New York studio with crew $10K a show and correspondents with production crews and writers account for the rest - feel free to correct me in the comments.)

At 10c per episode (this is disposable television - watch it once and it’s done) and an audience variously estimated at 1.3 to 1.7 million (1.5 used for simple math), that’s $150,000 an episode. Bandwidth and Apple’s margin might add another 10c to that (although 20c is incredibly hard to charge using conventional methods, allow me the conceit for the moment) for a retail price of 20c that would return the producer (or Comedy Central) a very tidy profit over the current budget and cost less than 1/3 the cost of a season pass.

Does NBC need Apple more than Apple needs NBC?

I’m certainly not claiming that Apple would be happy losing 30% or so of their iTunes TV content, and at least one analyst thinks it will hurt Apple more than NBC. Given the general level of accuracy of analysts in the tech sector, I’m always skeptical of such “analysis”. Almost all the rest of the writing on the subject reflects my own feeling that “NBC Could Not Have Screwed This iTunes Thing Up Any Worse“. Do they expect that the unreleased hulu which is also touted as a competitor to YouTube, or are they relying on the spectacularly unsuccessful Amazon Unboxed?

My prediction is that within 18 months NBC will be back in the iTunes store, with much less favorable conditions than they have now because they’ll have come back with tail between legs.

And here’s some other opinions. I think the headlines alone will give you a feel for “the wisdom of the crowds”.

From Cnet - NBC says bye to iTunes, hello to piracy and lost revenue

After this new PR campaign is complete, NBC executives–obviously without any grasp on reality–will sit there and expect their assistants to bring them financial numbers that show exploding growth in programming sales. With cigars firmly in place, the big shots will open up the revenue reports and come to one damning conclusion: revenue from programming has gone down, yet piracy has increased tenfold.

From iLounge - An Open Letter to NBC re: Leaving Apple’s iTunes Store

Let me explain something to you, because you don’t seem to understand it already. Your TV shows are available every day, every week, and every month of the year for free. They fly through the air (and travel through cables) at no a la carte charge to customers.

From blogger Thomas Hawke - iTunes Store To Stop Selling NBC Television Shows, Who the Hell Cares (not safe for those of delicate dispositions)

Who in the hell would pay five bucks for a TV show? Especially when all you have to do is hop on over to that old bittorrent thingy and just borrow a copy for free. …Nice move NBC. Way to go from being mostly irrelevant to entirely irrelevant.

From Podcasting News - NBC Betting On Losing Strategy

Proprietary portals, like Hulu, also have a long history of failure. NBC would be better off keeping its content in iTunes and working with other networks to create open standards for commercial video downloads. This would create a competitive environment for digital video sales and increase competition among portable media manufactures.

For a very satirical view, Phil Ryu describes an alternative universe: Zuckerland! - bizzaro reverse world where NBC’s decision makes sense.

In Zuckerland, customers on iTunes pay $4.99 per episode for NBC shows, which, though it may sound ludicrous at first, actually makes perfect sense within this fantasy world, because in Jeff Zucker’s mind, this is war with Apple, and wars cost a lot of money. So he’ll need some funding from all those hardcore customers on iTunes for the effort.

And someone should perhaps remind Jerry Zucker that, according to Angela Bromstead, Executive VP, NBC Studios, (yeh, she works for Zucker) The Office should have been cancelled but thanks to sales through iTunes it’s now a hit for NBC. Likewise sales through the iTunes store probably gave 30 Rock an extra season, and influenced the extension of Studio 60 on the Sunset Strip to a complete season. Would that have happened if “Studio” didn’t have just the slightest traction on iTunes? (Four episodes placed recently in the iTunes top 50.)

Perhaps it’s true, as Michael Gartenberg of Jupiter Research (yes another analyst so treat with caution) says:

Sometimes I think God put video content guys on the planet to make the music guys look progressive and visionary.

The last word goes to some intrepid photoshop artist who previews how NBC shows are going to be distributed in the future.