Can iTunes work its magic with TV programmes?

Apple’s iTunes store continues to dominate the music download market, despite a steady stream of challengers, but it may find it hard to replicate that winning formula with its TV and film download service.

The store already sells a few hit TV shows but is ramping up its UK offering following last week’s tie-up with BBC Worldwide, the corporation’s commercial arm.

The move comes amid a slew of online activity from broadcasters, and soon after the launch of Apple’s next-generation devices, the iPhone and iPod Touch. Apple has also updated Apple TV, a device that transfers iTunes content to the TV screen.

And all at a time when a new set of competitors – including Amazon, MySpace, Vodafone, Nokia, LG and Play.com – are entering the music sphere, promising iTunes-beating services.

The deal with BBC Worldwide brings with it, for the UK consumer at least, big BBC brands such as Doctor Who and Torchwood – aimed squarely at the mainstream.

And, according to analysts, it is this audience Apple needs to capture. Apple is charging about £1.99 per episode – almost double the US price – although many see a future for free, ad-supported content. Channel 4 last year changed its download site from subscription to ad-funded and ITV’s online programmes are similarly free to view. Meanwhile, the BBC’s iPlayer application gives viewers a seven-day download window to “catch-up” on broadcast TV.

The Worldwide deal is separate, offering paid-for episodes in an initiative one insider claims is more akin to the DVD market than recorded catch-up services.

A future of free content?

Some have suggested that the BBC and other broadcasters will attempt to insist on “free” content through iTunes. Certainly all the UK’s major players have continually outlined their commitment to media neutrality and content available over as many mainstream devices as possible. One broadcasting executive also points to the difference between TV and music, saying that audiences are used to free TV but are willing to pay for songs.

For Apple, the attraction lies in the cross-sell between iTunes and its premium, market-leading media players. Although iPod sales have driven Apple revenues, the company must encourage owners to trade up to its touch screen video models or face stagnation.

One industry analyst says what iTunes and iPod together have done is make Apple synonymous with music. Both have succeeded against cheaper alternatives because of their simplicity, ease of use and stylishness, creating brand prestige. He says/ “Apple does not sell music to make a profit: it sells it to drive sales of its players.” The content itself, he suggests, is not intended to be a revenue stream for Apple.

iTunes’ music dominance

 iTunes is the top online music store in all 22 countries in which it operates, with users downloading more than 3 billion songs. In the US, it is now the third-largest music retailer, trailing only WalMart and Best Buy. Despite this, Apple was this year forced to guarantee a level price structure across Europe, albeit still above US levels.

Yet according to recent research by Forrester, the paid-video download market is at a “dead end”. The research company predicts future growth will be ad-funded and Apple must respond accordingly. US analyst James McQuivey suggests that Apple’s “appetite for a slice of the video pie has proven bigger than its reach” and that the service will struggle to appeal to non-“media junkies”. He adds: “Importantly it won’t translate into what Apple really wants: increased demand for sophisticated hardware like the iPod Touch and Apple TV.”

Perhaps the answer is to use the mainstream appeal of a Robin Hood or a Dr Who, or to make the mooted move towards free downloads. For Apple’s competitors, there is still plenty to play for.

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