The inevitable grouping of the major studios under the iTunes roof finally occurred today, when Apple officially announced it had reached agreements with Universal, Paramount, Fox, Warner Bros., Sony and Lionsgate (along with previous bedfellow Disney) on day-and-date downloads of their new DVD titles. The studios had made most releases available for rental since earlier this year (with catalog titles for sale before that), but this marks the first time users can buy and download new releases on their DVD street dates.
The good news: You can wait and watch Made of Honor on your iPod in about three months! The bad news: It'll cost you $14.99 to download it. (Or $9.99 three months after that.) And for digital media that costs exactly nothing to reproduce, package or distribute, we think that amounts to little more than information highway robbery. And just in time for the studios to stonewall SAG on new-media revenues!
Or maybe they're not quite connected — yet. Conceding it would get paid for new media when studios got paid, the WGA settled its strike in February by negotiating for roughly 2% of studios' online grosses each year through 2011. But in an earnings call yesterday, Time Warner CEO Jeff Bewkes cited a 60%-70% profit margin during a VOD trial for Warner Bros. films on cable — more than twice the return on Time Warner DVD rentals. It's anyone's guess how that shakes out in terms of purchases, but with DVD sales last quarter at $3.5 billion, and with a fairly clear break between online and traditional media consumers, even a tenth of that revenue online would be enough for SAG president/time-bomb Alan Rosenberg to reinforce the hard line as the first round of negotiations come to a close Friday.
Moreover, as an observant tipster pointed out to us this morning, the markup on these downloads is pretty obscene, maybe even illegal. After piracy concerns were allayed in the last year, pricing was the only remaining sticking point for Apple — which wanted to keep purchases at $10 — and studios, which compromised at $15. Albums on iTunes cost an average of 40% less than their CD counterparts; but with online retailers and box stores pressuring DVD prices below $20, why should they get away with a difference as little as 15% in some markets — especially with no extra features or deluxe packaging? The courts have even addressed this before, but it usually applies to manufacturers complaining about suppliers, not the other way around. Someone! Get the FTC on the line!