The Wall Street Journal is reporting that Apple is resisting the idea of a US$5 to $10 surcharge for 4K/UHD movies over the normal prices for High Definition (HD) movies already sold. Apple should know better.
With the launch of a new, 5th generation, Apple TV on September 12 that supports 4K/UHD and HDR just about assured, Apple would like to have some 4K/UHD content ready at launch. The studios believe that 4K/UHD movies, being ultra-premium content, should cost more. Apple wants lower prices to accelerate its new entry into the market. From the WSJ:
… it [Apple] wants to charge $19.99 for those movies—on par with what it sometimes charges for new HD movies, the people with knowledge of the discussions said. Several Hollywood studios want to charge $5 to $10 more for 4K movies, the people said.
Apple is going to have a very difficult time winning this squabble. That’s because the studios are all about maximizing revenue and showing growth. With the decline in DVD sales, something has to be done to increase sales revenue, especially since 4K/UHD Blu-ray discs may not take off as fast as 4K/UHD TVs and Netflix.
Speaking of Netflix, Apple is keenly aware that customers are getting a lot of value from a $10/month ($12 for 4K) Netflix subscription service. Streaming, on demand, has become very popular, and $30 for one movie is a hard sell. But that’s just one perspective.
The studios steadfastly believe that customers will pay premium prices for premium content to satisfy their 4K/UHD appetite. The studios may or may not be misjudging here, but they’ve had a lot of experience with the Blu-ray revolution a decade ago. It’s smart to leverage the early adopters and then slowly bring prices down to widen the audience. It’s a legacy strategy that works.
The essential nature of the conflict is exhibited in a remark from a studio executive, cited by the WSJ .
I wouldn’t tell Apple how to price their iPads.
A look at what 4K/UHD movies are typically selling for on Amazon tells the story. Here’s an example of the already in-place price stratification.
Apple must be aware of the history of Blu-ray pricing in its early days, be familiar with early 4K movie pricing on demand, and be equally aware of customary practices by the studios with Amazon pricing shown above. Trying to recover from its 4K/UHD ineptitude of late by asking the studios to lower prices, at their own expense, to help itself out is just one way Apple reveals itself as an outsider in the industry.
Never Working from Weakness
If Apple were a stronger player, hadn’t let the Apple TV sink to 15% market share, and were considered a major partner in the TV and movie industry, it might have been able to pull off a temporary, agreed-upon grace period to spark the sales of its new 4K/UHD TV. As it is, however, the studios are going to smartly pick their outlets and select their pricing for their own best interests.
Meanwhile, it will be interesting to see how Apple re-ignites the Apple TV as it did with the Mac at WWDC. Becoming an industry leader in TV technology, participating in standards groups, showing up at CEDIA, partnering when appropriate, and having effective marketing across the whole industry are things Apple isn’t accustomed to.
Those initiatives are better than asking a partner to take a hit for your own benefit. If the shoe were on the other foot, Apple would also look out for its own financial interests first.