Apple Price Cuts May Include iTunes TV Episodes

Apple appears to be on a price-cutting spree. One Wednesday it took $200 off the price of its 8GB iPhone. Days later reports from entertainment industry journal Variety claim Apple will drop the price of TV episodes sold through iTunes to $1 from $2.

The price drop, according to Variety reporters Josef Adalian and Ben Fritz, isn't going over well in Hollywood. In fact a spat between Apple and NBC may have its roots in Apple's intent on dropping the price on TV episodes, according to the report.

Earlier this week NBC said it will part ways with Apple and iTunes citing an inability to dictate pricing of its own programs sold through iTunes as the reason.

At $1 an episode, the Variety story points out, it makes it extremely hard for NBC to sell DVD box sets of an entire season of TV programming. For example NBC sells the Season Three of The Office for $38 which includes 22 episodes. If each episode were sold at $1 a piece through iTunes NBC would be pressured to drop the Season Three of The Office DVD to $22 to be competitive.

DVD episode sales are a meaningful and growing source of revenues for networks.

The spat between Apple and NBC wasn't over alleged price drops. Rather Apple says NBC wanted to charge $5 an episode, up from $2. Apple said it wouldn't budge on its pricing scheme, and NBC said it would stop selling its programming starting in December. NBC announced it will work with Amazon's download store Unbox instead.

Sources told Variety that they acknowledged it made sense to drop the price of back catalog TV episodes. But it makes little sense for an episode of Lost to be priced the same as an episode of The Brady Bunch.

Interestingly Hollywood sees Apple's tight control over pricing as a sword that cuts both ways. Variety reports many basic-cable channels secretly hope Apple will loosen its pricing reigns on TV episodes. That would allow cable channels to sell content for less than $2 an episode - in turn allowing networks like MTV or A&E to be more price competitive.

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