iPod Movies: A Flop in the Making

Filed in archive Analysis , Apple on August 4, 2006

The Diffusion Group conducted a study on consumer price sensitivity fir movies on iPods. They found a sweet spot at $10 where 23% of U.S. broadband users said they'd be interested in buying a movie download on iTunes. Interest rapidly declined above that price. Interest was 12% for a $20 flick.

Current digital movie downloads are $20 at MovieLink and CinemaNow. A discount to $10 is reasonable given the small iPod video display. Variable pricing by fidelity and output device makes sense. But the studios and labels don't generally license digital entertainment this way.

Steve Jobs and Apple were able to extract concessions from the recording labels for flat $1 digital download singles. The result was a great consumer success. Will they be able to pull off a similar deal for $10 iPod downloads with the studios?

Unlikely. Current talk is that Apples is at $14 and studios want $15. So it looks like a loss for everyine involved.