Consumers have really taken to downloading the video content provided by networks from iTunes. Lots of people will be interested by that, but no one, as it turns out, more than the networks themselves. According to analysis by JPMorgan Chase Analyst Spencer Wang, the networks get more than 70% of the price for every download. That means that a typical $1.99 program means $1.44 for the network coffers.
It doesn’t take much imagination to figure out why networks have been jumping into deals to provide content online. Wang looks at an example of one of the hit one hour shows available for download, such as Lost. Advertising revenue can lead to one of those shows making $12 million in gross ad revenue, assuming 17 million viewers. As popularity grows for downloading, Wang estimates that the same show can generate $15 million in revenue from downloading. Obviously far fewer people will download the show than will watch it for free on TV, but the $1.44 per download is substantially higher than the 57 cents generated per user that he estimates in our current ad-supported system. In other words, get used to the idea of paying for and downloading content, because it isn’t going anywhere.