Apple TV Deal Rankles KHBS

An Oct. 12 agreement between ABC Television and Apple Computer Inc. has rankled some ABC affiliates, including KHBS/KHOG, Channels 40/29, in Northwest Arkansas.

ABC announced that it would provide reruns of three of the network’s hit shows so Apple can sell them for $1.99 per commercial-free episode through its online iTunes store. During the first month, ABC sold more than 1 million copies of the shows “Lost,” “Desperate Housewives” and “Night Stalker” for download.

“They made a deal with Apple to make money on these shows that we promote, but we don’t share in that [additional] profit,” said Jim Prestwood, general manager of KHBS/KHOG. “We are part of the reason for those successes. Our affiliate agreement is 40 pages long, and they’re in violation of that agreement.”

Prestwood said the station — along with ABC’s more than 200 affiliates nationwide — air advertisements throughout the day for the shows that ABC is selling to Apple, so the affiliates should get a piece of the Apple pie.

“I agree wholeheartedly with what Jim is saying,” said Blake Russell, general manager of KNWA, the local NBC affiliate. “We were the vehicle for the [network shows]. I don’t think they’re trying to sidestep us, because we’re going to get what we get when we get it, but it will cause some erosion [of viewership].”

Russell’s station is suddenly in a similar situation. On Nov. 8, NBC and CBS announced that they would make some shows available through video-on-demand for 99 cents each. CBS has partnered with Comcast Corp., and NBC Universal has teamed up with satellite operator DirecTV Group Inc.

Russell noted that NBC Nightly News is already available for Web viewing at no cost.

Although its announcement was only three weeks earlier, ABC seems to be setting the pace for a monolithic change in the way Americans watch television. The announcement was timed to coincide with the release of Apple’s new video iPods, which sell for $300 to $400.

The downloaded ABC shows can be viewed on the 2.5-inch wide screens on the video iPods or on most computers, making the shows instantly accessible to millions of American computer owners.

Eroding Viewership

Prestwood said he doesn’t know how the fledgling technology will affect the television industry. Some experts believe the Apple downloads will erode ratings because fewer people will watch those shows on TV.

Since the downloading began in mid-October, television viewing of “Desperate Housewives” has dropped by about 2 million per episode, from a four-episode average of 27.2 million before the video iPod to 25.2 million afterwards, according to Nielsen Media Research. TV viewership of “Lost” dropped from 22.7 million to 20.7 million since the downloading began.

Initially, some experts had scoffed at the idea of iPods cutting into ratings. They said the impact would be minimal because the downloads are aimed at iPod users and most people would rather watch shows on larger television screens. Analysts believe the video iPods will be used by hardcore fans who don’t want to miss an episode and perhaps lose track of the story line.

It’s new technical terrain, but the affiliates must act now, Prestwood said.

“If we don’t address this issue now,” he said, “they may cut a deal with Bill Gates to sell these programs on his products … Down the road, there will be opportunity to view [downloaded] programs through DVD recorders and TiVos but not yet. It’s a confusing process right now.”

“I think as the popularity continues, it will continue to erode who we are in comparison to their product,” Russell said.

Besides network affiliates, Hollywood unions are also crying foul.

Disney Deal

Before the ABC deal was announced, Apple reached a similar agreement with Walt Disney Co., which owns ABC. It has provided the Disney Channel’s “That’s So Raven” and “The Suite Life of Zack & Cody” for download through iTunes.

The landmark deal is the first time TV shows have been made available online for consumer ownership. The shows are available for purchase the day after their initial airing.

Before the Disney deal, MSNBC was already making live broadcasts of its news channels available to cell phone users.

In this fast-paced digital world, DVDs of popular television series are often for sale a year after the episodes first air.

Apple has sold about 30 million iPods since their debut in 2001.