In a comment at Josh’s place, slugfest asked what would happen to network TV if everyone bought TV shows online rather than watching them via ad supported TV. That’s the question I set out to answer tonight. Beyond the general point, it’s another angle into the NBC/Apple dispute.

I’m not that familiar with the TV advertising biz, and if anyone that knows better wants to chime in, I’d appreciate any insight. I’ll see if I can track down someone at ABC or ESPN to give me a better explanation.

For now, here’s my methodology to do a rough estimate. The key piece of data is the price of a 30-second spot. We also need to know the number of commercial slots per hour episode. We then need to estimate the number of households that would have to purchase iTunes to match the episode’s actual viewership.

Working backwards, here’s how I decided to tackle this. I’m going to assume an iTunes purchase is necessary per household. So, I should be able to take the number of households implied by the episode’s rating or share and just use that number directly. Looking through the 2007 Studio Briefings, a top 10 show averages around a 10-12 rating (non-rerun), which comes out to about 11.1-13.3 million households.

Looking at episodes of Lost, House, and CSI on iTunes, I’m seeing an hour episode running around 43:30, which means that there is 16:30 allotted for commercials. In order to simplify the math, I’m assuming this is sold in even 30-second chunks and is all national advertising. So, no regional slots, no splitting revenue with affiliates, cable broadcasters, etc. That makes 33 slots per hour.

The hardest thing to find was the per slot price for a 30 second spot. After a fair bit of Googling, I found several sources reprinting an AdAge article that breaks down the rates for the top 10 shows in 2006-2007. For the sake of simplicity, again, I’m going to pick an average for the top 10 at about $400,000 per 30-second slot. Obviously, this could be higher or lower depending on which show you’d like to do the math for.

So, based on these numbers a typical hour episode of a top 10 TV show brings in around 33 * $400,000 =~ $13.2 mil. This estimate is going to be on the high side because I doubt the national network gets all of the slots, as I mentioned before.

Based on the household numbers of 11.1-13.3 million households, we can estimate a gross take for Apple at $1.99 * 11.1 mil =~ $22 mil. At 13.3 mil households, it’s around $26 mil. Assuming it’s a 50/50 revenue split (unlikely — Apple probably takes a very small percentage), the network rakes in between $11 mil and $13 mil. More if they command a larger percentage of the retail price.

Based on this quick, “back of the envelope” math, it sure looks like TV will live if we all started paying for what we watched, at least as far as the top shows are concerned.

Where NBC may have a point, though, is if they wanted to reduce the price of some shows on iTMS based on ratings. I shouldn’t have to pay the same for, say, Mythbusters or Ice Road Truckers as I do for Lost or Heroes, which are way more popular. That’s not what NBC is arguing with their desire for “flexibility in wholesale pricing”, since they seem to be complaining that the prices are too low. TV Squad interpreted that statement to mean that NBC wanted to offer special promotions so that you could get an episode of The Office when you buy Evan Almighty (TVSquad’s example). That sounds as bad as the current cable scheme where I pay one “low” price and get more channels than I can watch.

As I mentioned above, I’m interested in feedback, corrections, or additional information from everyone, especially those more knowledgeable about ad sales and the TV business in general. I think this is a worthy conversation to have.

Update: One other thought: the total ad dollars above, based on a rating of 11 (12 mil households), would create a per episode price of $1.10. And, these are for the top 10 shows over the year. How much is something like Battlestar Gallactica or Psych or What Not To Wear worth in this scenario? Something else to think about.

I realize that free syndication is a BIG reason that YouTube has had such explosive growth over it’s other competitors, but I think they could start micro-charging like Amazon is for S3 and make a decent profit. I think people would pay to syndicate YouTube video if it cost pennies per video. That’s just my random light bulb of the day. Maybe keep a lower bound so if you have less than 10 views for a video on your site, it’s free. Then the question is how much of their bandwidth is used off site versus on YouTube itself (I’m assuming that advertising can pick up a large part of the bill for viewers at YouTube). And then how many videos hosted on blogs like FatMixx actually get viewed? If it’s a large percentage with only 1 or 2 views, then maybe this wouldn’t work. But if there are videos with 20-infinity views on average, a small micro-charge per gigabyte might not be terrible.

Just my random thought for the day.

The heart and soul of the Mac world is the large community of small software developers that make some of the best software on the Mac platform. I’ve had my favorites over the years. Watson, by Dan Wood, was one of the favorites (it helped me get my job at ESPN.com) and Dan is one of the good developers in the Mac software world.

Watson was run out of business more or less by Apple, and for the first time that I remember, Dan has put the story up on their company blog. The story is especially relevant because the rumors about iWeb make is seem like Apple is about to railroad Dan’s new product, Sandvox. It’s a good read, especially if you want to get into the Mac software business.

If these churches run like businesses, do they compete with each other? How would you compete with another church? Does their religious mission (bring more followers into the flock) override the business mission? Will one of these churches ever go public? Just thought I’d ask. It’s an interesting phenomenon…

Wow, NetNewsWire has been acquired by NewsGator. Now, NewsGator has one of the better online aggregators, an RSS plugin for Outlook, the best Windows RSS aggregator in FeedDemon, and, now, NetNewsWire.

It’s a nice stack. Now, the questions: What does this mean for Bloglines? Both FeedDemon and NetNewsWire had publicly shown a desire to implement Bloglines’s synchronization API. Since then, Bloglines was acquired by Ask Jeeves and both FeedDemon and NNW are part of NewsGator which has it’s own API.

Second, NewsGator is now in a unique position. I’ve been thinking a lot lately about how textual content isn’t really done well in RSS. With the combination of the synchronization features, a good web client, and these great desktop apps, they’re in a good position to start understanding what people read and how they consume. Perhaps they can use that information to bring together a better reading experience. FD’s newspaper feature on steroids, as it were, or Google News based on your reading habits and feedback.

I have a great deal of respect for both Brent Simmons (NNW) and Nick Bradbury (FD) so I’m sure there’s something very compelling to get these two guys to join forces with NewsGator. I’ve also had the opportunity to speak with some of the folks at NewsGator, and they’re smart guys who “get it.” So, you can understand that I’m a bit excited by these developments.

Update: wow, busy day… looks like Weblogs, Inc. got bought by AOL. Weblogs, Inc. owns blogs like Engadget and Autoblog.

Seemingly more relevant at work every day, Mark Cuban wrote an interesting post on his blog about the “[worst] reason for doing something”: “Thats the way we have always done it.” While I think that’s a good point, and a lesson that every business can use, his example of a bad case of this is, quite frankly, wrong.

He wants the NBA to stop reporting attendance figures for their games. Why? Because it’s information that could help competitors. From his blog:

Why in the world do sports teams disclose our attendance for games ? Does it make even a little bit of difference to anyone at all ? Do people bet on the number ? No. Does it change the outcome of the game ? No. So Yogi Berra knows its too crowded and no one goes there anymore ?

Does it help competitive entertainment outlets know how our business is doing ? Yes. Could it give them an incentive to spend more money on promotion to compete with us if attendance is good ? Yes. Could it give them more incentive to reference our attendance if its down ? Yes. I know I read the attendance figures of the other Dallas teams and it certainly impacts the marketing decisions we make in our market.

I tend to agree that there’s value in that information. But precisely because there is value in this information, competitors will get it on their own. Better that the enterprise release it’s own metrics than have the kabuki dance that happens in TV or the online space, where a third party estimates the traffic/attendance/viewership and sells that information. At the end of the day, it’s cheaper and simpler and cuts out a middle man. More to the point, if the “other Dallas teams” didn’t release their attendance information, as Cuban proposes, we all pay more and get less reliable information.

Now, it might be that you’re already relying on outside metrics/analysis firms for deeper demographic/behavior breakdowns (how many people paid for the $80 seats vs. the $15 seats, how much does the average consumer spend on concession, etc.). Even then, though, one metric can’t be that valuable. In fact, at least it gives you a baseline of “accurate” data to start other modeling from.

I feel like this is in part a discussion of the benefits of the commons vs. everything being proprietary. Business thrives when the commons are healthy and putting out attendance figures feels like a simple contribution to the information commons with benefits when (most) everyone participates.

Update: And I forgot about the most basic reasons… your advertisers want to know how many people will be seeing their ads. Once those numbers get out, they’re out there… (you can find ESPN.com’s public metrics if you know where to look).