Media execs embrace the iPad
Chase Carey, Brian Roberts praise device's earnings potentialWhen asked about digital technology last month on a stage in Beverly Hills, Chase Carey went off on the wonders of Apple's new iPad.
"Digital," said former Warner Bros. and Yahoo honcho Terry Semel. "Is it the next great revenue stream for content owners, or is it a value destruction force?"
The iPad, answered Carey, the News Corp. COO and deputy chairman, "actually has a chance to be a transforming event." And his unprompted praise for Apple's tablet computer was just getting started.
"That device really gives you a richer media experience," he said. "You can start to envision how you create a really appealing experience for a consumer in a mobile environment."
Carey's enthusiastic assessment came more than three weeks after the iPad's April 3 launch, presumably after the hype had subsided.
The iPad looks and acts like a giant iPod Touch with souped-up computing power. It features a 9.7-inch screen, is a half-inch thick and weighs 1.5 pounds, slightly thinner than the average magazine but slightly heavier.
Content looks sharp even when viewed at an angle, and there are no distracting buttons, making it, as one analyst said, the best portable device on the market for viewing video, whether delivered over the Internet or stored in its memory.
Plus, there's no wrong way to hold an iPad, and it can play video, surf the Web and handle more mundane computer tasks for 10 hours without a recharge.
Add it up, and it's easy to see why Hollywood is embracing the hot-selling gadget. To what degree is tricky to determine because Apple allows media conglomerates to discuss only what's already available for the iPad, not what's upcoming.
An exception to that rule came Tuesday in Los Angeles during the Cable Show, when Comcast CEO Brian Roberts discussed prototype technology that syncs the iPad to a set-top box, turning it into a sophisticated remote control for the TV. He called the iPad "a fabulous bridge between the TV and the computer."
As for News Corp., it jumped on the iPad juggernaut by introducing the Wall Street Journal app, which actually makes it fun to read a newspaper on a computer by mimicking a print version, with photos, headlines, pages, etc. -- minus the ink-stained fingers.
Carey boasted of interactive ads and print news stories that incorporate relevant video with the tap of a finger, like something from a Harry Potter movie. As of last week, the Journal had 64,000 iPad subscribers, though the company didn't say how many were paying $18 a month and how many were in a free trial period.
So far, the Journal is News Corp.'s most prominent embrace of the iPad, but, like media conglomerates in general, the company isn't ignoring the device as a distribution mechanism for movies and television.
"Some of the electronic distribution certainly gives us new opportunities to play with windowing and availabilty of products," Carey said. His boss, Rupert Murdoch, told analysts last week that the iPad will "lead a revolution in media content."
Video from Apple's iTunes is a breeze on the iPad. But studios and others distribute content elsewhere online, much of it via Adobe Flash, which iPad does not support. So you'll have YouTube on the iPad, but no Hulu.
ABC, which has content on Hulu and at ABC.com, built a dedicated app for iPad users. It's a smart move, considering iPad's sales trajectory.
It took Apple 28 days to sell its first million iPads, compared with 74 days to sell 1 million iPhones. Three years after iPhone's launch, 42 million have been sold. It won't take nearly that many iPads to represent a sea change in the way video is consumed.
It's early in the game, but so far about 40% of iPad users are downloading the free ABC app. The Alphabet offers more than a dozen primetime shows free with advertising. It's even talking about allowing affiliates to sell ads that would be seen on iPads in their markets.
ABC's app has been available since the iPad's launch, and users have watched at least a portion of 1.5 million episodes to date.
TV on the Internet already is a fast-growing business, and iPad -- not to mention soon-to-launch tablet imitators including HP's Slate and Dell's Streak -- is sure to add intensity.
Adams Research says that while U.S. sales and rentals of DVDs and Blu-ray Discs are projected to drop 9% to $15.8 billion from 2009-14, the comparative Internet business will surge 131% to $1.5 billion.
Those figures don't address the ad-based model. ABC delivers five 30-second ads an hour that viewers can't skip; according to a Diffusion Group study, TV network websites command a hefty CPM of as much as $50, a few dollars more than primetime broadcast TV.
Albert Cheng, executive vp digital media at Disney/ABC Television Group, says he could double the number of ads online without harming their effectiveness or chasing away viewers, though he'd have to bring CPMs down a bit.
"The iPad is built for media consumption; it's an intensified experience," he says. "The consumer is happy and, more importantly, we make money at it."
Beyond ABC, Disney's fingerprints are all over the iPad, with apps from Marvel, "Toy Story" and ESPN. The film studio is showing some trailers exclusively to iPad users before they go wide, and Disney Channel has full-length iPad versions of "Hannah Montana," "Wizards of Waverly Place," "Suite Life on Deck" and "Phineas and Ferb."
Other media conglomerates are just as enthusiastic about the iPad, even if they have been slower to serve up exclusive content. Behind the scenes, some executives complain the reason is that Disney had better advance access because Apple CEO Steve Jobs is a Disney board member and the company's largest shareholder. Not true, Cheng says.
"We're treated like any other developer," he says. "We wish we had more love, but it is what it is."
The iPad isn't perfect: Smudges need to be wiped off the screen often, it doesn't agree with sunlight, video will blur without a strong Internet connection and it can be trickier to get Internet access on an iPad than it is on a laptop computer (though the more expensive 3G iPad solves that problem). Plus, as noted, it won't play Flash video. But The Hollywood Reporter spoke with dozens of TV and film executives and analysts, and their assessments ranged from excited to downright giddy about what the iPad represents: the first simple, elegant, portable platform for Internet video.
"It's my home media companion," says Greg Clayman, executive vp digital distribution and business development at MTV Networks. "You interact with media differently. It's hard to describe. I spend more time reading, more time playing games, more time with Facebook and Twitter, more time with media. It's a uniquely portable device."
Adds Thomas Gewecke, president of Warner Bros. Digital Distribution, "The iPad untethers the movie and TV viewing experience in a way we haven't seen before, including a long battery life."
Part of the magic of the iPad, Gewecke notes, is that it comes with Apple's marketing heft. Indeed, two weeks before the first iPad went on sale, 66% of U.S. consumers with Internet access already had researched the product online, according to ComScore.
"We've taken apart this thing to figure out what's important and what's not," says Anthony Soohoo, senior vp and GM of CBS Interactive's entertainment division.
Soohoo says consumers will warm to iPad's ability to power up almost instantaneously. Using one's finger instead of a mouse also is an important innovation.
CBS shows are available at several places online, some of which use Flash, including CBS.com. But CBS.com also will recognize iPad users and play back content via HTML5.
CBS might follow ABC's lead this year and introduce a dedicated iPad app. Like at ABC.com, users at CBS.com get free shows with ads that can't be fast-forwarded.
"As long as we can get it measured, tracked, credited and monetized, we're indifferent to which screen it's watched on," Soohoo said.
Some analysts see broader implications for the iPad, making predictions far more bold than most entertainment executives would dare make -- on the record, at least.
"What TV and movie execs are thinking is that consumers will have a tablet computer in every room," Wedbush Securities analyst Michael Pachter says. "It can even take the place of a set-top box.
"The iPad will be your server, serving up any content you bring to it; why do you need cable TV?" he asks. "Cable companies are where landline telephones were last decade. Cable will be the losers, and the guys with the content will capture the lion's share of the profit -- as it should be."
There are more than 5,000 apps for the iPad, and one of the most popular is from Netflix. Subscribers who download it free can watch 20,000 movie and TV titles on-demand with a few taps. It's designed for mobile, but the proper cables will put the content on a TV screen.
"Netflix streaming in bed is a killer app," Adams Media Research president Tom Adams says.
About 55% of Netflix's 14 million subscribers already stream movies, oftentimes to their TV sets through a gaming console, TiVo or Roku set-top box, spokesman Steve Swasey says. But the iPad is Netflix's most notable mobile platform.
"Movies are a critical growth point for iPad," Carmel Group senior analyst Jimmy Schaeffler says. "Movies will be first to succeed, followed by TV. And consumers will pay for TV on the iPad."
Adds Adams: "There's a big market in replacing secondary TVs. You won't need lots of little TVs around the house."
So, if Murdoch, Carey and others are right, and we're at the beginning of an iPad-induced media revolution, how long will it last?
"Hey," Adams says. "The iPod didn't take long to revolutionize the music industry, did it?"