This is a departure from my normal subject matter but I think it is interesting.

Much has been made of the networks rejecting Apple’s $.99 price point for TV show rentals. So I tried to figure out how much they would have to charge an advertiser on Hulu to make the same amount.

The Apple TV (because believe it or not, some people live in a cave): The Apple TV is a device that you plug into your TV and your internet connection. It allows you to view content purchased form Apple on your TV.

Question: What CPM (cost per thousand impression) does a media creator (ie ABC, NBC, ect) have to demand to do better than renting their shows from .99 on the Apple TV?

Assumptions:

• 2 people watch the same screen, meaning there are two impression for every sale.
• There are an average of 8 ads in an hour long show on Hulu.
• The media creators make similar percentages from Hulu vs Apple, thus I will not calculate. (a .99 iTunes download yields .80 to the media creator/network).

Calculations:

• Target Value per Impression $.99 divided by the 2 people watching = $.495.
• Number of ads shown during play 8.

.495 cost per impression / 8 advertisers = .0618 cost per impression per advertiser
.0618 cost per impression per advertiser * 1000= 61.87 CPM

• CPM needed from each advertiser to beat Apple TV $61.87.
• Just for fun: the effective CPM in the Rental model is $495.

Comparison:

• A 2010 Superbowl ad costs around $2.6 million and will probably yield around 90 million impressions. This is a CPM of $28.88.
• If you want to reach a really niche audience Revision 3 podcasts go for around $32 CPM.
• Google TV advertisers can get cable inventory for around $3-$4 CPM, granted those may not be the latest and greatest shows.
• Either way the media companies are not going to get anywhere near the $.99 value per rental from an advertising model.

I guess I don’t understand the thought process over at the networks. It seems from my calculations they would want to push all their sales thought the Apple TV, rather than via advertising models. I would hope the media companies would come out and explain their thought process, you would think they owe it to their shareholders. As well as the tech savvy such as myself who look on this as knee jerk reactions from media dinosaurs.

Unless you actually live in a cave, or don’t have internet access (its really the same thing), you will have sensed that the intertubez are climaxing over the whole Apple tablet thing. Prepare for orgasm, unless there is no tablet in which case the internet will be seriously pissed off.

If I remember I will post where the best live blog is happening. Already a great bet will be FakeSteve.net.