Internet Video and Ads: Apple Cracks the Door

Apple seems to be sliding into the media business (and by media business, I use the Eric Schmidt definition of a company that makes its money through advertising)--they are going to begin showing ads inside of iTunes.

This is a reasonably big deal. Applications like Real Player have had ads running inside of them for years, as have a number of other downloaded applications. But iTunes is a bit unique because of the fact that it has content from the big networks and beyond. That is, those shows that are going through a major disruption as the means of delivery shift are beginning to find new ad models wrapped around them.

The question is now how far it will go. The ad-on-the-side model is interesting, in that it puts an ad up on the screen, but doesn't interupt the flow. But the issue that remains is sorting through the expectations of free content or of commercial-free content. That is: if I pay $1.99 for a show, I don't expect there to be ads. If I pay nothing for a show, I expect there to be ads.

That's one side of the equation. The other is they who gets paid question. If ABC sells 30 seconds at the start of Desparate Housewives, ABC makes the money. If Apple sells a banner next to DH during the first 30 seconds of the show...does Apple get paid? What if they both do it? Shoot, there goes the consumer.

The chesspieces are clearly in motion on this one. I applaud Apple for taking the steps and for taking them lightly. We can't really delay this debate too much longer.