Currently, Apple sells individual episodes for $1.99 (standard definition) and $2.99 (high definition). Shows are also available as full seasons or via a season pass. The current rumor suggests that Apple is trying to negotiate the right to "rent" TV shows for $0.99 an episode. What's more, these episodes would be streamed off of the device rather than downloaded locally.
While streaming content as opposed to selling it as local downloads would fit in with the other aspects of the rumored iOS-based Apple TV, a rental system doesn't make any sense to us. Streaming content is typically sold as a monthly, all-access subscription or across multiple devices (a la Amazon.com), not individually by episode.
While cable companies often offer recent episodes of network TV shows for rental via video-on-demand, even that model has shifted from paid to free. It just doesn't make sense to charge money to "rent" an individual episode of a TV show, especially if you're talking about sitcoms or animated content which has a run time of about twenty-one minutes.
What we can see happening is Apple shifting its current TV strategy from download-to-own to stream-on-demand. By that, we mean that rather than downloading the file in iTunes or on the Apple TV and then transferring it to an iPod, iPad or iPhone, users instead would be able to stream the content from any device connected to their iTunes account. The trade-off would be that because content is streamed, connectivity would be required.
If a stream-on-demand strategy were in place, that might be an interesting alternative to the all-you-can-eat offerings from Hulu Plus or Netflix Watch Instantly.
We reached out to Apple for comment regarding the latest Apple TV rumors but have not yet heard back from the company.