NBC Versus Apple: Who Wins, Who Loses?

By Alice Turner
15:21, September 1st 2007
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NBC Versus Apple: Who Wins, Who Loses?

In case you don’t know what the latest hot news in the technology world is over this week end, then you haven’t found out about the predicted divorce between NBC and Apple.

According to the New York Times, after two years of contract, NBC is ready to dump Apple’s iTunes, unsatisfied because they don’t let it to put the prices as they wish, and concerned by the anti-piracy measures ensured by the store.

A spokesman of NBC confirmed the information, but he didn’t give other information, so we find ourselves in front of a week end which is open to any kind of speculations.

Is NBC ready to leave Apple, or is this just a part of the negotiation “dance”, keeping in mind that the contract between the two sides expires in December? And if NBC will go to the end, what will this mean for Apple?

On the other side, the recent history showed that Steve Jobs didn’t gave up to the pressures made by the music companies, so probably, whatever the costs are, he won’t do it for NBC.

In fact, Apple officials quickly responded to NBC’s claims. "Apple declined to pay more than double the wholesale price for each NBC TV episode, which would have resulted in the retail price to consumers increasing to $4.99 per episode from the current $1.99," Apple VP Eddie Cue said in a statement. "We hope they will change their minds and offer their TV shows to the tens of millions of iTunes customers," he added.

ABC, CBS, Fox and the CW, and 50 other cable networks, have deals in place to sell fall shows at ITunes’ current price of US$1.99 per episode, Apple said.

Apple decided to go on step further and penalized NBC for its attempt to renegotiate. "Since NBC would withdraw their shows in the middle of the television season, Apple has decided to not offer NBC TV shows for the upcoming television season beginning in September," Apple added in its statement.

Indeed, in the last two years, NBC became one of the most important content providers for Apple, and according to the analysts’ estimations, about 40% of iTunes TV show catalogue comes from the media giant.

But just like in a deja-vu, NBC seems to experience the same symptoms as the music companies, which struggled, not long ago, to convince the Apple boss to charge more that 99 cents for a song. In the end Steve Jobs won the battle, but the companies weren’t too happy.

For example, on July 6 Universal Music axed its long term contract with Apple, despite sales estimated at around $200 million through the iTunes channel. Universal Music is holding approximately 30% of the world’s music market, with one-in-three tracks being released under its umbrella.

Earlier this month, Universal Music, the record company behind high-profile names like 50 Cent, Black Eyed Peas or Amy Whinehouse, announced that a significant portion of its music catalogue will be available without the DRM protection. Universal Music MG will offer the songs and the albums in the unprotected MP3 format at several online retailers, including RealNetworks, Wal-Mart, Amazon and even Google, but the big surprise is that Apple’s iTunes service, the largest online-music vendor in the US and third-largest offline or online vendor on the same market, wasn’t included in this “promotion”.

Actually the whole conflict between NBC and Apple resumes to one question: who can’t live without whom? Is iTunes Movies Store doomed to disappear if NBC leaves? Or will NBC fail to sell as much as they sold if they call back the shows on iTunes?

Apparently NBC thinks that it pulls the strings now, because a few days ago the company announced its involvement in Hulu, a new YouTube killer wannabe, a joint effort of NBC and News Corp. lead by Jason Kilar, a former Amazon.com executive.

Incontestably, the NBC content is valuable for iTunes, and a break-up would be hard to handle for Apple, but before a final decision, NBC should also analyze and learn from the recent history.

Even though iTunes isn’t the only player on the music and movie download market none of its rivals managed to get close to Apple’s store performances.

Last year, when Apple was extending its offer to movies while, only a few days before, Amazon announced Amazon Unbox and the only partner that Jobs could count to add movies on iTunes was Disney, because the others studios got on the Amazon’s “train”. Even so, iTunes managed to sell more and better and in time it added new movies. Amazon Unbox even teamed up with TiVo in order to expand its audience, but is still lagging behind iTunes.

My intention isn’t to analyze what are the reasons behind iTunes success, but I don’t think that a possible break-up with iTunes would be so benefic for NBC.

With a base of over 100 million iPods, and another hundreds of thousands iPhones and Apple TVs, Apple will continue to be the largest distribution channel for movies and TV shows and its clients will continue to remain faithful.

And even if they like it or not, NBC has to admit that iTunes hasn’t got a well placed rival, and to build an alternative to iTunes is a costly adventure in terms of time and money.

Actually, more than certain, everything is only a flash in the pan, and in the end both companies will fall to an agreement, because, in the end their goals are the same: to sell as much as possible.



© 2007 - 2008 - eFluxMedia
Tags: Apple, NBC, iTunes
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