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Apple Dumps NBC After iTunes Negotiations Breakdown

Friday, August 31st, 2007 at 1:40 PM - by

Following the news that NBC Universal will not be renewing its contract to offer TV shows for download through the iTunes Store, Apple announced on Friday that it will not offer the network's fall line up for sale. Apple vice president of iTunes, Eddie Cue, said the talks fell apart after the company refused to pay NBC rates that would have driven TV show prices up to US$4.99 per episode.

Apple prices TV show episodes at $1.99 each. Shows from ABC, CBS, FOX, CW, and over 50 cable networks are scheduled to be available for download once the new program season begins this fall.

"We are disappointed to see NBC leave iTunes because we would not agree to their dramatic price increase," he said. "We hope they will change their minds and offer their TV shows to the tens of millions of iTunes customers."

NBC's contract with Apple expires in December, which meant that the network's programming would have been available on the iTunes Store only for a partial season. Instead of offering customers the partial season, Apple chose to not offer the episodes at all.

The move shows Apple is ready to play hard ball with the networks, which may send out the message that the Cupertino-based company will not allow media companies to dictate what it considers to be unfair pricing. While NBC may have thought that Apple would give in to charging customers more for TV show downloads by threatening to pull its content, Apple seems to have stepped up to the plate and told the network to take its shows and go home.

Apple will likely see some kind of a dent in its iTunes Store revenue because NBC's TV shows accounted for about 30 percent of the store's TV show downloads. NBC will also likely take a hit on revenues since no one will be able to buy its shows at Apple's online store.

The news also means that a percentage of customers that were purchasing NBC's programming from the iTunes Store will likely switch to unlicensed file sharing networks to get the shows.

NBC has until the end of the year to reconsider, and Apple did leave the door open for further negotiations.

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vasic said:

member since 09 Aug 2005 with 279 posts, unranked, send him a message or view his profile

Fri Aug 31, 2007 2:54 pm

Well, well, well.... It seems that NBC had just learned a valuable leson: NEVER BLUFF WITH STEVE JOBS - HE'LL CALL YOUR BLUFF! What now, NBC? Now, imagine if on Wednesday they announce bigger video iPods, along with more video content on iTunes. The loss of NBC will be even less important for Apple; the loss of iTunes for NBC, however... Where will their digital money come from? Zune Marketplace...?? (must stop typing, can't stop laughing...).

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A guest said: (hide)

Fri Aug 31, 2007 3:04 pm

Good for Apple in sticking to their guns. This pro-consumer stance will hopefully demonstrate to the networks that fair pricing is a good thing and will increase sales thus making them more money in the long run.

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A guest said: (hide)

Fri Aug 31, 2007 3:26 pm

$4.99 per episode? Mwa ha ha ha. I can buy some big budget feature length movies for 5 bucks.

Let's see how NBC will now deal with the coming spike in pirated NBC shows.

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A guest said: (hide)

Fri Aug 31, 2007 3:51 pm

Besides, NBC doesn't have anything worth paying $1.99 for an episode much less $4.99.

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A guest said: (hide)

Fri Aug 31, 2007 4:00 pm

so NBC expected us to pay $100 for a season of low res compressed TV? that is more than most DVD seasons. screw them. Bittorrent is almost as easy as itunes nowadays.

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A guest said: (hide)

Fri Aug 31, 2007 4:44 pm

Actually,

All parties lose. Consumer, Apple and NBC.

But As far as we all know, itunes isn't Apple's cash cow per se, since most of the charging price goes to Sony BMG, Universal, ABC, CBS.... you name it

Considering this case, before itunes... NBC was receiving $0.0 on piracy. iTune at least offer something between $1.25 to $1.50 per show.

The right name for NBC actitud is: Greed.

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burrito said:

member since 07 Aug 2005 with 177 posts, unranked, send him a message or view his profile

Fri Aug 31, 2007 4:53 pm

let's not forget that M$ is one of NBC's biggest partners.. MSNBC, anyone?

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Intruder said:

member since 07 Jul 2004 with 3149 posts, TMO Mac Specialist, send him a message or view his profile

Fri Aug 31, 2007 5:11 pm

Let's see.... Universal dumps Blu-Ray for HD-DVD, which MS is pushing in order to use their latest "interface software" and DRM, then leaves iTunes.

It does make you wonder if there isn't something going on behind the scenes.

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A guest said: (hide)

Fri Aug 31, 2007 10:48 pm

Yeah- i'm sure that the universal-nbc-microsoft angle is real. They probably have this vision where everyone comes running to their online store to download shows and music.

1-people want one stop shopping. Their store will only have their junk.

2- to run the stuff on the ipod/iphone they need fairplay (or no drm at all) and they won't have it.

3- torrents are easier.

Trust me NBC-zune won't cut it. You've just accelerated your own death.

This is like the Kate Spade knock offs-KS does not lose any revenue because the people buying the knockoffs would never pay 300 bucks for an original in the first place.

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A guest said: (hide)

Sat Sep 01, 2007 6:27 am

I agree that this turn of events hurts everyone, NBC, Apple, and the consumer. However, it will hurt NBC the most... They're going to end up with nothing, and people will still get the shows from the network. Hell, all it takes is a TiVo, the encoding software (Toast 8 now), and a copy of QuickTime Pro. Just put it in your LimeWire sharing folder, and ta-da!

Besides, no one (with a brain that is), would pay $5 an episode for any of their shows. If you've got even a bit of intelligence, you'll know that their stuff is all crap. That said, I'm looking forward to buying the new season of Battlestar Galactica when it begins this fall. I might just get the new season of House M.D. as well.

A really stupid move by NBC, and the best move Apple could have made in response to their greed.

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elehcdn said:

member since 16 May 2005 with 9 posts, unranked, send him a message or view his profile

Mon Sep 03, 2007 3:27 pm

So does that mean that NBC is going to try to get that price from some other online provider? Good luck!

You have to wonder about the impact on NBC shows last year by offering their shows on itms. Would Heroes, or more importantly, The Office have been such huge hits if they weren't downloadable? Either NBC has written off the online portion of the success of many of their shows or they have overestimated the price that they can demand for those shows. Either way, they will be big loser when their new shows don't get the exposure that previous shows did by allowing itms downloads.

For me, I don't really care, since I already rip tv shows with my El Gato eyeTV and transfer them to iTunes to carry on the road. I do it for my own consumption, but I'll bet that many people will start doing the same and make the shows that NBC used to make a small profit available through various file sharing services.

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choard said:

member since 08 Jan 2004 with 6 posts, unranked, send him a message or view his profile

Mon Sep 03, 2007 5:14 pm

I'm thinking that 6 months after Leopard is released, someone will trot out an iTunes mini-app that will allow you to add a secondary source to it. The hot BitTorrent sites will code to the free/cheap API, and you can get your music and the like from iTunes protected, or from a BitT site, however.

The NBC guys don't like the amount of Gladbag (C) protection they get now? They will hate it full frontal with NO protection. You can DL NBC shows NOW, with no commercials for free, in HDTV. Watching them on an HD monitor is cheaper than buying the HDTV and the quality is sweet. How does THAT benefit NBC advertisers or stockholders, over the $1.99?

I gotta wonder and worry about Fortune 500 media companies so far out of touch with current pricing schemes. (Though their advertisers should worry much more) With DVDs for $6 at Walmart, why would I pay $5 for a 60 minute TV show in lo-res? Do these guys HAVE internet service? Do they OWN computers? Or is there still a secretarial pool of people who have to type their thoughts for them? Jeez...

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A guest said: (hide)

Tue Sep 04, 2007 12:29 pm

vasic wrote:
Well, well, well.... It seems that NBC had just learned a valuable leson: NEVER BLUFF WITH STEVE JOBS - HE'LL CALL YOUR BLUFF! What now, NBC? Now, imagine if on Wednesday they announce bigger video iPods, along with more video content on iTunes. The loss of NBC will be even less important for Apple; the loss of iTunes for NBC, however... Where will their digital money come from? Zune Marketplace...?? (must stop typing, can't stop laughing...).

Um, it wasn't a bluff. They left. It's a bluff if they stayed with iTunes at the lower prices. Pulling the fall lineup was not calling the bluff, it was retribution.

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gslusher said:

member since 13 Nov 2002 with 2088 posts, unranked, send him a message or view his profile

Tue Sep 04, 2007 1:52 pm

Anonymous wrote:
Um, it wasn't a bluff. They left. It's a bluff if they stayed with iTunes at the lower prices. Pulling the fall lineup was not calling the bluff, it was retribution.

Perhaps. However, the contract runs through December. NBC had to give 90 days notice or the contract would have automatically renewed. According to several sources, Apple and NBC are still in negotiations. Others say that NBC is counting on hulu.com, the service it is starting with NewsCorp (Fox).

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A guest said: (hide)

Tue Sep 04, 2007 2:50 pm

gslusher wrote:
Anonymous wrote:
Um, it wasn't a bluff. They left. It's a bluff if they stayed with iTunes at the lower prices. Pulling the fall lineup was not calling the bluff, it was retribution.

Perhaps. However, the contract runs through December. NBC had to give 90 days notice or the contract would have automatically renewed. According to several sources, Apple and NBC are still in negotiations. Others say that NBC is counting on hulu.com, the service it is starting with NewsCorp (Fox).

Interesting. Depending upon how the original contract was set up, Apple might be in breach of contract if they decide to follow through and not offer the fall shows until the original contract expires. NBC offers its shows online already at its own website, both streaming and download. I agree that in the short term this bad for all parties, but in the long run it will be better for the consumer if content providers are able to offer their shows through multiple service providers.

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