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Details of Apple, NBC Squabble Emerge

Thursday, October 25th, 2007 at 1:20 PM - by

NBC is obtaining far less than one percent of its TV renevue from iTunes, according to a Washington Post report on Thursday that revealed new details related to the squabble between Apple and NBC.

In the course of describing the current state of the conflict between NBC Universal and Apple over pricing control, Frank Ahrens provided some previously undisclosed details.

First, NBC Universal has confirmed that it sent a letter on October 9th asserting that Apple is in breach of contract. However, it is doubtful NBC will pursue legal action. The negotiations have ground to a halt, according to the report, and there is no resolution in sight.

Second, NBC claimed that before the breakup, its shows accounted for 40 percent of all the television programs purchased on iTunes. Apple said the number was more like 30 percent.

Also, while music companies depend on iTunes for 15 to 20 percent of their revenue, it is far less in the case of TV shows. In contrast, citing anonymous sources, the reporter said that iTunes revenues represented "far less" than one percent of NBC Universal's revenues -- only about $15 million.

Finally, regarding the core disagreement on pricing, the report provided details on the pricing proposals. According to another confidential source, Mr. Ahrens wrote that NBC proposed a range of prices for shows and packages on iTunes ranging from 99 cents up to $2.99. Apple declined that offer and later said in a press release that NBC wanted as much as $4.99 for some shows. NBC denied that, Mr. Ahrens reported.

Who has more to lose is the current question. Tim Bajarin of Creative Strategies pointed out that the sales of the Apple TV have suffered as a result. However, he also pointed out that NBC's action was a "mistake."

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tuscmat said:

member since 06 May 2004 with 35 posts, unranked, send him a message or view his profile

Thu Oct 25, 2007 2:37 pm

So, NBC thinks they're going to get more money from Hulu? Right, and Beyonce Knowles is going to marry me.

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A guest said: (hide)

Thu Oct 25, 2007 2:49 pm

One frakking percent?!?

Good gawd...

Let me go ahead and infer that NBC wants more "defined" "pricing" "structure", just when we know that Apple is actually *gasp!* offering a truly defined pricing structure.

Fine, go ahead and say 'Good Bye, Cruel World', NBC...

Guest, waiting to break open a fancy bottle of champagne when "music" and "entertainment" industries give up and price their goods the way we want 'em priced...

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Black_Dog said:

member since 18 Apr 2007 with 21 posts, unranked, send him a message or view his profile

Thu Oct 25, 2007 4:22 pm

One percent of their current revenue is better than the loss they will take as they try this thing on their own.

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nealg said:

member since 22 Mar 2006 with 123 posts, unranked, send him a message or view his profile

Thu Oct 25, 2007 6:57 pm

Interesting choice of title for this article. I would say the title should be-someone at nbc used their news contacts to try to win some concessions from Apple by leaking a one sided look at what is going on. If anything, Apple TV sales have suffered because Apple has crippled the device so that it doesn't have tivo like capabilities, not related to the nbc debacle. Unless I am not thinking straight about this, the nbc thing has very little to do with Apple TV sales. Also, if iTunes revenues were so unimportant to universal because they were such a small part of their revenue stream, why would it be so important to make such a big stink over the pricing structure. This whole thing just doesn't pass the sniff test.

I thought one of the things that happened was that some of the nbc shows became more popular and more widely watched because people saw them on iTunes. If that is correct, then just looking at the actual revenue from iTunes is a silly way to look at what iTunes brings to the table.

The question is will Apple respond to this or will they tweak Apple TV/iTunes offering so that NBC will come back to the table. I think Apple and Steve Jobs have got to be thinking about what to do here.

Neal

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Pashtun Wally said:

member since 18 Dec 2001 with 145 posts, unranked, send him a message or view his profile

Thu Oct 25, 2007 8:50 pm

Agreed: this is simply another move in the effort to maximise their free money.

Face it, the sales off iTunes is free money for the networks - yes, FREE MONEY. They've already made their dimes off their broadcast business - if they weren't, they'd be losing money by definition (basic broadcast model (simplified) is "we give it all away, and the advertisers pay for everything, including us"). Online distribution (as in web-streaming, one of NBC's proposed "revenue streams"), cable kick-backs, DVD sales are all on top of that, and exceedingly lucrative... but they're not free (okay cable kick-backs are *mostly* free).

Enter iTunes, whose model is (simplistically) "we'll do it all for you @ USD X, and we pay you Y". For NBC, Y is totally free: Apple does the conversion, storage and advertising, handles the accounting & distribution, and covers the bandwidth (their stragtegic partnership with Akamai was no accident - yes, even back then)). $15,000,000 - totally free.

But wait: $15,000,000 but per what? Per year, total? Per show? Per week? Per episode?

NBC could be making an insane amount of money here, and there's no reason whatever to assume that they're not getting enough free money because of mean ol' Apple! Based on the historical record, I'm inclined to the view that NBC's income from iTunes was sufficiently large that NBC *forgot* the first rule of free money ("let it flow!") and wanted it ALL...and Apple wouldn't give it to them.

How big are the stakes? Here's a data point: if I could buy reasonably-priced iTunes subscriptions to the shows I want to watch, I'd have the satellite dish yanked out tomorrow. How big ist the satellite-TV market?

I watch more TV now than I ever have (since puberty): Lost, Heroes, Eureka, House MD are the shows I watch. I've been impressed w/ Battlestar Galactica, but I've been too busy for it, so, four shows. If I could get Bill Maher's Real Time through iTunes (video, not podcast), I'd make it 5.

If I wait long enough (not that long) each of these show's seasons will be released on DVD, and if I wait not much longer, I can buy each one for $30-40 & have it permanently forever. How much would I pay to have a digital file I could see NOW at my convenience? $25 is my price point.

If there's a million others like me (not impossible, given the number of video-capable iPods in circulation - hell, there's a million iPHONES in circulation), that would be $25 million per show per season - prepaid. That's a lot of free money.

Even more free money: if I could replace my satellite with iTunes, I'd keep the $480 that DishTV wants every year - that would pay the iTunes bill handily, and leave plenty of money for Netflix....

(x-posted to my blog)

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JonGl said:

member since 12 Jan 2006 with 113 posts, unranked, send him a message or view his profile

Fri Oct 26, 2007 3:39 am

Guest wrote:
One frakking percent?!?

The problem is that, from NBC's perspective, it was _only_ 1 percent. They wanted it to be more--not by selling more, but by raising the prices on the hot shows. Of course, they don't really understand peoples' thinking, I suggest. I read another post, where somebody said $25 for a season was their limit. That would be mine as well, were I able to actually _play_ the videos on my Pismo. That is just about the same as for a DVD, if my memory serves me correctly, and I don't have to wait. It's also enough to make me squirm, or rather say "no" if the price goes any higher. Let's be honest, none of it is really all )that_ good!

-Jon

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A guest said: (hide)

Fri Oct 26, 2007 11:21 am

I'd agree with the $25 cap for seasons - by the time I'd bought all the HEROES episodes last year I might just as well have bought the DVD set, and had better resolution and no copy protection worth mentioning - er, the ability to play back on anything with a DVD drive. There's some flexibility in that. Yes, I can take my G4 Powerbook over to my friends house to watch episodes, but I'm sure as hell not going to let him borrow it. $25 for a season would be fair, considering. Assuming that was NBC/Universal's argument, which I doubt, as it would mean less money for them. The sad thing is, this year I'm watching mostly NBC/Universal titles, nothing much else interested me. Sure, I looked at Amazon Unboxed. No Mac solution, no interest, sorry.

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A guest said: (hide)

Fri Oct 26, 2007 3:01 pm

Pashtun Wally, you've got it all backwards. It is not FREE MONEY, it is LOSSES! If they are only making 15 million dollars off of iTunes, it is ridiculous for them to stay with iTunes at all. Most people who buy iTunes shows do not go out and buy the shows on DVD once they are released. This basically means they lose money on a potential sale that will never become a reality. As the previous guest says, you might as well buy the DVD for better quality, and remove the middle man of iTunes and let your money go to the content provider rather than the iTunes service provider who is giving you files that have a lower quality that you can get at about the same price. If the shows aren't on iTunes, and people want to catch up on old shows, then go buy the DVD and pay the people that own the show, not a corporation who bullies content providers to sell everything for the same price.

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A guest said: (hide)

Fri Oct 26, 2007 3:05 pm

JonGl wrote:
Guest wrote:
One frakking percent?!?

The problem is that, from NBC's perspective, it was _only_ 1 percent. They wanted it to be more--not by selling more, but by raising the prices on the hot shows. Of course, they don't really understand peoples' thinking, I suggest. I read another post, where somebody said $25 for a season was their limit. That would be mine as well, were I able to actually _play_ the videos on my Pismo. That is just about the same as for a DVD, if my memory serves me correctly, and I don't have to wait. It's also enough to make me squirm, or rather say "no" if the price goes any higher. Let's be honest, none of it is really all )that_ good!

-Jon

Nah, Jon. It is by selling more. Their idea was that they were going to start putting up old shows. Their contention is that not every episode should cost the same money. Something that aired years ago, but is now available on iTunes is not as valuable as something that aired last night.

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