NBC will not renew iTunes contract

[spikedavis]

NBC wanted to up the price of each show from 1.99 to 4.99 and Apple refused to go that high. Talk about pushing people towards torrenting. Dumb movie, NBC. Dumb.


http://www.nytimes.com/2007/08/31/technology/31NBC.html?_r=1&oref=slogin

NBC Universal, unable to come to an agreement with Apple on pricing, has decided not to renew its contract to sell digital downloads of television shows on iTunes.

The media conglomerate — which is the No. 1 supplier of digital video to Apple’s online store, accounting for about 40 percent of downloads — notified Apple of its decision late yesterday, according to a person familiar with the matter who asked for anonymity because negotiations between the companies are confidential.

A spokesman for NBC Universal, part of General Electric, confirmed the decision, but otherwise declined to comment. A spokesmen for Apple declined to comment. The decision by NBC Universal highlights the escalating tension between Apple and media companies, which are unhappy that Apple will not give them more control over the pricing of songs and videos that are sold on iTunes.

NBC Universal is also seeking better piracy controls and wants Apple to allow it to bundle videos to increase revenue, the person familiar with the matter said.

NBC Universal is the second major iTunes supplier recently to have a rift with Apple over pricing and packaging matters. In July, the Universal Music Group of Vivendi, the world’s biggest music corporation, said it would not renew its long-term contract with iTunes. Instead, Universal Music said it would market music to Apple at will, which would allow it to remove its songs from iTunes on short notice.

The action by Jeff Zucker, NBC Universal’s chief executive, will not have an immediate impact on iTunes. The current two-year deal extends through December, so a vast video catalog — some 1,500 hours of NBC Universal’s news, sports and entertainment programming — will remain available on iTunes at least until then.

Among the most popular NBC Universal shows available for sale on iTunes are “Battlestar Galactica,” “The Office” and “Heroes.” The company has been talking to iTunes about offering Universal movies, but has not done so to date because of piracy concerns.

The two companies could still reach an agreement on a new contract before their current deal expires. While each side has so far refused to budge, the talks will continue and have been free of acrimony, the person familiar with the matter said.

But the defiant moves by NBC Universal and Universal Music could embolden other media companies that have been less than thrilled with Apple’s policies. NBC Universal was the second company to sign an agreement with Apple to sell content on iTunes, and its contract stipulated that Apple receive notice of plans to cancel 90 days before the expiration date. Otherwise, the deal would automatically renew according to the original terms.

Assuming similar provisions in deals negotiated with media companies like CBS, Discovery and the News Corporation, a parade of 90-day windows will be coming due.

A move by NBC Universal to walk away or withdraw a large amount of content would probably hobble Apple’s efforts to move deeper into the sale of video-focused consumer electronics like the iPhone and a new class of iPods. While Apple’s early efforts in this area depended on music to fuel sales, analysts say video is what will drive much of Apple’s retail business in the future.

The iTunes service wields incredible power in the music business, since it accounts for more than 76 percent of digital music sales. And its influence is on the rise: Apple recently passed Amazon to become the third-biggest seller of music over all, behind Wal-Mart and Best Buy, according to the market research firm NPD.

But the sale of video online is still at a nascent stage. Media giants like NBC Universal are aggressively trying to move into the business — in part to avoid the piracy that has plagued music companies — but the revenue they earn from online video sales does not yet have a material impact on their financial performances.

So some media companies feel they have the upper hand: Apple, for now at least, needs their content more than they need Apple. And there are an array of companies — like Amazon, Wal-Mart, Microsoft and Sony — that would love to have NBC Universal as a partner to muscle in on Apple’s turf.

Then there is NBC Universal’s own Hulu.com, a venture in partnership with the News Corporation to build a video portal to compete with YouTube.

The risks that media companies face in removing content from well-known Web sites involve perception and promotion. NBC Universal could anger consumers by preventing them from easily watching shows and movies in the most popular way — through iTunes and the iPod. Television networks and movie studios have vigorously tried to avoid being branded with the same anticonsumer sentiment that has worked against the record labels.

And because iTunes is so popular, NBC Universal would lose an increasingly important way of marketing entertainment products, particularly fledgling television shows, to consumers.

For months, most media companies have grumbled that Apple underprices video and audio content as a way to propel sales of a much more significant profit center: iPods and related merchandise. (One noteworthy abstainer from the grumbling is the Walt Disney Company, which has Apple’s chief executive, Steven P. Jobs, as a board member.)

The iTunes service has sold songs for 99 cents each since its beginning four years ago, except for the recent introduction of songs without copy protection. Episodes of television shows sell for $1.99, with movies priced at $9.99.

NBC Universal and other companies say they want to increase prices by packaging content— say an episode of “The Office” with the movie “The 40- Year-Old Virgin,” because they both star the comedian Steve Carell.

In the past, Apple has argued that a range of pricing would complicate the iTunes experience and squelch demand.

[appleye1]

The iTunes service has sold songs for 99 cents each since its beginning four years ago, except for the recent introduction of songs without copy protection. Episodes of television shows sell for $1.99, with movies priced at $9.99.

NBC Universal and other companies say they want to increase prices by packaging content— say an episode of “The Office” with the movie “The 40- Year-Old Virgin,” because they both star the comedian Steve Carell.

In the past, Apple has argued that a range of pricing would complicate the iTunes experience and squelch demand.I've got to say that Apple is absolutely right and NBC is wrong on this one. I don't want to have to wade through a bunch of different pricing schemes and buy shows I don't want just to get shows that I want.

Screw NBC, let them see if they can sell their crap for $4.99 somewhere else.

[Warren]

torrents here I come.

[jrinck]

Apple is just another cable/sat company that delivers content but doesn't create it.

Eventually the content providers are just going to sell their content via the internet, and the cable/sat/Apples of the world will be left with nothing to distribute. Apple needs NBC more than NBC needs Apple.

[MikeMar]

Apple is just another cable/sat company that delivers content but doesn't create it.

Eventually the content providers are just going to sell their content via the internet, and the cable/sat/Apples of the world will be left with nothing to distribute. Apple needs NBC more than NBC needs Apple.

MAYBE true for TV

but for music people aren't going to mess around going to like 4-5 different places to find the artist they want, not going to happen.

at 1.99 a show, I MAYBE would get a show if I missed it, at $5 NEEEEVER

[jrinck]

MAYBE true for TV

but for music people aren't going to mess around going to like 4-5 different places to find the artist they want, not going to happen.

at 1.99 a show, I MAYBE would get a show if I missed it, at $5 NEEEEVER

I was primarily referring to television content, although I didn't make that clear.

I agree--music needs distribution centers because there is so much of it.

Television content can easily be distributed by the creators, though, since there's much less of it and the internet is the perfect delivery system now that set-top boxes are finally becoming internet-enabled.

[MikeMar]

I was primarily referring to television content, although I didn't make that clear.

I agree--music needs distribution centers because there is so much of it.

Television content can easily be distributed by the creators, though, since there's much less of it and the internet is the perfect delivery system now that set-top boxes are finally becoming internet-enabled.

yeah exactly, I can name the 4 big networks, I could NOT name the 4 big music companies to even GO to their site!

[Andrew_S]

I agree--music needs distribution centers because there is so much of it.
The same applies to televison and video.

Television content can easily be distributed by the creators, though, since there's much less of it and the internet is the perfect delivery system now that set-top boxes are finally becoming internet-enabled.
Television content will not sell on the internet if it is inconvenient to find. If I have to know what channel a show is broadcast on, the name of the provider that distributes that show on the internet then that is not going to work. I can visit a torrent site with an aggregator and find all the shows I want very easily. Can you imagine if you needed DirecTV, Dish, and Comcast in your house because each broadcast a different channel and you had to know which provider carried what show?

The networks are in a tail spin much like the music industry was 5 years ago. DVD's, videogames, sports, the internet, podcasts, user generated content.... TV is fighting a losing battle to remain in control of what we watch and how we watch. It will not work any better than it has for the music industry.

[MikeMar]

The same applies to televison and video.


Television content will not sell on the internet if it is inconvenient to find. If I have to know what channel a show is broadcast on, the name of the provider that distributes that show on the internet then that is not going to work. I can visit a torrent site with an aggregator and find all the shows I want very easily. Can you imagine if you needed DirecTV, Dish, and Comcast in your house because each broadcast a different channel and you had to know which provider carried what show?

The networks are in a tail spin much like the music industry was 5 years ago. DVD's, videogames, sports, the internet.... TV is fighting a losing battle to remain in control of what we watch and how we watch. It will not work any better than it has for the music industry.

really?? You don't know that the office is NBC or Fam Guy is FOX???

[marksman]

It is stupid for them to be charging for content they should be pushing for free in the first place.

[TriBruin]

really?? You don't know that the office is NBC or Fam Guy is FOX???

I have a Tivo (and a Comcast DVR). Although, I could probably tell you the Office is on NBC, I don't really pay attention any more. When I see a show that I want to record. Go to my Season Pass and create one. I don't know or care what channel it records from. :D

[JLucPicard]

I'm curious why you think the TV networks should be providing their content over the internet free? That logic just escapes me.

[Andrew_S]

really?? You don't know that the office is NBC or Fam Guy is FOX???

Family Guy. That's on the Cartoon Network late at night, right? So maybe I'd find it at that website. Wait, it's also on WTBS, hmmm, I guess I should check out that site too. Fox, another good choice.

What about Iron Chef? Trading Spaces? Where would I find these shows? The NBC, Fox, or ABC websites? What about Veronica Mars? Weeds? The Sopranos? Mad Men? There are hundreds of channels. Expecting people to know where content originates and who distributes it online is nuts.

I'm curious why you think the TV networks should be providing their content over the internet free? That logic just escapes me.
It shouldn't be free, but it has to be reasonable. NBC would like to charge $5 per episode. Not reasonable. Takes it well out of the impulse buy and makes consumers seek another avenue to acquire content. Drive your customers to free content, good plan.

The networks plans to distribute video online via their own websites is a failure. Few, if anyone, wants to sit in front of their computer and watch full length flash based content. They're recreating television from the 1970's (pre-vcr) on the net. It's not going to work. They're trying to restrict the consumer from unfettered access and control over their content. Content must be mobile, it must be convenient and it must be priced at a reasonable level.

[jrinck]

The networks plans to distribute video online via their own websites is a failure. Few, if anyone, wants to sit in front of their computer and watch full length flash based content.

They key thing here is that they WON'T be watching it on their computers--they will be watching it on their big-screen HDTVs via their internet-enabled DVRs/Tivos. :)

[MikeCC]

It shouldn't be free, but it has to be reasonable. NBC would like to charge $5 per episode. Not reasonable. Takes it well out of the impulse buy and makes consumers seek another avenue to acquire content. Drive your customers to free content, good plan.



I suspect that the consumer will have more of an opportunity to influence prices of content if the content was provided by multiple sites, like the media companies, rather than have it all hoarded in one big distribution portal by Apple.

I always cringe when folks start talking about "reasonable" prices. Remember--it has to be reasonable to the consumer, or the consumer won't buy.

BUT... it also has to be reasonable to the provider, or the provider won't supply.

[pkscout]

And now we have three threads in two forums about this topic...

[Andrew_S]

I suspect that the consumer will have more of an opportunity to influence prices of content if the content was provided by multiple sites, like the media companies, rather than have it all hoarded in one big distribution portal by Apple.

Exactly. If it's available at iTunes, Real, Playstation Store, XBox Live, then it will be cheaper. If you can find all content at all of those sites, it makes life as a consumer easier and happier. If a customer must visit multiple sites to find multiple shows, that's not a success. Apple wasn't hoarding any content. As far as I know they were neither seeking or signing exclusive content deals.

[Warren]

I could tell you what network a show is on. But not what time or what the channel number is.

[marksman]

I'm curious why you think the TV networks should be providing their content over the internet free? That logic just escapes me.

Because the network's entire business model has been SUCCESSFULLY based on providing free content to people which they then sell advertising to make money.

That is how they became these huge billion dollar corporations. They did not do it by going door-to-door and asking people to pay a dime to watch Bonanza.

They have totally lost their way here. You think it is more expensive for them to provide content over the internet then it is to provide it through their network of 100s of local affilaites where they have to maintain and pay for broadcast facilities?


It is dumb that it is not free, because their revenue model is still based on getting as many people watching shows as possible. Instead they have fewer viewers watching shows and now they want to nickle-and-dime the consumer to get the "opportunity" to do so.

[TriBruin]

Because the network's entire business model has been SUCCESSFULLY based on providing free content to people which they then sell advertising to make money.

That is how they became these huge billion dollar corporations. They did not do it by going door-to-door and asking people to pay a dime to watch Bonanza.

They have totally lost their way here. You think it is more expensive for them to provide content over the internet then it is to provide it through their network of 100s of local affilaites where they have to maintain and pay for broadcast facilities?


It is dumb that it is not free, because their revenue model is still based on getting as many people watching shows as possible. Instead they have fewer viewers watching shows and now they want to nickle-and-dime the consumer to get the "opportunity" to do so.

The problem is not the number of "viewers", it is the number of viewers who earn money for watching the show. More and more consumers are finding ways of watching shows WITHOUT the inconvience of commericals. These viewers earn nothing for the studios/networks. These could be legal (DVD sets, online/download, or DVRs) or questionable (Bittorrent). The networks/studios are trying to find a way start earning revenue from these alternate sources.

Regarding the pricing NBC is looking for, it is outragous. I have used iTunes for multiple shows. When I didn't have SciFi, I bought the Season Pass for BSG. When I was a business trip and missed a Lost/Heros/etc. I had no problem paying $1.99 to watch the episode sooner than I could by waiting till I got home. But at $4.99, buying is no longer an impuse.

[JYoung]

Bad move by Universal but not surprising.
They're already pulling this move with their music division and they managed to extort Microsoft into giving them a piece of each Zune sold.

I figured they'd dig their heels in on the TV shows sooner or later.

[marksman]

The problem is not the number of "viewers", it is the number of viewers who earn money for watching the show. More and more consumers are finding ways of watching shows WITHOUT the inconvience of commericals. These viewers earn nothing for the studios/networks. These could be legal (DVD sets, online/download, or DVRs) or questionable (Bittorrent). The networks/studios are trying to find a way start earning revenue from these alternate sources.

And that is why we see more and more product placements. With them controlling the content on the internet they could take advantage of additional ways to make advertising revenue. Not to mention have a better guage on who/what/where/why is watching their shows beyond the ridiculous Nielsen ratings.


The foundation of broadcast television has been to devise ways to get the public to watch advertising or be exposed to advertisers. By going to a pay-for-play model they are entering into an entirely different business. Television shows on the networks have always just been a means to sell advertising. Now they want them to be their own product for sale. These businesses are very different.

[Mike10]

Bad move by Universal but not surprising.
They're already pulling this move with their music division and they managed to extort Microsoft into giving them a piece of each Zune sold.

I figured they'd dig their heels in on the TV shows sooner or later.

Universal music is a completely separate company it was not part of the NBC universal merger

[cmontyburns]

And now we have three threads in two forums about this topic...

Might as well post in each of them. :D

Exactly. If it's available at iTunes, Real, Playstation Store, XBox Live, then it will be cheaper.

Not really, since the variety of DRM's in use fragments the market. And doubly not really, since the only DRM that really matters in the marketplace is Apple's. (And don't forget, it is the content providers -- music and video -- that want the DRM, not Apple.)

This is what NBC clearly doesn't get. They're acting like their content is driving the digital video market, and one day it might (although that will require removing the DRM the content owners are so in love with). But not right now. The current lever is the device, not what you watch on it.

So let's say Apple does introduce the full-screen video iPod on Wednesday, as they are expected to do. And let's see that NBC/News Corp/Microsoft/others are successfully able to partner to get Hulu.com off the ground to sell video properties like Heroes (and with all those fingers in the pie, good luck finding it for $1.99 an episode!). Naturally, this new version of Heroes won't play on the new iPod (or any other one, as things currently stand). So you want one of the bitchin' new iPods to watch video on the go, and you want to watch Heroes. Which one will you compromise on? I'll bet virtually everyone will get the device they want, the iPod in this case, and will go find the content from someplace where the content is playable on that device. (Hint: it ain't Hulu, and it'll be free.) You lose, NBC. It's not the distribution that matters, it's the endpoint. Content providers can try to take back all the distrubution they want, but until they own the endpoints -- and they never will (sorry, Sony) -- they're stuck.

[Redux]

So you want one of the bitchin' new iPods to watch video on the go, and you want to watch Heroes. Which one will you compromise on? I'll bet virtually everyone will get the device they want, the iPod in this case, and will go find the content from someplace where the content is playable on that device. (Hint: it ain't Hulu, and it'll be free.) You lose, NBC.People shouldn't steal. Just because something is priced too high doesn't mean people should steal it.

But they do.

Apple found the solution. Painless pricing. Simple pricing. You don't have to comparison shop, you don't have to analyze pricing packages, you just do it.

It is a viable alternative to the reality of virtually everybody just taking the stuff for free. Some still do that, obviously, but millions of people willing to be honest if it doesn't hurt too much become customers.

Why, as a vendor, you would want to turn your paying customers into thieves is a mystery to me.

[TriBruin]

People shouldn't steal. Just because something is priced too high doesn't mean people should steal it.

But they do.

Apple found the solution. Painless pricing. Simple pricing. You don't have to comparison shop, you don't have to analyze pricing packages, you just do it. :up:

It is a viable alternative to the reality of virtually everybody just taking the stuff for free. Some still do that, obviously, but millions of people willing to be honest if it doesn't hurt too much become customers.

Why, as a vendor, you would want to turn your paying customers into thieves is a mystery to me.

:up: :up: :up:

The studios complain that people steal their content instead of paying for it, but when Apple showed a simple pricing model works (very well), the studios get greedy and want more. End result, less sales more piracy.

[getreal]

I could tell you what network a show is on. But not what time or what the channel number is.
Okay, where do I look for "Medium"? I haven't found it for the past season, except occasional appearances on some cable channel.

[jgerry]

When the consumer has to go to 4 different web sites to buy this content, each with different, incompatible, draconian DRM, none of which will play on any iPods, which owns 70% of the portable market... That's pretty insane. And far too complex for consumers to deal with. People like iTunes because it's dead simple to use; the pricing may be a bit high for some but it's fair and easy to understand. All these networks who are bitching about wanting more money are going to be sorely disappointed and they'll all be back on iTunes in a year or two.

[gossamer88]

Looks like Amazon (http://www.amazon.com/b/?&node=16261631) will provide the NBC shows.

[Andrew_S]

Looks like Amazon (http://www.amazon.com/b/?&node=16261631) will provide the NBC shows.
Now with 50% more DRM!

[mcb08]

Looks like Amazon (http://www.amazon.com/b/?&node=16261631) will provide the NBC shows.
I assume this means that Amazon will charge $4.99 for shows in the upcoming season? The eps that are on there now are $1.99.

[IDSmoker]

I'm curious why you think the TV networks should be providing their content over the internet free? That logic just escapes me.
My argument is that using bittorrent to download a show that I receive on the cable I already pay for, is perfectly legal under the Fair Use Act (http://www.copyright.gov/fls/fl102.html).

Until there is a judicial ruling otherwise, my argument is every bit as valid as the one saying that bittorrenting a television show is illegal.

[Andrew_S]

My argument is that using bittorrent to download a show that I receive on the cable I already pay for, is perfectly legal under the Fair Use Act (http://www.copyright.gov/fls/fl102.html).

Until there is a judicial ruling otherwise, my argument is every bit as valid as the one saying that bittorrenting a television show is illegal.

Let's just agree that it's a moral grey area. Until the networks decide to make available content in a user friendly manner, than I'll continue to use Bittorrent for downloading TV shows. The only time I think twice about it is when the show is televised by HBO or Showtime.

[madscientist]

The thing I find odd about this, and what no one has mentioned, is the math. From what I've read iTunes says that NBC wants to "double its price" and that would push the iTunes price to the consumer to $4.99. Now, maybe I'm just not up with the "new math" but last time I checked 2 * 2 != 5... and surely all $1.99 of the iTunes price is NOT going to NBC in the first place.

So, you know, I might be more sympathetic if it didn't seem like iTunes is just using this as another excuse to screw us.

[spikedavis]

The thing I find odd about this, and what no one has mentioned, is the math. From what I've read iTunes says that NBC wants to "double its price" and that would push the iTunes price to the consumer to $4.99. Now, maybe I'm just not up with the "new math" but last time I checked 2 * 2 != 5... and surely all $1.99 of the iTunes price is NOT going to NBC in the first place.

So, you know, I might be more sympathetic if it didn't seem like iTunes is just using this as another excuse to screw us.

huh? :confused:

[Kevdog]

Now with 50% more DRM!

And no Mac support!

[Worf]

The latest news is that Apple actually wants to push the video download prices down to $0.99, which is why NBC balked as well. Apple's justification is that the increase in people buying legitimate downloads (hey, it's under a buck!) more than makes up for the loss going from $1.99 to $0.99.

Of course, the other sticking point is that the studios consider this would cannibalize DVD box set sales since you could buy an entire season cheaper on iTunes than on DVD. Neglecting the fact that the DVD is higher quality, more portable, etc. Pay cheaper price for locked DRM encoded seasons, or pay more money for less DRM (DVD still has DRM, even though it's trivially broken) and higher quality...

[Andrew_S]

The latest news is that Apple actually wants to push the video download prices down to $0.99, which is why NBC balked as well. Apple's justification is that the increase in people buying legitimate downloads (hey, it's under a buck!) more than makes up for the loss going from $1.99 to $0.99.

And I think Apple is right, but it's that leap of faith that will be hard for networks to make. I also think more music would sell better at $0.25 than $0.99. In my opinion, music and video is a commodity item that is best sold in large quantities. At least, in this day and age.

[bareyb]

That "bundling" idea sucks and it would piss me off to the point that I'd buy NOTHING. Let's throw in some crap they don't want or need, and make the price five times higher. Typical corporate greed. It's transparent as hell and insulting to the intelligence of consumers. :mad:

[jlb]

I forgot where I originally read it, but I had flagged today in my calendar to look for the NBC pilots on Unbox. Most of the pilots for the new shows were to have free Unbox downloads. I have downloaded the Bionic Woman pilot and Journeyman.