An Open Letter to NBC re: Leaving Apple’s iTunes Store | iLounge Article

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An Open Letter to NBC re: Leaving Apple’s iTunes Store

Hi, NBC. It’s me, Jeremy. You probably don’t know me, but I’m one of your customers. That’s right, “customers.” Two years ago, that word wouldn’t have made any sense to either of us. The idea of paying money for your TV shows was next to ridiculous to me back then. Even today, I think it’s on the fine edge of foolish, and all it would take is one really dumb move by your company and I’d stop paying to watch your shows.

Today, you did something that comes as close to “really dumb” as you’ll need to get to lose my business entirely. You announced that you’re considering pulling your videos out of the iTunes Store come December over piracy and pricing concerns. The New York Times also reported that you’re holding back on selling movies through iTunes because you’re worried about piracy.


TiVo’s Series 2 DVRs can automatically record television programs for you, with almost Apple-quality simplicity

Let me explain something to you, because you don’t seem to understand it already. Your TV shows are available every day, every week, and every month of the year for free. They fly through the air (and travel through cables) at no a la carte charge to customers. There was also this thing called a VCR, which more recently has been replaced by something much better called a PVR (personal video recorder) or DVR (digital video recorder), which people can rent from any cable or satellite company, or buy for their TVs or computers. These devices record your free TV shows and let people watch them later. With only a few button presses, people can now even record an entire season of your shows automatically and watch it whenever they want. For free.

In other words, the per-episode price people are accustomed to paying for what you show on television is “zero,” or something very close to it. Most people are also not so addicted to what you are producing that they would suddenly start paying for it if you stopped offering it for free. In truth, I’ve personally found it hard to convince close friends to shell out $1.99 on iTunes for a single episode of a show they aren’t already interested in seeing—I know, I’ve tried, and I wind up “gifting” those shows half of the time.

That brings me to iTunes. Two years ago, Apple created a place for you to sell your TV shows, and has let you try a few pricing tests since then. I remember laughing really hard when you tried to sell individual Saturday Night Live skits for $1.99 per download—not because the show was funny, but because the idea of paying $2 to watch 3 minutes of Goat Boy or Debbie Downer was just on-its-face preposterous. I’ve also seen you give away content as an incentive to become interested in new shows I didn’t care much about, like Flash Gordon. Sometimes it works. Sometimes it doesn’t. But don’t blame Apple.

What you should have learned from the iTunes experiment is simple: Apple is helping you make money, and build fan bases. Shows like The Office that were going nowhere suddenly developed religious fans and—in my case—customers. I missed the first and half of the second seasons of The Office because nothing you did to promote the show worked properly. Then, one day while I was on vacation, a friend recommended the show. So I downloaded an episode from iTunes. Then I downloaded the entire series. I let my now-wife watch, then she and I both got our fathers (and other family members) hooked, and so on. The same thing happened with Battlestar Galactica, and this week, I bought the entire first season of Heroes. It’s purely coincidence, I think, that The New York Times reported this morning that those are your three most popular shows on iTunes.

Without iTunes, this would never have happened. I want to underscore the word “never.” I love these shows now, but I was completely losing interest in television until the iTunes Store made the video content conveniently available. Like it or not, the Apple pricing and piracy provisions you’re protesting have worked almost exactly as they should have. Most of your customers feel that the per-episode and per season prices could stand to be a little lower, especially overseas, but somehow I doubt that you are fighting with Apple to lower your prices. TV show prices just effectively went up in the U.K., after all. [Note: Following publication of this editorial, Apple announced that NBC was attempting to force a price increase to $4.99 per episode.]


NetFlix rents 3 DVDs at once for $17 per month, cheaper than buying DVD box sets or an entire show’s season through iTunes

And piracy? If you have an objection to Apple’s FairPlay system, let me acquaint you with the world’s three best alternatives. First, there’s the DVD. Put it into any computer, run a free program on it, and a couple of hours later, its contents can be transferred a million times over to anyone. Sure, you make money on DVD sales, but why buy a DVD when you can just rent it? Next-generation video discs with more piracy protection? Almost no one has HD-DVD or Blu-Ray Disc players yet. And the security on those things was already cracked, too.

Next, there’s Bittorrent—or, put another way, massively distributed file-sharing services. Apple takes until Friday to post Thursday’s episodes of TV shows at 640x480 (or lower) resolution, charging $1.99 and locking the files against copying. Bittorrent and its alternatives post the same content in high-definition for free with zero piracy protection within hours of the original airtime. You’d have to be stupid, lazy, or really honest to pay 2 bucks for something you can get in higher quality, with no piracy restrictions, and earlier for free.


Elgato’s eyeTV 250 is only one of many computer-based TV and HDTV recording solutions now available

Consider me one of the “really honest” ones. But I prefer the third option: the PVR. My TiVo is now set up to record each of my favorite shows—again, for free—and I can watch them immediately after they’re aired. They can be stored indefinitely on my hard drive or DVDs. Just like the millions of other people out there with PVRs, I pay nothing for this, and it’s completely legal.

I have to admit one thing: I’ve also been buying your DVD box sets on occasion. The Heroes season I mentioned above? I purchased it this Tuesday on disc. It didn’t seem to make any sense to me to pay $43 for the season at iTunes when I could buy a higher-quality box set, complete with extra features, for $37 at a local store. Interestingly, my wife bought us The Office Season 2 last year, and I pre-ordered Season 3 a week or two ago—despite the fact that we have iTunes and PVR copies of the same episodes. Also, once I’m done watching the DVDs, I could loan them to friends. Or sell them. I can’t do either of those things with my iTunes downloads.

If you’re concerned about piracy of what you’re selling through iTunes, my suggestion would be to take a quick look at the fact that you’re distributing your content in completely unprotected or compromised ways every single day. FairPlay is the smartest, most effective protection you have.


TiVo content can be transferred to your computer for later big screen or portable viewing

So, if for some crazy, misguided reason you ultimately pull out of iTunes or try to raise your prices beyond today’s level, two things are going to happen. First, I’m going to stop paying money for any of your shows, and recommend that iLounge readers do the same thing. Seriously. My PVR works wonderfully, so I’ll just record for free anything that vaguely interests me, and show others how to do the same. I’ve been on the fine edge of greater PVR interest for the past couple of years, but the iTunes Store has mostly staved that off. I’ll extend this to box set DVD purchases, too; I really don’t need archival-quality copies of network programming I’ve already recorded.

Second, I’m going to decide to stop back-sampling your shows. If something doesn’t interest me at the beginning of its season, I’m not going to pick it up mid-stream and become a loyal viewer thereafter. Instead, I’ll devote my interest—and my dollars—to programs from your competitors. I hope that iLounge readers would do the same. There are lots of channels out there, and I’m certain that I can find great alternatives on ABC, CBS, Fox, or any of the other stations represented on iTunes.

Granted, The Office, Battlestar Galactica, and Heroes are excellent shows; I’d hate to give them up. But if you leave iTunes, I won’t have to. I’ll just stop paying for them. And I’ll enjoy watching how your concerns over pricing and piracy work themselves out without Apple, and customers like me, on your side.

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Comments

1

well, put, and my sentiments exactly.

Posted by Toxic Boy on August 31, 2007 at 9:31 AM (PDT)

2

I feel the same way - especially since they make so much money from advertising, product placement, etc. My new 6G wireless iPod ( crosses fingers) will work just as well without NBC iTunes contributions. Especially since I’ll just get the same shows another way.

Who’s up for an NBC iTunes boycott starting today up through November Sweeps?

Posted by jquig99 on August 31, 2007 at 9:38 AM (PDT)

3

I agree completely, and I also think that NBC is just being plain greedy.

Seriously, if they stop selling via iTunes, where else are they going to sell?  There’s nowhere else that has the sheer number of video ipods and the like (e.g., QT viewing on the Mac/PC).  NBC needs to stop looking at this for pure profit, and start looking at iTunes as a medium for building interest in shows, which then leads to more advertising profit.  A venue like iTunes can help ratings go up, and it’s just crazy to ignore such a medium, especially as there’s no other significant alternative.

What are they going to do next?  Ignore and stop using the internet?

Posted by Kevin42 on August 31, 2007 at 9:44 AM (PDT)

4

Nice!

My thoughts too. Another case if TV execs sitting in an ivory tower thinking they can charge what they want. They’re lucky they have an audience with the iTunes downloads.

Now if only they had the brains to actually read and understand what you wrote. A tall order, but Palm did when brighthand wrote an open letter:
http://blog.palm.com/palm/2007/08/thanks-engadget.html

Maybe I’m expecting too much from NBC execs.

Posted by bleh on August 31, 2007 at 9:52 AM (PDT)

5

Very well put article Jeremy.

I wonder how NBC will look after Apple announces this great new iPod line (that plays TV shows beautifully, on-the-go, and with the same flexibility of being DRM-enabled but not restrictive about it) and they have just put themselves out of the game.

Will they apologize? Will Apple stop using their shows in their ads?

Time will tell.

Posted by misaelt in Mexico on August 31, 2007 at 10:08 AM (PDT)

6

Excellent article. And wasn’t NBC the FOURTH rated network all last season? Talk about shooting yourself in the foot. iTunes was probably the best thing they had going for them in terms of revenue. Idiots.

Posted by ele©tro on August 31, 2007 at 10:13 AM (PDT)

7

Jeremy, I must disagree with you.  I applaud NBC for pulling its content.  If they don’t like their revenue share, they should take their marbles and go home.  More power to them.  I love NBC shows, have bought them off of iTunes, but I can just as easily go to the NBC site and buy my content there and reward the content creater as opposed to the content aggregator.

Posted by Edgar Newt on August 31, 2007 at 10:19 AM (PDT)

8

Edgar, while you do have a point, NBC is cutting themselves off from a large chunk of potential customers—customers who can increase their ratings.  Yes, people could buy/download from NBC’s site, but I’d be willing to bet that the number of NBC purchases/downloads is a h*ll of a lot smaller than the iTunes number.  There are a lot of people who view shows on their iPods, and NBC has just made a decision which cuts them off.

Note that it’s not about you (or me).  It’s about the sheer number of eyeballs, and there are a lot more eyeballs at the iTunes site.

Posted by Kevin42 on August 31, 2007 at 10:38 AM (PDT)

9

Edgar - will you buy NBC’s content if they double their price?

Posted by jquig99 on August 31, 2007 at 10:48 AM (PDT)

10

Superb editorial, Jeremy.

And folks, this isn’t NBC as much as it is Universal, who are simply extending their existing beef with Apple from the music to the TV realm. And apart from the higher prices they want, I’ll be this is about something else too.

Remember, Microsoft bent over for these goons and is paying them a cut of every Zune sold. You know they’s love to be sucking money out of Apple the same way. I’d be shocked if this isn’t a large part of why these negotiations are breaking down. Uni wants their cut of iPods sales OR they want big hikes on the song/episode prices. If they don’t get either, they take their ball and go home.

I applaud Apple for standing up and saying no to this extortion. I hope and expect that this will blow up on Universal’s face.

Like Jeremy, I’ll continue to watch NBS/Universal shows I enjoy thanks to my HD TiVo and my $40 Silver Sensor antenna which pulls them out of the ether for free. But they’re not getting any more of my money.

Posted by Fangorn in Texas on August 31, 2007 at 10:56 AM (PDT)

11

I am very selective about who my content providers are. I lost interest in television several years ago, and currently I don’t watch more than a half hour every month.

I don’t understand what all the angst is about; if the content providers insist on binding their product with DRM, and you don’t like that, don’t just quit buying it or renting it. Instead you should flat out ignore it, including the bit torrents and the sneakernets. You do not _need_ those products, especially under those terms. You also do not need to be pushed into illegal acts to enjoy them. Just Ignore Them!

Advocate _compatible_ providers! Develop a good relationship with providers that you can work with! Promote this position!

Posted by Michael Brian Bentley on August 31, 2007 at 11:08 AM (PDT)

12

Fangorn,

It is important to note that NBC/Universal is owned by General Electric, while the Universal Music Group is owned by Vivendi, a completely separate company. While they may share a common name, they are not, in fact, related in terms of negotiations with Apple.

NBC/Universal: http://www.nbcuni.com/

UMG/Vivendi: http://www.vivendi.com/corp/en/subsidiaries/index_music.php

Posted by Charles Starrett on August 31, 2007 at 11:22 AM (PDT)

13

I completely agree with you Jeremy. As a new fan of The Office and Heroes I purchase them from iTunes because I may be a little lazy at times, but I could very well bring them into my iTunes either from Tivo or my purchased DVDs. I really think NBC instead of trying to increase viewer ship of the very little pool of good shows they have left they are pushing us away. My Supersized Thursday loyalty towards NBC ended when “Friends” (which had NBC on a pedestal under my eyes) ended. I rarely turned to NBC after that. Now is when I’m getting hooked with The Office and Heroes. I will be really sad if they get out of iTunes but on the positive side I’ll stop being lazy.

Posted by Jamabo on August 31, 2007 at 12:05 PM (PDT)

14

I whole heartedly agree with every point you have made in the article. As a college student with iTunes as my primary (and really only) source of such shows as The Office, Heroes, and other NBC shows I was quite disheartened when I read that NBC was thinking yanking their shows. However I moved far past disheartened when this morning I read the press release from Apple that said that NBC was trying to get more for their shows. I really hope for the sake of college students everywhere without cable television in their rooms that NBC comes to their senses and realizes just how many suckers like myself there are out there.

Posted by RandalStevens on August 31, 2007 at 12:34 PM (PDT)

15

NBC = Fools….

I never watched your crummy channel until the Office came to iTunes. You do not know the implications of your actions NBC- from all who do not watch a whole lot of TV in the first place you are offending a whole lot of new viewers like myself who buy your shows to watch them on our terms by carrying them around with us in ipods. I will not chase your shows on TV for ratings and I WILL NOT tune in to web feeds of your show, I like the Office - but I like the Office on MY TERMS, as an iTunes purchase. NBC you didn’t have me as a fan before iTunes, then you had me as a new fan at my terms, now YOU WON’T EVER GET ME BACK…...

Good job, Apple.

Posted by Hatman on August 31, 2007 at 12:59 PM (PDT)

16

Hear, hear! NBC- Nuts, Bolts, and Crazies! Something Homer Simpson would think is a good idea.

A open letter to probably closed and obviousley small minds.

Keep up the good fight!

Posted by snarron on August 31, 2007 at 1:31 PM (PDT)

17

What a mess. Well couple this story and one I read about the other day where the MPAA is requiring restrictions on our equipment for VoD and once again fears of piracy and copyright infringement are going to change the landscape of electronics. Just the requirement that no part of the digital signal may touch an analog pathway in any computer, PVR, DVR, whatever,from input to speakers, the MPAA want total control of our electronics. From what NBC has said it appears broadcast is going the same way. What a mess. How much will we be willing to spend to watch video where and when we want?

Cart

Posted by cartman on August 31, 2007 at 1:34 PM (PDT)

18

kudos Jeremy, I’m with you.

Posted by ~ruindpzzle in san diego, CA on August 31, 2007 at 1:42 PM (PDT)

19

I completely agree. I used to buy the Office and Heroes from itunes. Now I will have to resort to tivo or simply torrents. Your loss NBC.

Posted by opp789 on August 31, 2007 at 1:49 PM (PDT)

20

Great letter… if it’s not on iTunes, for which I’m willing to pay, it’s going to be some ‘other’ way, which will likely be torrents/IRC.  Big mistake, NBC.

Posted by porfitron on August 31, 2007 at 1:49 PM (PDT)

21

Thanks Jeremy, I just want to add my name to the list of FORMER NBC fans who will now be boycotting the network

Posted by urbanslaughter on August 31, 2007 at 2:12 PM (PDT)

22

Great for Apple!!! NBC must be NUTS to think anybody would pay $4.99 per episode. This is exactly the approach I have felt Apple should take with the EU over the EU’s Ipod/Itunes crusade.

Posted by kirasaw on August 31, 2007 at 2:29 PM (PDT)

23

Very well written Jeremy. Part of me is hoping this was nothing more than a bluff by some greedy executive who’s being taught a very valuable lesson right now by a higher up who has a lot more business sense.

Posted by David Chartier in Westminster, CO on August 31, 2007 at 2:46 PM (PDT)

24

Charles, of course I should have known that. I withdraw my conspiracy theory. NBC/Uni’s move is still lame, however.

Posted by Fangorn in Texas on August 31, 2007 at 2:59 PM (PDT)

25

I’ve bought season passes on iTunes to every season of Heroes, The Office and Battlestar Galactica even though I am an avid torrent downloader. I wanted to support the shows. No more. Bittorrent, here I come.

$4.99 per episode NBC? Stupid, stupid, stupid.

Posted by Quinn Perkins on August 31, 2007 at 3:30 PM (PDT)

26

The underlying problem here is that the industry does not have consumers in mind when trying to maximize profits. To maximize profit they need to be able to compete with piracy. The idea that Digital Restrictions Management technology will solve this problem disregards important factors. One of these being that those who are obtaining commercially produced audio and video online have easier and less expensive means to it. To counter this threat the industry as a whole needs to develop operating system independent open source software that can be used on computers and emended in devices. Developing a peer-to-peer solution that downloads verification codes from official servers/channels with advertising sponsorship would go allot farther. It would guarantee best quality, improve search results, and increase download speeds and cut distribution costs. While some technically savvy consumers may remove commercials from these unencrypted streams and downloads the average consumer will not bother to do this unless shows contain excessive advertising. In has always been possible for the average consumer to disconnect from advertising and the options have only increased over the years with the invention of the remote and such features as mute and off buttons as well as recording devices such as the VCR. Most consumers will continue to watch advertisements up to a point for the mere interest in consumerism. Over-advertise and consumers will mute, off, or skip. Only a considerate balanced advertising approach will result in maximized profits.

Posted by WeeTux (GNU/Linux) on August 31, 2007 at 3:32 PM (PDT)

27

Great Job Jeremy, that’s why I love iLounge.

Posted by Hatman on August 31, 2007 at 3:47 PM (PDT)

28

Can I just point out that - if NBC is so concerned about piracy and the protection of its intellectual rights - it really should stop broadcasting its content to affiliates over unscrambled satellite links which result in the content sometimes being available here in the UK before its even been seen over broadcast in the US.

Just a thought.

Can I also point out that there is a strong possibility that TV executives are a living argument against Darwinian evolution theory.

Posted by Mark Solomon on August 31, 2007 at 3:56 PM (PDT)

29

While I mostly agree with the sentiments of the letter and the majority of the comments, I think one important fact has been overlooked. NBC is willing to make outrageous demands on Apple because it has its own storefront for its shows waiting in the wings. Hulu, NBC’s joint venture with Fox, will be launching this fall, and while there’s no guarantee that it will be successful, NBC is willing to take the risk of abandoning iTunes in exchange for the greater control it will have in Hulu. Of course, they would be stupid if they price anything on Hulu at $4.99 an episode, and I doubt they will do that. By cutting out Apple as the middleman, they can make more money without raising prices. I’m not condoning it, I’m just pointing out that it might not be as stupid and shortsighted a decision on NBC’s part as it appears on the surface.

Posted by pj100 on August 31, 2007 at 4:58 PM (PDT)

30

Good for you for voicing your opinion in the hopes that someone will respect a consumer’s rights.  I am tired of these greedy companies pulling tactics like this because they’re only getting a bit of your money.

I have the same regard for my local cable company here in Toronto.  They won’t support CableCard ‘cause it doesn’t work with their Video On Demand service, which I’ve never used anyway.  Rather than offer CableCard and make money from my HD subscription, while I use the DVR of my choice, they’ll not offer anything because the potential for video and movie purchases are absent.  It’s ludicrous. 

You don’t need a MBA to see that this is a terrible business decision.

Posted by warrenpeace™ on August 31, 2007 at 5:17 PM (PDT)

31

I have sent a message to NBC/Uni, along with the link to Jeremy’s open letter, asking corporate to read it. If anyone wants to do this (and millions wouldn’t hurt), go to http://www.nbcuni.com/. In the left side navigation panel, go to ABOUT NBC UNIVERSAL > CONTACT US. I chose “NBCUni.com General Questions” to get Mail.app to pop up a new message (Subject: NBC/Uni and iTunes). Go iLounge; go Apple. ~DeRay

Posted by deray on August 31, 2007 at 5:58 PM (PDT)

32

I totally agree. Funny thing, I just made a lengthy post myself analyzing what consumers think TV shows should cost, versus what content producers think they should cost.

The answer I came up with was the same as yours: even $2 is overpriced. TV shows are competing against “free”. And worse still, they are single-use. NBC, I’m not going to watch your show again and again: I’m going to watch it exactly once.

Posted by Drew Thaler on August 31, 2007 at 6:19 PM (PDT)

33

pj100: while that may be NBC’s thinking, I don’t think it’s a very good one: they are (probably, very likely) abandoning iPod/iPhone users, of which there are LOTS.  The only way for NBC to not abandon these users is to produce shows without DRM, which is highly unlikely.

My guess is that NBC’s new show portal “will not be very good”, from a consumer standpoint, and so they’re trying to force consumers to use it.  I see two possible scenarios, here:

1. NBC really does want to raise the price above $1.99.  If iTunes sold the same show for $1.99, no one would pay the higher price, and so NBC is leaving iTunes.

2. NBC wants to put more restrictions on the shows.  These restrictions are such that, if a show were available on both NBC’s and the iTunes sites, most people would choose iTunes.  And, so, NBC is leaving iTunes to force people to use their new site.

Of course, NBC might just want to cut out the middleman (Apple), to make more money.  While NBC is certainly free to do this, this cuts them off from the large iPod marketplace; if you want access to the large numbers of iPod viewers, you have to go through Apple (if you want DRM, which currently seems to be an absolute hollywood requirement).

Posted by Kevin42 on August 31, 2007 at 6:35 PM (PDT)

34

I find it interesting that on NBC’s website they still advertise their shows as being sold on iTunes…

NBC

Posted by mattt. on August 31, 2007 at 6:39 PM (PDT)

35

Wow. Jeremy, Wonderful editorial.

How many times do these things need to be explained in such concise and simple terms before entertainment execs actually understand the business they’re in. Or, in NBC’s case, the business they’re not in.

Posted by Eric S. on August 31, 2007 at 6:40 PM (PDT)

36

Excellent letter Jeremy.  However, I think you may have missed an important point:

NBC is all about the money.

Having people love your show(s) is great. Building a strong, faithful following is great. But it means nothing in the corporate world if it can’t be converted into USD.

The conversion of the iTunes viewership into USD poses a bit of a problem it seems. I assume the bulk of NBC revenue comes from advertisement. I am willing to bet that all the NBC iTunes sales for a single episode of Heroes pales in comparison to the ad revenue generated off the original TV airing of the same episode.

Unfortunately (for NBC) every method you listed (iTunes, torrent, PVR, DVD) of watching their shows allows the viewer to easily pass over any revenue-generating ads.

I think NBC and the other networks are finally starting to realize that their original razor/blade business model is broken beyond repair.  I don’t think they have accepted it yet. (Obviously not, if they think $4.99/episode is a reasonable solution.) But I do think they are finally past denial, and transitioning between anger and bargaining. At this rate, acceptance should occur just about the time IPTV takes over.

Posted by VideoKilledTheRadioStar on August 31, 2007 at 6:41 PM (PDT)

37

You forget that while customers pay ‘zero’ to watch NBC over the air or via cable, advertisers pay millions to NBC for the opportunity to run their commercials during those ‘free’ shows.

NBC first makes money from airing a program by charging advertisers then they make money again when they sell the DVD of that same show to consumers.

If you download the show from iTunes then NBC does not make money from advertisers or from selling you that DVD (since you get to keep the iTunes download)

Posted by Ariza on August 31, 2007 at 7:12 PM (PDT)

38

Jeremy is actually being pretty kind here. Jeremy is exactly right and I’d even go further regarding shows. Let’s face it: the monetary value of digital content is effectively heading toward zero.

Universal and everyone else is going to have to find a way to generate revenue by making something that is freely transferrable. No DRM is going to stick ultimately, making the content infinitely transferable. Jeremy goes out of his way to not suggest things which are illegal.

I, too, prefer a legal route but the reality is that if people can’t get NBC’s content in a timely, reasonably priced fashion, they are going to steal it.

Universal seems bound an determined to maintain a business model that *cannot* be maintained.

So good luck with that, guys.

Posted by mattjumbo on August 31, 2007 at 7:22 PM (PDT)

39

Living (way) outside of the USA, I still think NBC are complete fools.  And it’s exactly that kind of stupid thinking that has been keeping video content out of all the other iTunes markets in the world.

I have two choices when it comes to US TV shows - DVDs (which do make it out here in good time) or ‘other’ methods.

Would I use iTunes if I had the option?  Would depend on quality and flexibility, but it would certainly be an option.

Posted by AJ-in-NZ on August 31, 2007 at 7:38 PM (PDT)

40

I am going to respectfully disagree with this writer.

While I agreed with the first 75% of this post, the last bit threw me off.

You’re talking about boycotting NBC and the artists that create such wonderful shows as Heroes and The Office just because they aren’t part of the mega-machine of Apple?

I was with you when you were making your case that asking for $4.99/episode is ludicrous, but then you adopted the “if you aren’t with Apple then you’re against us” mentality towards the end. You stand behind Apple and their one nation, one vision for media and the future the way drones stand behind a fascist dictator.

So what if NBC isn’t copacetic with Apple? Who says they need to share their media through iTunes, like it is the center of the world? Go ahead and watch the show through your DVR just like you intend to, it works out better for NBC, who stands to make more ad revenue than a paltry $1.99.

In case you forgot, it is advertisers that keep the big networks alive, not Steve Jobs and the Apple empire. They need you to adopt the show on your television set, not to continuously download commercial-free episodes for $1.99.

Everyone should notice that he asks all of the iLounge readers to boycott NBC by only watching it on TV, because he can’t outright tell everyone to boycott The Office and Heroes altogether. If he did that we would all laugh in his face.

Your boycott only increases Nielsen TV ratings, increasing advertising money which actually helps the deep pockets of the execs at NBC. Genius.

Posted by Henry D on August 31, 2007 at 7:44 PM (PDT)

41

I think we should do what the fans of Jericho did when the show was canceled they sent peanuts to CBS in protest (it was part of the story line of the last episode).

I think we should start sending apples to NBC head courters!!!

Posted by zathrasjr on August 31, 2007 at 7:56 PM (PDT)

42

Best. Article. Ever.

Posted by dee-jay-es on August 31, 2007 at 8:20 PM (PDT)

43

This is the same NBC that’s partnered with Microsoft on MSNBC, right? I can’t imagine why they’d want to cause any trouble for Apple or that their partner would give them any bad advice about selling their shows…

Wonder if the NBC shows will be showcased on the new NQALATO (not quite as lame as the original) version of the Zune?

Posted by eckenheimer on August 31, 2007 at 9:56 PM (PDT)

44

.....How much does it cost them to sell an episode on iTunes?  Oh yeah, $0.  What’s that profit margin compared to making DVD’s?  So they sell 200,000 episodes of Heroes at $2 for a profit of $400,000.  Wow, that’s 400000% profit.  How much to produce the same amount of DVD’s?  Probably about $1,000,000 with all the art and advertising, and other stuff.  So, you sell these for $30 and you gross $6 million dollars.  Granted, that sounds like a lot, but it’s only 83% profit.  You had to spend $1,000,000 just to make the same amount of copies as you sold on iTunes and then you have to sell 80,000 copies before you see the same dollar amount profit that itunes did for free.  Now, I know that NBC does not get all the $1.99 but whatever the amount is, it is always going to be more than they can ever profit by having to spend money to sell their shows.  No matter how many shows you sell NBC, you can NEVER reach even 100% profit. Is my math wrong?  I cannot believe that they guy that made this decision for NBC still works their.  My boss would never let me come back if I blew a 400000% Profit….

Posted by Monsoon on August 31, 2007 at 10:58 PM (PDT)

45

As many have mentioned, their content is easily available for free through various channels, and it should be noted that one of these channels is their primary business. What you’re paying for through iTunes or Hulu is not the content itself, but the convenience of never needing to leave your chair, and the ability to forget to set TiVo.

If NBC really wants to squeeze a little more revenue out of online channels, they should stick with their core strengths—do what they already know how to do—and encode advertising into the content that they sell through iTunes. They have the content, they have the customers, and Apple provides the channel. It’s plain stupid to leave that opportunity laying there untouched.

Posted by signalii on September 1, 2007 at 4:17 AM (PDT)

46

It is a foregone conclusion that the record, TV, and movie companies that provide content on iTunes would eventually let greed overwhelm their common sense.  iTunes is not something any of these companies can replicate on their own: a centralized means of providing legal multimedia to a mass consumer base that is both easy to use and offered on a level playing field. 

So Universal is selling cheaper, DRM-free, higher bit rate content via Walmart.  I am guessing if NBC comes up with their own distribution option they’ll do something similar. 

End result?  Everyone loses. Without the ease of the iTunes/iPod interface very few people will bother to use their services.  There’s no way I’m going from site to site setting up accounts to download single shows or seasons, not to mention the additional steps needed to get them on my iPod.

In addition, it seems self-evident that iTunes has single-handedly reduced piracy by offering an affordable and legal alternative to online or ripped content.  It’s simply no longer cost effective or worth the time for the average user.  At the end of the day, they are penalizing the honest user for doing the right thing.  It all smacks of Microsoft’s recent WGA debacle.  They are treating the lawful among us like criminals by assuming we are thiefs. 

BTW…$5 an episode?  Even NBC can’t be that out of touch with reality. This is certainly part of a larger strategy.

Posted by rayzha on September 1, 2007 at 4:27 AM (PDT)

47

NBC is the most pig-headed network of them all. When are they going to realize how valuable things like iTunes or even putting their shows on their site for free are.

ABC puts episodes of their major shows on the Web site with only (if I recall) 2 commercials) and pretty good size.

I’m a huge LOST fan and before I got DVR, I would either buy missed episodes from iTunes or watch it on their site. This had the effect of making them a few bucks, but it also got me hooked on other show (Grey’s Anatomy).

I get that they need to make money. But cmon NBC. We aren’t stupid. You made your money on ads for the TV airing. Everything else is gravy and free advertising.

Posted by JimD on September 1, 2007 at 6:13 AM (PDT)

48

A brilliant analysis of the forces at work, only you are overlooking the networks’ traditional (and most significant) revenue source: advertising. The shows you watch on broadcast TV are not really “free,” as you are paying for them with your attention and “impressions.” Your PVR may be able to skip the ads, which is nice for you, but NBC is still paid for these 30-second spots, whether you watch them, skip them, mute them, or ignore them. Downloaded shows from iTunes are packaged without advertisements (except those product placements in the shows themselves), and so need to recoup their production and distribution (e.g. bandwidth) costs through other means.

Apple has probably decided that $1.99 is the sweet spot, just cheap enough that people will pay for it, yet high enough to cover their infrastructure costs and give the networks a slice (who, in turn, may share some with the production company that actually made the program). Of course we think $4.99 is too much, since we are the consumers, but I bet NBC has some internal numbers that say $4.99 is appropriate, from their point of view.

Considering that even broadcast TV is not “free,” how much do you think advertisers pay, on your behalf, per viewer per episode?  Take total ad dollars spent per airing divided by number of viewers.  Is it less or more than $1.99?

Posted by IntlOrange on September 1, 2007 at 8:50 AM (PDT)

49

Well said. Based on the decision by NBC, I will NOT be purchasing their box sets of DVD any further, nor will I be campaigning for my friends and family to tap into shows that I enjoy and would normally endorse. So long Earl, see ya The Office and adios Heroes. While I will probably continue to DVR these shows, not another penny of my money will be thrown into the NBC coffers. So there.

Posted by brianlog on September 1, 2007 at 9:14 AM (PDT)

50

Very well said. This was the worst move imaginable for NBC.
I will be getting my Heroes, BSG and Eureka through piracy now if I have to, though I paid for them on iTunes specifically to support them. I WANT to pay a fair price to support the shows I love. I certainly do not want to pirate them. Particularly shows like Eureka, which I never would have watched if not for iTunes.

Posted by Serenity42 on September 1, 2007 at 10:00 PM (PDT)

51

I sign this open letter too.
Well said.

Posted by MyMac on September 2, 2007 at 11:32 AM (PDT)

52

Nice work, Jeremy.  (as always).

Posted by a7dk on September 2, 2007 at 3:01 PM (PDT)

53

If you really want NBC to re-think their position then you should start contact their shows sponsors.

Let the sponsors know you will stop buying their products as long as they continue to sponsor a network that has become gready, consumer unfriendly and blankets all iPod owners/ and others as criminals. 

Its simple, easy, and very effective.

Posted by Moneytalks on September 2, 2007 at 7:52 PM (PDT)

54

I don’t think it’s about greed. NBC certainly knows that Apple wouldn’t sell a TV episode for 5 bucks each.

It’s a strategic move to weaken Apple and the iTS even if they lose some money in the short term. They’re pissed cause Apple is getting too strong.

So imho your open letter addresses the wrong issues (though it’s very well written).

Posted by krischan68 on September 3, 2007 at 12:40 AM (PDT)

55

While I applaud your sentiments, a story in the Saturday edition of the Wall Street Journal added several details to the story I didn’t see in your letter and perhaps worth considering.

First, according to Apple, the dispute was ignited due to NBC’s demand that Apple pay more than double the WHOLESALE cost of future episodes. Presumably the $4.99 price was calculated by multiplying the higher wholesale cost by Apple’s curent markup? However it was calculated, the number of people willing to pay $5 for what used to be $2 would seem to be a much smaller potential audience for NBCs content.

Second, as a possible explanation for NBC’s action, the network is just months away from launching its own video download site named Hulu.com, a joint venture with News Corp. While doing so would certainly lower NBCs costs a bit, it’s difficult to imagine why any other networks or content creators would use Hulu to distribute their own material, especially ABC which is owned by Disney and on whose board Steve Jobs sits as a director.

Finally, Apple is now the third largest distributor of retail music and video in the US, behind only Wal-Mart and Best Buy. As a certified 800 pound gorilla, I suspect NBC may well end up eating a helping of crow, but probably later rather than sooner.

Posted by coastalcutt on September 3, 2007 at 3:56 PM (PDT)

56

Well said, Jeremy. 

You have stated my personal experience as well.  Not trying to be snobish, but I NEVER watch TV outside of sports.  NBC/Universal offered a free Battlestar Galactica episode which I was always dismissed as some cheesy sci-fi show.  Well after that free download I bought every single season and episode and became a fan.  Same thing occurred with other shows.

I realize it’s NBC’s content, but they ought to be smart about how they distribute it.  And this idea of bundling the good stuff with garbage at a higher price is just one more way to try and stick it to your customers.

Posted by Obadiah on September 4, 2007 at 5:13 AM (PDT)

57

Sorry Jeremy, you’re missing the point. The issue is not what the price but who sets it; the content provider or the distribution channel? If Apple bought 1 million downloads of Heroes wholesale they could retail them at any price they like but I assume the business model is that payment is only distributed between Apple and the networks when someone buys a download so the price is, frankly, none of Apple’s business.


If NBC overprice their shows and lose sales they’ll adjust the price accordingly - that’s how markets work. Steve Jobs has never been comfortable with free market economics; he could have licenced the Apple OS to create a free market but he didn’t, which is why most PCs run Microsoft software instead of Apple’s. He could also licence Apple’s DRM system but he won’t do that either so we’re back into the VHS vs Betamax standards battle all over again.

If Steve Jobs is so protective of Apple’s copyright and pricing he can hardly cry foul when other people feel the same way about theirs.

Posted by Andrew C (UK) on September 4, 2007 at 5:28 AM (PDT)

58

Nicely stated. NBC is only trying to push Apple around into giving in to NBC’s demands on pricing. Kinda like Lindsay Lohan intimidating the legal system because “she can just drive her car somewhere else”.

Posted by provibe on September 4, 2007 at 2:00 PM (PDT)

59

Boycott of NBC Universal!

Posted by sbfunlover on September 5, 2007 at 12:58 PM (PDT)

60

Excellent response Jeremy and my sentiments exactly.  I purchased Season I via iTunes to watch via an Apple TV box overseas and had the intention of doing the same thing with Season II. 
  After this greedy, boneheaded, over-the-top move, it took me about 15 minutes to find free high quality episodes of Season II on the internet, download them, and intall them on my Apple TV.  I’ll be watching the rest of this season for free (as well as any other NBC programming I decide I’m interested in) and without NBC making a cent.  In the meantime, I’ll continue to pay for everying non NBC and we’ll see if NBC starts taking its medication and comes to its senses.  In the meantime, I have no qwalms about my newfound criminal behavior.  Greed this out of control deserves a backlash and financial consequences.

Posted by TSH332 on October 7, 2007 at 11:50 AM (PDT)

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