NBC Universal responds to Apple pulling fall lineup | iLounge News

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NBC Universal responds to Apple pulling fall lineup

NBC Universal has issued a statement responding to Apple’s announcement that it will not be offering the network’s fall lineup of programming, due to NBC’s non-renewal of its iTunes contract. In its statement, Apple claimed that contract talks broke down between the two companies due to NBC’s demand to raise wholesale pricing of shows in a manner that would more than double the current price of $1.99 per episode. Cory Shields, executive vice president of communications for NBC Universal, disputed these claims in a prepared statement.

“We never asked to double the wholesale price for our TV shows,” said Shields. “In fact, our negotiations were centered on our request for flexibility in wholesale pricing, including the ability to package shows together in ways that could make our content even more attractive for consumers.” He added, “It is clear that Apple’s retail pricing strategy for its iTunes service is designed to drive sales of Apple devices, at the expense of those who create the content that make these devices worth buying.” Shields went on to say that NBC also asked Apple to take “concrete steps” to prevent piracy, “since it is estimated that the typical iPod contains a significant amount of illegally downloaded material.” Apple has yet to respond to the statement.

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Comments

21

Thing is, I wouldn’t pay the $3.99 or $4.99 NBC wants for an episode…That’s too much money for something I’m likely to want to discard right after I see it; hey $10-15 more and I can buy the dvd of the whole season! So I think the ‘flexible’ pricing NBC wants to do will back-fire on them.

Posted by carrie on September 2, 2007 at 9:57 AM (CDT)

22

Now you really gonna see your shows on everyone iPod - but this time only in an illegal way cause you didn’t gave us any other way…

That what I call A$$e$

Posted by LinkTree on September 2, 2007 at 2:48 PM (CDT)

23

The guy just blatantly contradicts himself. If as he claims NBC only wanted to make package pricing more attractive for consumers, than what’s with the ‘iTunes is designed to drive Apple devices at expense of those who create the content’ routine? If NBC is taking issue with Apple’s pricing policies being at *NBC*‘s expense, then THEREFORE NBC’s counter-demands CANNOT, ipso facto, be in favour of the consumer! They MUST mean more money for NBC!

A more insincere and comically self-refuting public statement would be difficult to come by.

Posted by DBL on September 2, 2007 at 4:24 PM (CDT)

24

“flexibility in wholesale pricing, including the ability to package shows together in ways that could make our content even more attractive for consumers.”

1) I never say ‘flexibility’ in prices bend any way other than up.

2) How can they make content more attractive to consumers than letting consumers just buy exactly what they want and only what they want? How have bundles you don’t want half of ever been more attractive than just the bits you like?

Hello, Mr Shields. Just because you’re an idiot doesn’t mean you should treat me as one. That’s kind of not the way to win the argument.

Posted by Jon on September 2, 2007 at 7:06 PM (CDT)

25

I think the important point to this story is two-fold:

1. NBC was the largest supplier of content to the iTunes store and is now no longer going to participate.  Though the iTunes store still doesn’t do much in videos compared to music, this is still an important development as Apple continues to move toward the video component of ipods becoming more relevant.

2.  If the largest contributor of video content to the iTunes store can stand up to Apple and say, “We’d rather not sell any videos than sell them according to your rules.” it seems to me that the lesser providers may very well rise up as well and demand a shift in the business model that Apple has set forth.  Apple needs to understand that they need the video content more than the content providers need them….  There are always other ways for networks to distribute video (they already broadcast a lot of them for free on the official websites, paid for by advertising) but Apple has nothing without them.  Without content Apple’s revenue source is dried up… 

I, for one, have a hard time blaming NBC or Apple solely for this situation.  It seems to me that both of them have lost sight of their mutual need for each other.  I think ultimately Apple will lose more than NBC will.  NBC can always sell their content on their own website, but Apple isn’t going to begin producing their own content for video iPods on the level of the shows offered by NBC.

Posted by John on September 2, 2007 at 11:37 PM (CDT)

26

That’s great , not instead of buying episodes of The Office on iTunes, i’ll just torrent them for free and enjoy them a day earlier.
I’m trying to remain legit, but companies like NBC that are out of touch with the digital world are making it harder to continually support them.

Posted by Dennis on September 3, 2007 at 12:41 AM (CDT)

27

One, I agree with previous commens that NBCU does have the right to bundle and price their content any way they choose.  BUT a distributor/retailer, like Apple, has the right to reject content, because it can reflect poorly upon the distributor.  Retail stores regularly reject goods and services because they determine those things aren’t in the best interests of their customers and/or their brand. Although digital is different in that “shelf space” is fairly limitless, it’s the same otherwise.

Two, in response to John, content providers need distribution as badly as distributors need content. Remember the studios (movie and music) cowering before Walmart/Target. Apple’s release pointedly responded to NBC’s innuendo of more defections in its leaking of the story to the NYTimes, by noting that all the major networks and over 50 cable networks had already signed new contracts.  Apple’s response is more likely to deter other networks from leaking private negotiations in the future. 

Distribution may seem easy but it’s not. Note how very few companies have successful distribution of any kind on the Internet; and even fewer of those that don’t already have brick-and-mortar distribution (like media companies).  Among media retailers: Vongo, Movielink, CinemaNow, Real, Napster, MTV/Urge, Walmart, Coca-Cola, Microsoft, Sony, even Yahoo (media content), are among the already dead or soon to be dead. No, distribution is not so easy.

Finally, NBCU’s response was indirect, which meant Apple was accurate in what it said.  For example, Apple said “more than double”, so NBC’s carefully worded response of “never asked to double” is also true, because they asked to “more than double” in conjunction with bundling. 

Apple does not sell media “at the expense of those who create content”; the content creators are well paid by Apple (about 70% of revenue); not even considering that they are getting paid again for the same content (the first time through TV ads or movie ticket sales.)  And NBCU forgets that without those devices, especially iPods, tens of millions of people would not even be paying a cent for that precious NBCU content.

By the way, the devices are worth buying because content can be gotten for free in other legal (taping off TV) and illegal ways (torrents). Accusing your current and potential customers of being criminals is just plain dumb - but it perfectly reflects the mindset of the NBCU.

This NBCU response is really written to sway future customers (public opinion) and not to sway Apple, and therefore, it should be evaluated in that light. So all in all, it’s just another stupid public comment written by lawyers and arrogant/greedy media middlemen, who are filled with contempt for their customers.

Posted by mark on September 3, 2007 at 12:44 AM (CDT)

28

mark: you can add Google Video’s effort to sell TV shows to your list of dead or soon to be dead distributors.  And there were some more music stores that have died, like Virgin and Loudeye-back end stores; they were of so litte consequence, I can’t remember their names anymore.

Posted by Jonesy on September 3, 2007 at 12:52 AM (CDT)

29

I get the feeling that none of this is even about DRM, pirating, or what have you. NBC saw that their shows sold very well on iTunes, so their heads swelled, and they assumed they could take advantage of their popularity and charge more for what they considered to be “premium” content. And Apple, not wanting to upset its entrenched customer base, decided against it.

Posted by Multimoog on September 3, 2007 at 6:07 AM (CDT)

30

Remember that NBC is also MSNBC and that Universal also recently announced sole HD sales on HD-DVD (the inferior Microsoft based format).  Just like they pressured Toshiba to stay with inferior HD-DVD, they’re pushing NBC to disassociate from Apple’s superior technologies.  When they speak of “preventing piracy” what this means is using Microsoft’s draconian and visually inferior WMV.  It’s just the same old Microsoft s**t, but now M$‘s doing it by pressuring other companies to do it for them.

Posted by Bill on September 3, 2007 at 8:52 AM (CDT)

31

NBC has forgotten that we as viewers REALLY set the price.

If all ipod owners boycotted NBC for two weeks a real message could be sent not just to NBC but corporate monkeys that ENOUGH IS ENOUGH AND WE AREN"T GONNA TAKE IT ANY MORE!! When it hurts their bottom line they will see.

Apple has deveploped a dead simple price structure that has made them NBC lots of revenue, but NBC’s corporate GREED needs to be taught a lesson!

Posted by James on September 3, 2007 at 4:44 PM (CDT)

32

“NBC has forgotten that we as viewers REALLY set the price.”

Technically, yes. Realistically, no.

Sure, we can decide to pony up the cash or not, but the reality is that we’re also witnessing the decay of the advertiser fueled model that has funded our el cheapo television viewing for so long. If it comes to the point that it isn’t profitable to manufacture something like Lost or Heros, they won’t manufacture shows like that, period.

I’m not sure who is more at fault here since we know nothing about the specifics, just the typical he-said, she-said. All we can trust is that neither Apple nor NBC gives a rat’s patootie about any of us beyond squeezing the most money out of our pockets and into their bank accounts. Wherever the breakdown in negotiations actually occurred, it only occurred because the parties couldn’t come to a mutual agreement on how to best accomplish that. If NBC really did want $5 shows and Jobs et al really believed that Apple would make just as much or more money at that price point without eating into video capable iPod sales at that price point, you can bet we’d be paying it right now.

Posted by Chip on September 3, 2007 at 6:46 PM (CDT)

33

Apple wants to sell hardware (iPods, iPhones, AppleTVs, Macs), as that’s where the majority of their profit lies. Apple knows that one of the major differences between their hardware and that of other companies’ is customer satisfaction—i.e. ease of use, design elegance, perceived value. In this sense, Apple really DOES care more about their customers than other companies. That’s a major part of their differentiation. Everything in their software follows from this, because that drives their hardware sales. Ergo, Apple HAS to be much more on the consumer’s side in this than NBC, Universal, or any of those other clueless media companies who think they can shove whatever crap they want at us and charge whatever they want for it.

To put it another way, Apple doesn’t really make money on their software—or the content on iTunes. So the whole point of that software and content is to make their hardware desirable. To do this, they want to make the software and content as desirable as possible, which means low prices and minimal restrictions—especially since the alternative of piracy already exists, which is “free.”

Other companies whose only value lies in software and content are going to want to get as much money as they can for that software and content, because they have no other revenue stream. They’re much more up against the wall vs. piracy, though. Most of them think the only way they can compete against the pirates is by shutting them down completely (see RIAA), so they can get 100% revenue from their content. That will never happen, though. Apple seems to be the only company who realizes this, and knows that the only real way to fight the pirates and make any money at all off content is to just make a LITTLE money off each show/movie/song/album by offering them at a low price with minimal restrictions. Any company who thinks this is an all-or-nothing game is going to lose.

Posted by LunaticSX on September 3, 2007 at 7:37 PM (CDT)

34

Here’s the rub.  When Apple owns 80% of the legitimate download market and refuses to let NBC back into what they walked away from, NBC will be crying “unfair trade”. 

F*ck em!  Let them die!

Posted by Frank Z on September 3, 2007 at 9:20 PM (CDT)

35

NBC is supposedly one of the ‘Big3’ networks.  Well, they are not #1, or #2….  Yet they have the top selling shows on iTunes.

Forget the fact that Heroes is awesome, lets look at the office.  By all rights, it should be dead and gone. It WOULD be dead and gone if it hadn’t been discovered and gained a bigger following in iTunes store. 

Let NBC miss out on the revenue and revival in rating that they got for free courtesy of the iTunes store.  Let them sink even farther down in the ratings and die. Who cares? (other than heroes fans)

Someone will discover a sleeper, under appreciated show like the office from among the remaining iTunes store participants, and make it a super hit.  Apple will make up for the NBC defection, and the lucky studio/ show will enjoy lots of new viewers.

Posted by darknite on September 4, 2007 at 12:03 AM (CDT)

36

“Most iPods contain illegal content” = “Most iPod Owners are crooks”. Screw you, Universal!

Posted by Laer on September 4, 2007 at 7:17 AM (CDT)

37

Right on, Mark!  Excellent analysis!

NBC seems to forget that Apple pretty much created this market for them and others like them, where people are actually willing to pay $1.99/episode for content that they could get through other means perfectly legally and for free, simply for the convenience that the iTMS provides.

Posted by The Raven on September 4, 2007 at 8:58 AM (CDT)

38

You guys (and Apple) seem to forget one very large factor here.  iPods are worthless without the content, and the content does not belong to Apple.  I, for one, say Go, NBC.  I completely agree with their statement that Apple wants the shows to be priced so that Apple can sell more iPods.

And to all you pirates out there, crying about the dinosaurs being out of touch with the new world, etc.  Same story - someone’s got to pay for the content, and if the content providers can’t find a model to get revenue for their work, guess what - no more content.  We’ll all end up watching reality TV crap all day.

I don’t know what the answer is, but the question is how to make money off content in the post-TV world.

Posted by kokketiel on September 4, 2007 at 9:26 AM (CDT)

39

@kokketiel

The content you speak of is available legally for free through other methods.

Apple actually provided a way for these clowns to make money, nearly all profit mind you, by making it convenient for consumers to obtain.

The iPod was popular well before there was an iTMS so people will find a way to get the content they want, one way or another…by ripping DVDs and CDs, PVR-ing shows, etc.

The balance has shifted.  The iPod is the most popular device for playback of digital media by a huge margin.  If you’re a content provider, you WANT to be on that device.

I doubt many people are going to give up their iPods and iPhones just because some greedy content provider doesn’t like the way Apple runs it’s business.

Posted by The Raven on September 4, 2007 at 11:28 AM (CDT)

40

The old ipods are worthless without content argument really doesn’t hold here any better than for music.

People already own huge libraries of CD and DVD content.  The only question is how willing are they to reformat the content they own so it can be put into iTunes/iPod?

Really, in the case of movies or TV is it worth it?  The iPod, and even urban legendary/ mythological wide screen iPods are still very small to watch a TV episode on, let alone a 2.5-2 hour movie.

If YouTube and google video are available on iPod, thats doable.

And seriously, if content providers like NBC don’t want stuff on iTunes Store, let Apple throw a super drive and some format conversion software into TV and customers can store all the free content broadcast television has to offer, Free, and Legal. No skin off Apples’ nose, but a potential big loss for NBC

Posted by darknite on September 4, 2007 at 11:30 AM (CDT)

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