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NBC Universal wanted cut of Apple hardware sales

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By Charles Starrett

Contributing Editor
Published: Monday, October 29, 2007
News Categories: Digital Media

NBC Universal CEO Jeff Zucker has said that along with flexible pricing experimentation, the company was seeking a cut of Apple’s hardware sales during iTunes contract negotiations. Speaking at an event organized by Syracuse University’s Newhouse School of Public Communications, Zucker said “We wanted to take one show, it didn’t matter which one it was, and experiment and sell it for $2.99. We made that offer for months and they said no,” Zucker said. “Apple sold millions of dollars worth of hardware off the back of our content and made a lot of money,” he added. “They did not want to share in what they were making off the hardware or allow us to adjust pricing.” NBC Universal, in partnership with Fox, today launched a public beta of the Hulu.com video service. Responding to a separate question, Zucker said that “Apple has destroyed the music business. If we don’t take control on the video side, they’ll do the same” to video.

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Comments

1

By “destroy” do you mean not gouging the general public with high prices at a whim?

If so, then yes, lets hope Apple “destroys” the video business as well.

Posted by unreal on October 29, 2007 at 2:55 PM (PDT)

2

First of all, the music industry is destroying itself. Apple doesn’t have anything to do with it.

My question is this, are they going to ask for a cut of TV sales as well? Those moochers have been making money of NBC for decades.

What about eyeglass makers? Couch manufacturers? Hell, you couldn’t even watch TV without a house to live in… NBC should get a cut of that too.

Posted by ortortort on October 29, 2007 at 2:56 PM (PDT)

3

@ortortort,

Nice one. I wish that someone could mail this dumb as% and show him how stupid he really is. I thought Steve Balmer was a serial idiot but this Zucker the “f***er” takes the cake for out right stupidity.

Posted by Don Trammell on October 29, 2007 at 3:02 PM (PDT)

4

This is the fall out from Microsoft and Zunes where they are offering a cut of the hardware sales to the content providers. It was only a matter of time before the content providers went after the lead dog in the hardware world. So does this men that every hardware manufacturer should pay a fee to the content providers. Remember the when Sony released DAT players way back when Sony blamed the record labels for not supporting the new format. Does anybody remember what Sony went and did after that? They went and bought a record label and a movie studio.  So NBC has some precedence to follow if they think they are being treated unfairly make there own player and they can make the money on hardware.

Posted by GMiller on October 29, 2007 at 3:07 PM (PDT)

5

Jeff Zucker probably *does* understand the Media Content Industry, but he’s doing a good impersonation of someone who doesn’t.
Let’s see: Content Providers provide Content, Retailers Sell the content to the Consumer, hardware manufacturers manufacture hardware to display the content.
Back in your Box!

Posted by Dan Woods on October 29, 2007 at 3:07 PM (PDT)

6

I just finished reading the article;
Revenue is down by an undefined factor, probably between 10 and 100, but they are still making profits and are financially viable.
Just how much is the Markup on their product, or have they had significant savings on distribution now that Apple are footing the bill for downloads.
In my industry, Retail Markup is significant compared to most other industries, but if we took a 90% loss in revenue, our financial viability wouldn’t even be under question; we’d be closed down.

Posted by Dan Woods on October 29, 2007 at 4:28 PM (PDT)

7

If Apple destroyed the music industry, then Jenna Jameson ruined porn.

Jeff Zucker is either baiting Jobs, or he’s incredibly stupid. Probably a little of the former and a lot of the latter. He might as well blame HBO for hurting network television with “The Sopranos” and “Big Love,” which stole the thunder from “Golden Girls” and “Amen.”

Posted by Flippy Hambone on October 29, 2007 at 4:57 PM (PDT)

8

It’s egg on his face.  He thought he could strong arm Apple and it didn’t work out.  So now he’s playing the victim.  Gosh, Apple stock is just gonna take a dive now that the so important NBC content will no longer be available (sarcasm).  NBC new the price before they started, “...off our backs…”, Please!

Posted by kaioslider on October 29, 2007 at 5:02 PM (PDT)

9

“Sold millions off the back of our content” - haha that’s a laugh. How about the reality:

“NBC Sold millions off the back of Apple’s hardware.”

Nice try NBC - dumbass.

Posted by Joshua Bryant on October 29, 2007 at 5:13 PM (PDT)

10

As a boy, I never really cared so much if another kid got mad and took his toys home, particularly if the kid had crummy toys.  Last I looked, NBC had like two shows in the top 20 and nothing in the top ten.  I just don’t know how I’ll get by without being able to pay for and replay another episode of Deal or No Deal on my iPod. :(((

Posted by ipodder06 on October 29, 2007 at 5:16 PM (PDT)

11

This arrogance, I assume, is born out of many decades of artist manipulation by record companies. While strong arm tactics may work on a couple of kids who started off in their parent’s garage I’m not so sure it’s a wise idea here.

Posted by Jordan on October 29, 2007 at 6:02 PM (PDT)

12

Hmmm….. So why doesn’t NBC seek a profit from all of the TV manufacturers too? In a sense, don’t they also profit from NBC?

This guy’s an idiot!

Posted by gregw74 on October 29, 2007 at 6:13 PM (PDT)

13

We are in the time where no one wants to buy the whole album anymore, it’s just a song or two. Artists have never even really profited off of their music, with labels becoming more and more money hungry and trying to get every cent they can get out of the artists. The labels only have one thing going for them and that’s money. Most artists aren’t wealthy enough to provide the amount of advertisement and promotion that the industries do. While I do think artists deserve the majority of the profit that they make off of their music, that’s not the way it’s really going to go. But also, today, I’ve seen bands sponsored by companies like Monster (energy drinks), so maybe they can actually get promotion without the labels. Also, A LOT of people don’t even pay for the music. It’s not really if the music industry’s providing a fair way to access music, it’s that people are stealing the music from the artists. Now I have to say, I didn’t really get into some artists until I (illegally) downloaded their stuff. Therefore, I can tell if I like the whole song without just listening to it for 30 seconds and not knowing what’s all in the song and how the song fully goes. I’ve purchased many songs because of P2P software.
I think in a sense, Apple has destroyed the music industry by crippling the profit that artists can get. But, I also must say, I don’t like the idea of paying for a show that I’m only really interested in watching one time.

Posted by doompod on October 29, 2007 at 6:58 PM (PDT)

14

Unless he said it elsewhere, I’m not sure he’s actually asking for a piece of the hardware money, just stating that it isn’t being offered to them. He’s using that as a way of saying NBC doesn’t tell Apple how to price iPods, why should Apple tell them how to price TV shows?

But at the same time he says they only made a few million off of the iTunes relationship. Seems like that is still a few million that they weren’t making before. If they don’t want it, I’ll take it.

Also I don’t think Apple wrecked the music business so much as they saved it by giving people a reasonable way to buy digital music instead of stealing it. Others are doing it now, but not as well as Apple. And if this guy thinks monthly fees are the way to go, he’s just taking a giant step backwards.

Posted by brted on October 29, 2007 at 7:20 PM (PDT)

15

Probably comes as no surprise, but I actually agree with the guy.  Apple iPod, together with iTunes, is a different business than NBC content on TVs.  I salute NBC for walking away from 15 million when they felt like their partner wasn’t being sufficiently equitable with the revenue streams.

Posted by Edgar on October 29, 2007 at 9:58 PM (PDT)

16

From the Variety article about this

“NBC U wanted to explore higher pricing for hit shows such as “Heroes” by raising the price from Apple’s standard $1.99 to $2.99 on an experimental basis.

“We wanted to take one show, it didn’t matter which one it was, and experiment and sell it for $2.99,” he said. “We made that offer for months and they said no.”

In lieu of more flexibility on pricing, NBC U sought a cut of Apple’s hardware sales.
“Apple sold millions of dollars worth of hardware off the back of our content, and made a lot of money,” Zucker said. “They did not want to share in what they were making off the hardware or allow us to adjust pricing.””

Posted by marshallld on October 30, 2007 at 12:49 AM (PDT)

17

Its certainly there right to walk if they think they can make a better profit for their share holders, actually its their reasonability as managers of a public company. But is a wise long term decision. I’d bey no. Just the start up costs of a new distribution system would easily be more then $15 million. So they’ve turned a $15 profit into at a likely lose. I’d also bet there are very few people that didn’t watch the shows because they are available on iTunes. My bet is the vast majority of those that bought them on iTunes wouldn’t have watch them on TV or if they would have would have DVR’d them and skipped the important part for NBC revenue - the commercials.

Also the number of people that bought an iPod just to watch an NBC show, or that it played an significant part of the purchase decision is a number that is likely very close to an insignificant percentage of sales of iPod. Wasn’t there a recent study that showed what a small percentage of iPod users regularly use the iPod to watch full length new shows.

Posted by marshallld on October 30, 2007 at 1:00 AM (PDT)

18

$2.99 for Heroes on an “experimental basis”?  Are they freakin’ kidding?

Going by the pricing of season one, $2.99 would bring a whole season to over $60.  That’s pretty much the price of the DVD’s.

Morons.

I’m still behind Apple on this one.

Posted by illegalattempt on October 30, 2007 at 6:26 AM (PDT)

19

HaHa, I bet Michael is gonna give someone in The Office a Zune this year for Christmas instead of an iPod like 2nd season.  NBC’s shady tactics!  Though deep down Steve Carrell would of course iHeart the iPod over Zune any day.

Posted by Hunter on October 30, 2007 at 6:30 AM (PDT)

20

Ironically, in last night’s “Heroes,” one of the new characters was given an iPod Classic. Next season, will she trade it in for a Zune?

Posted by The Doctor on October 30, 2007 at 8:02 AM (PDT)

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