NBC got a little greedy yesterday when it decided to drop its contract with iTunes to sell digital downloads of TV shows on iTunes (source: NYTimes.com).
NBC was requesting that iTunes introduce stricter piracy controls and higher pricing, something that Apple was unwilling to provide. Personally I already think that iTunes is already packed with far too much DRM and the prices for TV Shows are about as high as I’d be willing to pay.
The current contract that Apple has with NBC was to run up until December this year. However, Apple bit back and decided to cut this short and stop selling NBC TV Shows in September at the end of the current TV season.
Bad News for Apple or Bad News for NBC?
NBC accounts for about 40% of video downloads from iTunes so this is a big bite into Apple’s offerings. But as AlleyInsider.com points out, given the small margins that iTunes makes on selling video downloads and the costs involved it is not a big deal in terms of money that Apple loses this contract.
However, it does damage iTunes video catalogue. iTunes prides itself on being the central place to buy all the music and videos you’d ever need, which in turn drives sales of iPods and Apple TVs.
NBC on the other hand is losing out on a huge audience which it won’t find anywhere else. If NBC is hoping to create this audience on its planned YouTube-like video site Hulu which is set for an October launch then I think NBC is very mistaken.
Touched a Nerve with Apple
This whole deal has touched a nerve with Apple, so much so that Apple decided to put out this press release:
iTunes Store To Stop Selling NBC Television Shows
CUPERTINO, California—August 31, 2007—Apple® today announced that it will not be selling NBC television shows for the upcoming television season on its online iTunes® Store (www.itunes.com). The move follows NBC’s decision to not renew its agreement with iTunes after Apple declined to pay more than double the wholesale price for each NBC TV episode, which would have resulted in the retail price to consumers increasing to $4.99 per episode from the current $1.99. ABC, CBS, FOX and The CW, along with more than 50 cable networks, are signed up to sell TV shows from their upcoming season on iTunes at $1.99 per episode.
“We are disappointed to see NBC leave iTunes because we would not agree to their dramatic price increase,” said Eddy Cue, Apple’s vice president of iTunes. “We hope they will change their minds and offer their TV shows to the tens of millions of iTunes customers.”
Apple’s agreement with NBC ends in December. Since NBC would withdraw their shows in the middle of the television season, Apple has decided to not offer NBC TV shows for the upcoming television season beginning in September. NBC supplied iTunes with three of its 10 best selling TV shows last season, accounting for 30 percent of iTunes TV show sales.
Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market this year with its revolutionary iPhone.
