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Analyst: iTunes/NBC dispute hurts Apple more

updated 10:20 pm EDT, Sat September 1, 2007

iTunes dispute hurts Apple

The iTunes pricing dispute hurts Apple more than its hurts NBC Universal and reinforces the relatively little influence that Apple has in the video download market (compared with the digital music market). NBC Universal's decision to pull its network TV shows from the industry-leading iTunes Store points to fierce resistance among media companies to the potential Apple dominance of online video sales, an industry analyst told IDG News Service. NBC, which already offers most of its network shows for free via its ad-supported website, has sold out most of ad inventory already, giving it an alternative--and potentially lucrative--distribution strategy. The rift with NBC is more damaging to Apple than to NBC, the analyst said, because Apple is using its digital store to sell products, such as the Apple TV, the iPhone, and video iPods.

The public spat, which started when NBCU announced it decision not to renew its iTunes contract for selling TV shows in December, continued on Saturday with NBCU execs insisting that the disagreement with Apple was over pricing flexibility rather than a "doubling of the wholesale" price of content.

On Friday, Apple said that it would not sell NBC TV shows for the upcoming television season because NBCU demanded more than double the current wholesale price for its content. NBCU's pricing demands would have resulted in the retail price to consumers increasing to $4.99 per episode from the current $1.99, according Apple.

The incident reflects how poorly the iTunes video store has done relative to the iTunes music store, according to Forrester Research analyst James McQuivey. "It shows how paltry and uninfluential the video side of the iTunes house is," he said. Few major music labels could similarly afford to pull out of iTunes, which dominates the online music industry.

While the analyst said that iTunes does make up the bulk of the online video resale market, he emphasized that the video download market is still small and that the industry is wary of Apple dominating the market, like it does the digital music market.

Forrester estimates that iTunes will take the bulk of the $300 million online video resale business and NBC will bring in about $60 million from iTunes video sales this year; however, that the potential money loss for NBCU may be well worth it, McQuivey said.

The loss of that revenue would be "not that big of a cost if it helps them undermine Apple's monopoly aspirations in the video world," McQuivey told IDG News.

NBC's own internet platform offers its shows for free to users and creates a market for paid advertising. The report claims that NBC has already sold its online advertising inventory for the upcoming season and notes that unlike iTunes, the revenue it won't be shared Apple. The ad revenue from that service is likely to generate hundreds of millions of dollars in a few short years, McQuivey told the publication.

Although likely applauded by other content providers, the Forrester analyst believes that others will not follow NBC Universal. Like NBC Universal, most would, however, like more flexibility in pricing and the ability to offer various content bundles.




by MacNN Staff

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Comments

  1. Flying Meat

    Joined: Dec 1969

    0

    apparently,

    The analysts are ignoring the general publics rising "then f*@! you!" attitude towards commercial exploitation of John Q. Public.

    sosume!!!!!

  1. apple4ever

    Joined: Dec 1969

    0

    Nope

    No, this hurts NBC more. Apple still has plenty of content, and you know what, if they don't sell videos- oh well, they'll still be selling iPods. This actually hurts NBC more, because the bad publicity coming from this will decrease the ratings of their shows. It just shows that NBC doesn't care about their customers, as they just want to bend them over.

  1. DCW

    Joined: Dec 1969

    0

    Even if so...

    Which I highly doubt - considering Disney's recent announcement and the fact that the the store is doing great numbers, from what I gather from recents reports - it was about time someone finally stood up to these henchmen masquarading as studio execs. I thought the iTMS worked well for everyone involved - the studios, the consumer and Apple. And having a rivalry is one thing, which NBC apparently has with Apple (although I have read that is one sentiment not reciprocated by Apple), but it just doesn't seem to make solid sbusiness ense to try to pull this stunt. I'm no business-model expert; any care to chime in on what business sense this makes for NBC? -dcw

  1. nhmlco

    Joined: Dec 1969

    0

    Two Markets

    While the article points out that NBC's own internet platform offers its shows for free to users, and creates a market for paid advertising, it fails to realize that they can do that anyway.

    Apple has the vast majority of the portable digital download player market in the iPod and iPhone. So while some people will go to NBC and watch online, viewing NBCs ads, others will pay to get PORTABLE video. Shows that they can watch in the car, on the plane, in the subway, on the train, and so on. In other words, places a streaming-only service can't reach, ads or no ads.

    In short, the two offerings serve two different, but complementary, markets. They're not replacing Apple's sales with ad sales. They could have both.

    As to "Apple's monopoly aspirations" I say humbug. Because it's not Apple's monopoly as much as it's the people's choice. Apple is providing great products and a great service, at a reasonable price, with as few restrictions on use as possible. As such, people are actually choosing to use it and (horror of horrors) PAYING for content online.

    Is such a thing really THAT scary to content providers?

  1. nhmlco

    Joined: Dec 1969

    0

    An NBC alternative...

    Here's an idea NBC absolutely, positively will hate. Instead of watching a show like Heroes on NBC. Don't. And don't use their site. And don't torrent them either.

    Instead, when the DVD sets come up for sale... BUY USED. Get used sets from Amazon or Half.com. That way you'll have legitimate copies, but NBC will only have the one first sale of each set. When you're done sell 'em to the next guy in they same way.

    All perfectly legal... and as little money to NBC as possible.

  1. slider

    Joined: Dec 1969

    0

    Greed, Market, and Death

    I can personally say that I will not pay more than $2 an episode. I know a lot of people gripe about them being that much, but I believe it's a fair price and totally worth to watch a program on my time and without commercials. We have two companies, one, Apple, fighting the movie, music, and tv industries trying to keep prices down. And the other trying to find new ways to squeeze another dime out of us, the consumer. Of course Apple has an interest it keeping them low, but they could just as easily have gone the other way, Apple knew then and knows now that for this thing to work the prices have to be kept under control. The market will bear two bucks a show, the providers are, as always, greedy, and if they get their way we'll see the death of this media format as we know it.

  1. horvatic

    Joined: Dec 1969

    0

    No I think NBC will hurt

    No I think NBC will hurt more. It's there sales, Apple doesn't earn anything from them. Apple gets its revenue from selling the iPod, iPhone, and Apple TV. Clearly these people don't know what they're talking about.

  1. BelugaShark

    Joined: Dec 1969

    0

    whatever

    I own an Apple TV, and I'm not stupid to buy a TV show, evein if it was $0.99, I can watch it on my cable. I don't think paying $4 for a TV show will sell more Apple TVs, what will sell more Apple TVs is a MOVIE RENTAL SERVICE.

  1. experimental

    Joined: Dec 1969

    0

    black and white

    NBC makes more money from advertising exclusively from their own distribution center. ie advertisers will pay more if they distribute shows exclusively from the point of advertising. Thats a pretty simple equation and I know anyone who wants more profit and control will follow that. Follow the yellow brick road!

  1. VinitaBoy

    Joined: Dec 1969

    0

    Choices, Choices . . .

    I just spoke with "a friend" who lamented the absence of NBC episodes on the iTunes site. He was more than satisfied with paying $1.99 per episode of his favorite shows but went ballistic at the thought of shelling out $4.99. My solution to him was to save his hard-earned dollars and do what MOST internet users do anyway: Download the very same product from bittorrent sites FOR FREE! He now does exactly that, proving that NBC is TRULY the loser here.

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