Originally Posted by AppleInsider
NBC Universal chief executive Jeff Zucker on Sunday urged colleagues to take a stand against Apple's iTunes, charging that the digital download service was undermining the ability of traditional media companies to set profitable rates for their content online.
"We know that Apple has destroyed the music business -- in terms of pricing -- and if we dont take control, theyll do the same thing on the video side," Zucker said at a breakfast hosted by Syracuses Newhouse School of Communications.
His comments Sunday were the most aggressive yet since NBC informed Apple last month that it had decided not to renew its contract to sell digital downloads of television shows on iTunes after this year.
NBC originally claimed to be seeking more control over the pricing of songs and videos that it was selling on iTunes, in addition to better piracy controls and more flexibility to bundle video content in an effort to increase revenues.
For its part in the bitter feud, Apple responded by saying NBC was asking for a twofold increase in the wholesale price of its TV show content, which would have resulted in the retail price to iTunes customers increasing to $4.99 per episode from $1.99.
Answering questions at the breakfast Sunday, Zucker offered substantially more color on the iTunes matter, explaining that it was a relatively easy decision for NBC to walk away from the Apple download service because it had only earned about $15 million from the service last year in spite of accounting for about 40 per cent of the videos sold on the store.
He said NBC routinely propositioned Apple to breach its standard pricing model and experiment with higher pricing for one hit show such as Heroes by raising the price from the iTunes standard $1.99 to $2.99 on a trial basis.
We wanted to take one show, it didnt 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.
The NBC chief also revealed that in addition to more pricing flexibility, his firm was also seeking a cut of Apple hardware sales -- such as the iPod and iPhone -- which were capable of viewing content downloaded from the iTunes Store.
"Apple sold millions of dollars worth of hardware off the back of our content and made a lot of money," he said. "They did not want to share in what they were making off the hardware or allow us to adjust pricing."
Zucker's comments also arrive just as NBC and NewsCorp. are launching their joint online video venture, Hulu.com, which aims to compete with iTunes by offering streaming TV and other commercial video content to viewers under an ad-supported model.
He said that 50 million streams of TV shows accessed on NBC.com during the month of October are proof that there is a demand for traditional TV series on the web.
Its extraordinary, he said. Its like a small cable channel in our universe that is becoming very successful.
The Bitter Taste of Ones Own Kool-Aid
The Blogs and news wires are abuzz over the recent comments from NBC Universal chief Jeff Zucker who told an audience at Syracuse Universitys Newhouse School of Public Communications, Apple has destroyed the music business this seems to be the hot-button that everyone is jumping on.
In fairness to Zucker, heres what he said at the breakfast meeting: We know that Apple has destroyed the music business -- in terms of pricing -- and if we dont take control, theyll do the same thing on the video side.
While this sounds more like a quip than a declaration of war, there are issues behind the statement and the timing is no accident. The company is launching a rival download site together with NewsCorp called HULU that goes into a limited Beta this week offering over 90 different television shows and 10 movies. Not only that, from the Apple perspective, theyve moved to the dark side syndicating with Microsoft as well as AOL, MySpace, Yahoo and Comcast. But heres the rub. The site is going for an ad supported model with revenue being split between the content creator, HULU and the distribution site. According to Shelly Palmers MediaBytes.com.
But like all stories there is much more going on here. AppleInsider reported that Zuckers overtures to Apple werent just in raising the price from a seemingly modest $1.99. The $2.99 figure was the wholesale price according to Apple, meaning a 2.5X increase to $4.99 per episode for iTunes viewers. And that number was just unacceptable to the iTunes team.
Not only that, AppleInsider also reported that Zucker wanted Apple to give them a cut of hardware sales. Apple sold millions of dollars worth of hardware off the back of our content and made a lot of money, he said. They did not want to share in what they were making off the hardware or allow us to adjust pricing.
The concept is just so outlandish, its ludicrous. Imagine that. Apple didnt want to cut NBC Universal in on its hardware sales. Taken to its logical conclusion Zucker will next be demanding fees from TV manufacturers, PC makers (accessing the new HULU site) and hey, why not radio, set-top box and satellite converter box makers as well?
I think Steve Jobs nailed it back in 2005 when, after iTunes was a run-away success and the music industry was pressing for price increases, he called the industry greedy. Ok, heres what he really said:
If they want to raise the prices, it means that they are getting greedy, said Apple's CEO, Steve Jobs. If the price goes up, they (consumers) will go back to piracy and everybody loses. He added, Theft is bad, and [Jobs] the Buddhist joked that You dont want to burn in Hell.
What poor Mr. Zucker doesnt get is that the world has shifted and Buddhist Jobs discovered a workable way around the curse of digital piracy. Its simple really, offer people fair pricing, and they will gladly pay for content. Try to cheat the folks with excessive prices simply because you can and the folks will rebel. Want proof? Blogger waytogobuddy on the AppleInsider forum said it best:
Hey NBC: As a member of the demographic you are marketing to, I say Apple corrected pricing schemes. And that was up from zero (i.e. torrents) while taking down hyper-aggressive DRM. Welcome to the age where shit media content and shit usage rights only gets you shit.
The world changed in another way too. Just look at these two bloggers reply to the recent news about NBC pulling out of iTunes:
Not happy about it. But i dont watch TV anymore - if i want something i download it from itunes. And watch it when i want! As long as they have BSG and Lost im ok with it.
That's my take ... I watch what's in iTunes ... if I have to go somewhere else, I watch something else. And that's not because of my unwavering love for iTunes, it's just the way it is. It's what I have become used to. (Originally posted: October 29, 2007 Goodbye, NBC. And good riddance).
I guess ones own Kool-Aid really does warp reality. By asking Apple to share in hardware sales because of his content, Zucker actually believes iPod and iPhone customers were lining up in front of the Apple Stores with just one thought on their minds, to get this piece of hardware in order to download the really cool, super great NBC programming content.
Sip away at your Kool-Aid Mr. Zucker, but be careful, the sweet fruity taste may turn bitter come end of quarter when the sales numbers come in. SS