NBC chief says Apple 'destroyed' music pricing - Page 2

They'd argue that it was because iTunes had a ready delivery mechanism, which they now have many alternatives to, including ones they've had a direct hand in crafting. So, if consumers flock to Hulu and continue to use NBC.com as they'd like (despite the, at times, HARSH difference between how NBC does video and how ABC does it) they'll be more than pleased to move on without iTunes. I was watching videos on NBC.com the other day, and they freely bounced from Quicktime movies to Flash, with varying volume controls in their ads. It was a complete mess. They're just throwing crap at the wall right now. It seems clear their departure from iTunes isn't going to hurt anything more than their image. --And I think it has done serious damage... considering the harshness of the remarks. This is a war apparently. --Worse, other executives are certainly listening.

~ CB

What a joke! He admits that they wanted to raise prices. And they wanted a cut of hardware sales!!! For what! They're beggars looking for money from rich Apple. Hey, how about my cut. They're making money on the backs of consumers. We should get money back.

Cries from a dying industry.

KMA

in a related event, NBC's vp of inanity admitted that for the past 22 years NBC has been pursuing unsuccessfully a plan to claim "our fair share" of revenue from new television sales. Michael J. Buffoon said the major television manufacturers had stopped returning his calls, "but that doesn't mean we're wrong: They've made a lot of money off our content."

I think the recording industry is getting a little payback for the way it has ripped off the very same musical talent that gave them all their billions for years. I mean come on charging over $20.00 for 35 year old soundtracks is ridiculous! I haven't bought a new CD in over nine years, and I don't plan to ever buy one again. You get what you deserve! Go Apple!

To expect cuts for the sale of iPods and iPhones is retarded. Should TV manufacturers also pay NBC royalties? I bet SJ got a really good chuckle at the idiotic suggestion. Let NBC hang themselves.

Well, I think NBC pocketed $15 Million after they paid everyone off. Apple pays Akamai to deliver the content from my understanding, so Akamai gets a chunk of the pie. So do the people that are in the TV show.

I think that NBC is getting nervous. Isn't NBC getting sold off from GE? Aren't there discussions of that happening? I think they are just trying put Apple down for trying to make LEGAL content somewhat affordable. Hey, if they raised the pricing, then they might not sell as much. I have an iPod and I don't have any TV shows because they haven't posted any that are worth paying for.

"...undermining the ability of traditional media companies to set profitable rates..."
Uhhh, THAT WAS THE IDEA Mr. Zucker!

My message to NBC:
You shouldn't be getting rich off of a lesser quality format of content that already brings in billions of dollars for you. The Internet is a new model of marketplace. It's not for profitting billions of dollars, it's for providing people a service they need and want. It's supposed to be your way of saying "thank you" to the customers that have provided you loyal viewership and BMWs and mansions for luxury condos for a century. If it makes you a lot of money (or any money at all), you should see it as a bonus. If you want more money go and make some real technology yourself - which Hulu is a small step in the right direction of doing.

Last time I checked, it was supposed to be the consumer determining what your profit should be by our purchasing decisions. If you have a better option than Apple, then stop crying and do it yourself, and see what consumers prefer.

And before you go on whining about Apple being so inflexible - remember - you signed a contract with them. Remember that? Contracts are those little thingies that say you agree to certain terms with someone. You remember - like the contracts you make musicians and recording artists sign giving them practically "pennies" compared to the money you make off of their content.

I only wish I worked for NBC-Universal, just so I could walk into your office and tell you-off and quit. C'mon people, all you people with NBCUNI on the end of your email address; where are all of you? All of you that know your company CEO is making ridiculous statements on your behalf. Statements that in theory and practice have no basis in anything good for you as a consumer.

do you mean 2 fold or 2x

2 fold is 4x

fold a piece of paper in half twice and count the layers

Absolutely right! These guys have a consistent history of producing POOR quality entertainment , news that is no longer news (it's poor quality entertainment), movies that suck, and TV that has customers running to cable and the Internet to find relief. And if that was not enough, they want us to continue maintaining them in a life style they haven't earned. If it wasn't for Apple we would all be torrent freaks instead of paying. They should be listening to Jobs instead of drinking their own stale Kool=aid.
The "entertainment" industry is trying to force Apple join their swirl around the drain.
I will continue to shop with Apple.

Exactly! You want to see how powerful the consumer can become? The aforementioned post has it dead to rights.

I see Zucker taking a bath and losing his job within 2 years.

How about, nearly two fold.

"We know that Apple has destroyed the music distribution cartel -- and if we dont take control, theyll do the same thing on the video side," Zucker should have said...

Actually, no. 100 million shows at $1.99 per show is $199 M REVENUE, not gross profit. You have to subtract the cost of distribution to get the gross profit. This would include what Apple pays Akamai and a few other distribution costs.

And NBC didn't say that they made $15 M in revenue. They said $15 M in profit - which is revenue minus expenses. Granted, their expenses should have been small (cost of conversion to iTunes format and some advertising expense), but they need to be counted.

No, twofold is double - same as 2x:

http://dictionary.reference.com/browse/twofold

I think your comment exposes a point that's been generally overlooked on this forum a misconception, even: the cost to the network of selling a tv show on iTunes is not "nothing": it's whatever apple is charging for that service. That's a number we don't know, right? What if it's 49 cents: Is $1.50 enough for NBC to net from a $1.99 sale? What if Apple's share is 99 cents? $1.49? Is 50 cents per episode sufficient?

What about music: What if apple's share of a 99 cent song sale is 25 cents? Is 74 cents net to NBC sufficient? What if apple's take is 50 cents? 75? If it's 75 cents, should NBC be content with netting 24 cents on a song sale? That's 2.88 for a 12-song album. What if it sells that album for $14.99 in a store instead, and the cost of manufacturing the CD is 75 cents and the artist's take is $1 and the store's take is $7.50? In that example, NBC's net would be $5.74, compared to $2.88 from a sale on the iTMS, given the hypotheticals above.

Changes the discussion, doesn't it?! The problem is, to the best of my knowledge we don't know what real (or even generally accurate) numbers are. Without those numbers, it seems to me these discussions are pointless.

I'd like to believe Apple's set up a pricing scheme that to an outsider would seem fair, would convince us NBC's stance is wacko. But I'm not willing to leap to that conclusion.

I agree... $15 mil really isn't too large in the grand scheme. Bottom line: people don't want to purchase big 42 minute television shows that they only watch once. Where I think Apple and Content Providers can really make "BANK" is by offering a rental service for movies/television, (not music).

Wasn't there some kind of rumor that said a TV/Movie rental service would be out in the fall. Like a movie would be $4.99 to rent for thirty days or something like that. This would be better the DVR.

While on the surface it may sound similar, Apple's relationship with AT&T is quite different.

Many people left their current carrier and switched to AT&T so they could get an iPhone.
No one is switching to the iPod so they can watch NBC content on the go.

AT&T just sells the customer the phone - no sign up - no technical support
Apple handles the sign up, technical support, advertising, etc.
NBC gives Apple digitized files, Apple does pretty much everything else and sends them a check.

No way they only made $15 Million revenue off of iTunes sales, I call BS.

Do they ask every TV manufacturer, DVD recorder, DVR manufacturer, set-top box manufacturer, TV antenna manufacturer, etc. for a slice of profits? Give me a break.

Apple did not "kill the music industry in terms of pricing," because if you remember, before iTunes, ALL music available online was FREE. Does he really not remember reality from only a few years ago? What an a-hole, Apple CREATED the online digital music industry and gave studios a revenue stream (and a big one at that) compared to the ZERO-dollar revenue stream it had been before iTunes came along.

As far as I can tell, there are several facts that are driving most of the motivations of traditional media right now, and let me tell you, they are scared to the point of insanity:

In another 5-10 years, broadband speeds will likely be quite a bit faster than today, allowing for vast amounts of high-quality digital media to be distributed online trivially. This includes wireless connectivity well in excess of 50Mbit/sec -- even approaching Gigabit/sec speeds. Think about how much music you could grab with a 100Mbit/second connection. WHat about a 500Mbit/sec connection? How many HD-DVDs is that per hour?

In another 5-10 years, a small hard drive or flash drive device will be able to store many, many Terabytes worth of data -- say, a huge chunk of a studio's entire library of content. Without DRM, it would be pretty easy to creative an archive of a studio's entire library, and transfer it to your friend's iPod with no effort.

Niche content providers and alternative forms of electronic entertainment (such as video games) will continue to attract more viewers/users, so the main studios will have way more competition than today. Youtube and its ilk represent the future of hundreds-of-thousands "micro-broadcasters" who with minimal resources and an instant distribution system (the InterTron) can get their content out cheaply and easily.

Hahahah welcome to the New World Order of 21st Century Media, old-skool losers! You will actually need to compete in terms of quality above all else, and ALSO need to show creativity in your approach to attracting viewers, distributing your content, and generating revenue streams. VERY FEW of these folks "get it" right now. Dare I say Starbucks understands a lot more about 21st century music distribution than any of the big labels (Song of the Day, in-store iTunes WiFi Music Store, etc.)

JEFF ZUCKER NBC's Superstar Entertainment Chief by Kaya Morgan

All that glitters may just be the peacock. It's no secret that NBC is, by far, the most successful of all the broadcast networks. According to the Nielsen ratings, out of the top 10 shows in prime time, NBC racked up 6 including Friends, E.R., Law & Order, Will & Grace, Scrubs and Law & Order Special Victims Unit. During the upcoming season, NBC is expecting to generate more than $700 million in profits from prime time alone, not including the additional revenues from reruns sold to cable and other TV stations. A single hit show can generate more than $100 million in annual profits. So, there are serious chips on the line.

But the top dog doesn't stay the top dog without protecting his territory. In this case, FOX is yapping at NBC's heels. Always jockeying for position, the networks fiercely compete, hoping to hit the jackpot with that special show that will drive the majority of viewers to their network. Consequently, NBC has brought out the biggest gun and brightest talent they have Jeff Zucker. Many say he's brilliant. Others say he's a self-confident and decisive leader. Whatever he is, he's broken the mold.

more here: http://www.islandconnections.com/edit/zucker.htm

If you piss off Internet savvy people, they just might go out of their way to make sure NBC's new shows are immediately available as torrents. And they'll keep Transmission on all the time to help seed them.

seems logical, but my widget dictionary says twofold means twice as many...

Everyone in Hollywood thinks everyone in Hollywood is BRILLIANT. If they are, why are the big 3 losing obtainable business to virtually anyone else that creates content. Our press (the American Press) needs to call these guys to task instead of continuing rewarding lack of vision.

Of course that blurb is from an article that is almost 5 years old (2003) and the industry has changed a lot in that time. iTMS was just a baby and there were no shows available for download on it back then.

Well, keep in mind that NBC had signed a contract when they originally put their content on iTunes. So at one time they did think it was profitable.

What? NBC is in the business of making money, not be a charity. It's their job to try to make money where they legally can. I don't know where your Billions of dollars figure comes from, Apple's video service probably hasn't grossed half a billion.


From a recent interview with a European Universal exec, we do know the number for music is roughly 70%. And that's not enough to him. I really don't think it's unrealistic to expect that videos are sold at similar margins.

Wow... that line read like it was written by Zucker himself! Isn't the intent of a comparison to offer two sides to a story?

I think that line should have read: "Many say he's brilliant. Others say he is a self-absorbed and combative leader..."

We know for music from multiple sources that Apple gets 30% of the price to pay the costs of the site, distribution, credit card costs, marketing (affiliate payments), etc. So Akamai distribution costs comes out of Apple's share.

Even if we assume that Apple gets 50% (though I think it's the same 30%) of the 1.99, then there was $100M going back to the studios. If NBCU is 35% of sales (Apple says over 30%, NBC says 40%), then NBCU should've collected 35M. So does it make sense that it costs NBCU 20M to prepare the shows and manage distribution? Maybe they needed to have a one-time buy of special equipment to take its digital masters and convert them to MP4. Maybe they needed to pay huge bonuses to startup an organization to deal with the Internet. Who knows, but I'd assume its more likely that NBCU just burns through the revenue from iTunes.

...they'll almost certainly realise Zucker can't see his hand in front of his face. Will they rally together to delay the inevitable or will they see his failure to embrace the future of TV as their best opportunity to increase market share?

Lets hope it's the latter or "AppleTV" will be off the air for good - until the next thing replaces it.

McD

At $1 per episode, I'd be buying a lot of shows, AND, an AppleTV or maybe even two AppleTV's.

$2 each is too much. I'm not in that big of a hurry to watch the stuff. At $2 per episode, I'll just buy the dvd's when they come out, watch them, then dump them on eBay, thereby costing me very little.

Thank you for attempting to include a dose of sobriety to the issue. However, we do know precisely what percentage Apple gives to major labels for each $0.99 song sale. They get $0.70. Which seems more than a fair share.

Where the guess work begins is figuring out, given the recent track records of Apple and NBC, what terms seem most likely for a video download contract. Apple walks up to the networks with a product that despite its wild success, had already been publically identified as a threat to their business model. Apple therefore has to find a way to not only make the proposition favorable to NBC, but immediately profitable. I think it's fair to assume Apple presented terms that were comparable to their iTunes music model, if not even more favorable to the networks than to Apple.

In addition it seems clear that the Apple model for iTunes is centered on taking a loss in the percentage of iTunes sales, while reaping the far greater benefit of claiming a bigger stake in what was a barren technology landscape, and expanding their brand recognition and loyalty. All of which supports (not "boosts") hardware sales.

Wow. It takes some creative effort to spin Apple's success as a "destruction." Why can't these executives channel that energy into creating some actually innovative ideas? I bet everyone at NBC is happy he let their hardware profit desire slip out.

This is like Armani calling me up and saying that since I've worn his clothes to work, he'd like a cut of the "millions" I've made. No, that's not a good analogy--because he's way too classy for that.

After this, I can hear Zucker talking about Mother Theresa, "Man, like she's way so arrogant, wearing all white all the time and everything..."

Ok, somebody stop me.

I'll answer that one - zero! Having destroyed the revenue model that supports their production you won't have any BLU-RAY discs to rip (sorry but HD-DVD was never going to win) & isn't 802.11n 200Mbps+ already?


You'll probably be able to put the whole library on a current device, see argument above


Is that why eMusic (not iTunes) is the largest online retailer in the world?


Whilst I empathise with where you're coming from, be careful Nicky. When the revolution has come and the music industry looks sooo different from now you may find some of the old structures creeping back in but by then you'll be out of school and will know this. "Revolutions" have a habit of ending up back where they started that's why they are so named and that's only if we're lucky sometimes we get to remove the "R" but others we get to replace it with a "D"

McD

Since I don't have cable or even own a tv, iTunes was perfect for me. I love "Heroes" and bought it every week off iTunes. Now? I just download it off The Pirate Bat torrent site. So, as far as i'm concerned, NBC lost that revenue by leaving iTunes.

"Variable" pricing is code for more expensive. Period. Watch the Amazon store. They start with a bunch of tunes at 89 cents, but once it becomes successful, watch the prices go up and up and up. The same thing happened with CDs.

This NBC guy just proved my point by admitting that NBC was pressuring Apple to up the price on Heroes, its most popular show. What would have stopped them from making it $4.99 the following year? or $5.99 the year after that?

These companies are pissed at Apple because they don't like to relinquish control. That's all there is to it. Jobs had the same issues with Disney and Pixar. Until Pixar kicked the crap out of Disney year after year. And then Jobs and Pixar effectively took over Disney Animation altogether. (Disney "bought" Pixar, but Jobs became top stock holder, and The Pixar executive staff all took top positions at the Animation studio.) With any luck, Apple will buy some prominent indie studios and make its own content. Let the big networks go gently into that good night. I can live without another season of Heroes.

Anyone remember Zucker's roots? Yes, he's the poobah of NBC now, but he used to be telling Katie Couric when to smile on the Today Show. Once a cheesy huxster, always one.

Ah what cruel people Apple are!?! I'd have to agree with NBC, Apple should pay a portion of their hardware profit, but only the same portion as every TV maker pays NBC now, and every DVD player manufacturer is required to pay.

:-)


Good question. I think it's mainly that Apple thinks they see a new model for TV that works for everyone, and is trying to kick start this model. For instance, the local station makes about 50c per viewer when you watch Lost on them (via advertising), and NBC only gets a portion of that. So if you assume 2 viewers of an iTunes purchase, for $1, NBC would be ahead of the TV model. However, NBC doesn't want to replace the TV model, they want to add a new model (or maybe upgrade the DVD model). It involves higher profits per show but far fewer buyers per show. Not Apple's desire.

Fantastic analysis!

I think that JZ is, well, stretching the truth (to say the least).

I doubt they'll do pirate torrents, but they are probably seriously considering their DVR options. NBC's moves could be great for us!

Just making up an example that might work VERY well for Apple, and encourage deals with Disney/NBC/Fox/etc.

They could offer a DVR AppleTV with multiple options
1) record & watch a live/delayed TV show just like TiVo does, skip ads etc.
2) download for free a TV show with only TWO ads per ad break (google video ads?), customised to your own interests, and NOT skippable
3) pay $1 to download & watch a TV show (without ads) multiple times in a one month period.
4) pay $2 to own a TV show.

So for NBC, your AppleTV would only have option #1. And we'd be able to skip through the ads entirely.

And for Disney/ABC, your AppleTV might remove option #1 - just have options #2 and #4. ABC gets $2 per show, or FORCES you to watch a couple of customised ads. This is good for Disney/ABC.... much better than following NBC's decision and having you skip ads.

(Note: It would save Apple money if ABC viewers record FTA instead of downloading, but I don't think this is crucial to them)

What do you think? Could Apple legally do this? Technically do this? Would it encourage NBC?

Actually it would be 199M in sales not profit. There is a cost involved to the shows.
NBC says it profited 15 million not 15 million in Revenue. There is a difference.
How much did they have to pay the production company, ads, who know what else they throw in there.
In theory NBC could have reaped all the the 199M in revenue and still claimed 15 million in profit.

As some music artist and old school TV people about the studios "accounting". Example... the networks claimed that some of James Garners old shows never made money even thought they were hits and were on the air for a number of years. He had to sue them to get the books opened.