Apple has announced that the iTunes Store will not be selling NBC television shows for the upcoming season. According to Apple, NBC Universal decided not to renew its agreement with Apple after Apple declined to pay NBC more than double the wholesale price per episode. That would have had the effect of increasing the per-episode price of NBC TV shows from $1.99 to $4.99. Three of the top 10 TV shows on iTunes came from NBC, accounting for 30 percent of iTunes TV show sales.
That loss will no doubt hurt, but it's not at all surprising that Apple refused to increase the price of the TV episodes. Although the current iTunes Store prices seem quite reasonable on a per-episode basis, those charges add up quickly with regular viewership, and increasing the per-episode price to $4.99 would radically increase that cost. (For more on video costs, see my comprehensive article "I Want My *TV: Comparing Video Acquisition Methods," 2007-06-04.)
As with Vivendi's Universal Music Group opting for a month-by-month contract (see "Universal Rejects Long-Term Apple iTunes Contract," 2007-07-02) and more recently offering DRM-free music through a variety of online music retailers other than Apple, this latest spat with NBC Universal is indicative of Apple's new position in the entertainment industry. The major content providers clearly didn't anticipate Apple's success with the iTunes Store and thus agreed to licensing terms that give Apple more control than the content providers would like. The question is if Apple has gained sufficient market traction that losing the iTunes Store sales will be enough to force NBC Universal and Universal Music Group to return to the fold. The defection of one or two content providers won't turn the tide against Apple, and at the moment, there isn't sufficient commonality of opinion among the content providers (who all compete with one another, remember) to threaten Apple's position.
Soon after Apple announced the termination of NBC programming on iTunes, NBC and Amazon.com announced that the shows would appear on Amazon Unbox, the retailer's own video content system. In addition, Amazon Unbox customers can now download the pilot episodes of several new NBC shows prior to their network premieres.
My question: Is the fact that the French conglomerate Vivendi owns Universal Music Group and 20 percent of NBC Universal (the remaining 80 percent is owned by General Electric) related?
Although the current agreement expires in December 2007, Apple decided to pull the NBC shows before the season started rather than wait until the middle of the season. That call could have gone either way. If Apple had waited until December to pull NBC's shows, viewers accustomed to downloading shows from the iTunes Store would undoubtedly have been outraged, but whether that outrage could have been directed at NBC rather than Apple is unknown. It's possible that Apple made the NBC announcement now to draw attention to how NBC will be missing out on the new iPods Apple released at its September 5th "The beat goes on" special event (see "Apple Introduces iPod Touch, Wi-Fi iTunes Store, and New iPods," 2007-09-07).
On the plus side, Apple also announced recently that television shows from ABC, Disney Channel, MTV, Nickelodeon, and Paramount Comedy are now available for 1.89 pounds per episode from the iTunes Store in the UK.