Did Apple Cave or Did NBC Bend?

Among the many announcements at yesterday's Apple (AAPL) event, including new Nanos and headphones and colours and the Genius auto-playlist feature — all of which was obsessively live-blogged and Twittered by legions of bloggers — came the news that NBC (owned by (GE)) shows had returned to the iTunes store, many of them in high-definition.

It was almost a year ago now that the network pulled its content out of Apple’s grip, saying the company was too inflexible on price and other things, and started putting it up at Amazon (AMZN) and its own Hulu site, while Apple spread the word that NBC had wanted to boost prices.

So who gave in? From the sounds of it, both sides got their punches in: NBC gets to charge more for HD shows, but will also sell some of its older shows for less than the $1.99 price that Apple applies to virtually everything. As a piece at CNET notes, Apple also gave in to the demands of the movie networks earlier this year, and allowed them to set multiple prices for movie downloads. Will the music labels try to use these signs of weakness to get Steve to bend on album and song pricing?

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Comments

[jmmx:]

Don't be so childish!

Business deals are always the result of negotiations. There are the needs of both companies, and then these change over time as well. Are you going to tell me it was a sign of "weakness" when Apple first released the Nano and Shuffle players? No, it was just a change in times, and it was time to usher in less expensive players.

So too, now was the time for both parties to make whatever compromises were necessary to put this deal together. I am sure they will both win from the agreement.

2008 Sep 10 02:26 AM

[Murphy Mac:]

Maybe it sounds chilidish, I don't know. But NBC execs would have a hard time explaining to shareholders how leaving iTunes was good for business when they were the best selling tv shows for the best selling portable media player. How do they explain the lost revenue?
They had hulu in the wings, yes. But the content couldn't be placed on an ipod. The networks need to embrace the changes, not run away.
Still, NBC coming back AND offering some free content is a good sign that they're catching on to the new world.

2008 Sep 10 08:04 AM

[winindthedust:]

I wonder how much revenue NBC lost in the last year?

These labels and networks need to catch on to the fact that they can't have it both ways...

1.) low prices equals cutting out pirating, and greater sales & profits. Win. win. win.

2.) high prices? Torrent sites are free; lost profits; money spent on catching pirates while not making sales. Lose, lose, lose.

3.) people are just loath to buy high priced digital media when they can get hardcopies for cheaper at their local discount store. However, if they have multiple ways to watch, carry, and store that media (iTunes & iPod & TV), that adds a value that is catching people's attention and makes digital download media very attractive.

4.) Quality & Value- let's face it; SD iTunes downloads are way better then the highly compressed HD television cable offerings, and I would even say better then DVD. iTunes HD content is awesome. Where is Blueray? Frankly, most people when they see the quality of TV compared to DVD & especially Cable, are very impressed. Add commercial free, and multiple ways to store and watch; you have a winning ecosystem that people really like. If the networks want to raise prices, they should be helping iTunes advertise and tout this value.

2008 Sep 10 08:35 AM

[squawk:]

Generally agree with comments here. Neither side "caved in." Negotiations seek to achieve a "win-win" for each party, & it's apparent that each side achieved a win. To take a more cynical view of business negotiation as only "win-lose" (i.e. a "cave in") shows a lack of understanding or appreciation for the negotiation process, nor the attributes of an informed journalist.

2008 Sep 10 10:39 AM

[brewer:]

NBC are closely tied and in partnerships with Microsoft. But I think this shows that even NBC has no choice but to put content on iTunes. Amazon and 'Hulu' just can't compete.

2008 Sep 10 11:09 AM

[Steve Mage:]

Angela Bromstead, president of NBC Universal, which owns and produces The Office had this to say: “I’m not sure that we’d still have the show on the air. The network had only ordered so many episodes, but when it went on iTunes and really started taking off, that gave us another way to see the true potential other than just Nielsen. It just kind of happened at a great time.” (Prior to the spat, 2007)

Here is the bottom line: NBC’s SEASON suffered last year. That is at least partly attributed to not being on iTunes. And while profits for Studios from iTunes are not CURRENTLY anything that warrants a second glance, fast forward a few years when on top of the 65 million current iTunes account holders, another 50 million or more Americans have iPhones or iPod touches… This landscape is changing fast, and NBC knows it.
Let’s recap last year, shall we? Jeff Zucker made a complete IDIOT of himself when he threatened (unfortunately for NBC, very publicly) to remove all NBC content from iTunes by the end of the year. Apple, instead of cowering in dismay, did Mr. Zucker one better: They immediately and unceremoniously removed all new NBC content post haste (Early Sept. 07).
Here is the word on the street: Apple made the decision to completely ban NEW NBC content from the iTunes store for a period of exactly one year. That is why even though Apple and NBC appeared to “make nice” in January, you haven’t seen NBC content back on iTunes until now (Early Sept. 08).
Apple approached this issue in this way in order to send a message to the other networks that might be contemplating doing the same. “You’re free to leave whenever you want, but chose wisely, because it'll cost you once you decide you want back on the gravy train.”
Apple’s financial reports never registered even the slightest blip from a missing NBC over the last 12 months. In fact, their growth has been unprecedented and their profits have been Apple’s largest in history.
NBC can't say the same. Their financial reports show blood from last season's fiasco, and their Nielsen Ratings were in the toilet.

And in the end, NBC is back and you and I can still buy The Office or any other new NBC show at $1.99, just like we could last year. No change there. Don’t let the spin people fool you. NBC did NOT get what it really wanted. But the variable pricing scheme (for HD and older shows - a simple no brainer) sure helps make Mr. Zucher LOOK like he saved a little face, doesn’t it? And Apple is classy enough to let him keep some of his pride and even have his day in the spotlight, too. They know people can see where the cards really lie.
NBC made a massive miscalculation. End of story.

But here are a few classic NBC CEO Jeff Zucher quotes for you anyway:

“Apple sold millions of dollars worth of hardware off the back of our content, and made a lot of money,” Zucker said. “They did not want to share in what they were making off the hardware or allow us to adjust pricing.” - NBC Universal chief executive Jeff Zucker, Oct. 29, 2007

Can you imagine, no cut for NBC from Apple’s iPod & iPhone profits??? Of all the nerve!

“Apple has destroyed the music business–in terms of pricing–and if we don’t take control, they’ll do the same thing on the video side.”
–NBC Universal chief executive Jeff Zucker, Oct. 28, 2007

I think GE needs to make sure Zucher sits down with a public relations professional...say every Monday & Wednesday at 11:00 from here on out.

“We’ve said all along that we admire Apple, that we want to be in business with Apple. We’re great fans of Steve Jobs.”
–NBC Universal chief executive Jeff Zucker, Jan. 20, 2008

What is this? Schizophrenic Economics? Or the public apology of someone who realizes he made a serious miscalculation?

2008 Sep 10 08:03 PM

[Steve Mage:]

I hate to say "I told you so..."

news.cnet.com/8301-102...

2008 Sep 10 11:57 PM

[kynik:]

I don't see why Apple had been unwilling to budge on pricing.??

2008 Sep 11 03:20 AM