Apple, NBC Fight Over TV Shows

Apple is done with NBC for 2007. It’s the kind of thing that happens
when you make Apple CEO Steve Jobs angry.

After NBC Universal said it will not renew a contract that runs
through December to sell digital copies of its television shows
through Apple’s iTunes store, Apple today announced it will pull NBC
shows from iTunes in September.

Apple said negotiations fell through when it declined to pay more
than double the wholesale price for each NBC TV episode. Apple said
that price increase would have resulted in the retail price to
consumers increasing to $4.99 per episode from the current $1.99.
That’s not a price Apple was willing to pay, even though it confirmed
NBC supplied iTunes with three of its 10 best-selling TV shows last
season, accounting for 30 percent of iTunes TV show sales.

An NBC spokeswoman told InternetNews.com she could confirm
that NBC would not renew its current contract, but refused to say
whether negotiations would continue with Apple.

“We are disappointed to see NBC leave iTunes because we would not
agree to their dramatic price increase,” said Eddy Cue, Apple’s vice president of
iTunes, in a statement. “We hope they will change their minds and
offer their TV shows to the tens of millions of iTunes customers.”

This is not the first time Apple has refused to back down from its
strict iTunes pricing policies.

Music studios have long complained
that $.99 per song on iTunes is too little for hits and too much
for older music. In July, Universal Music Group’s iTunes contract
expired, and the company tried to renegotiate for a pricing structure
more to its liking. No go.

Van Baker, research director for Gartner, told
InternetNews.com at the time that Universal and other content
producers have little alternative beyond Apple.

“Apple knows they could go to [RealNetworks’] Rhapsody or Napster,
but their unit volume would be 20 percent of what it is through
iTunes at best. It’s a ‘cut off your nose to spite your face’
argument,” Baker said.

But contract negotiations with NBC Universal may have played out this way because NBC is already trying to build its own
alternative to iTunes. In March, NBC signed with News Corp. to
develop an advertising-supported Web video site. Yesterday, that site
got its name, Hulu.

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