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NBC – The first of many?

Like many of you, I digest a lot of news media during all hours of the day and for me the primary source is the internet and news feeds via RSS.  Well, just a short while ago, NBC announced that it is not renewing it’s contract to sell NBC programs via Apple iTunes in the coming year…

NBC’s motive for doing this is Apple’s control of the iTunes environment and consequently pricing.  I know some people think most things including TV should be free, but a company’s got make money to put those programs on air! There are lots of other issue to consider as well such as DRM (those for and against) and screen size – the iPod being somewhat small for me.

Don’t get me wrong, I like and use iTunes a lot and thoroughly enjoy my iPod, but consumers and media companies alike are looking for something a bit different.  Adobe has come up with a solution known as the Adobe Media Player, but it remains to be seen whether it will be as well adopted as iTunes.  AMP addresses a lot of the issues that media companies face and puts them in control of what kind of media they deliver and how much (if anything) this media costs.

Coming back to NBC, they are Apple’s largest provider of content and the story below details that many other contracts from the likes of ABC, CBS, Fox, etc. are coming up for renewal over the next year. 

So, here’s a bit of Friday news for you to digest and ponder as we head into the holiday weekend.  Cheers!

originally posted 8/31, updated 9/2

Adobe Media Player

NBC / Apple article from SF Chronicle

Apple Press release

A video and link that’s likely to get pulled!

Update – 9/4

Well, I did receive three terrific, passionate responses that for the most part condemned NBC for the odacity to ask for $5.00 per episode. As I mentioned in my responses, it is Apple who floated that number, not NBC. Today, NBC and Amazon announce a new deal to distribute NBC content at $1.99 per episode.  Here’s one of a myriad stories on this latest development

NBC and Amazon announcement from thestreet.com

Update 9/10 Okay, okay, I’m like beating this dead horse now, but the story keeps going on, though not with the same force as a week ago.  NY Times article is quite interesting and deserving of your time…

NY Times article

Comments

The main problem was NBC wanted to get greedy and charge $5 for each episode. I guess corporate greed knows no boundaries and if Adobe thinks there their offering is going to allow companies like NBC to do that Adobe has its head in the clouds and not down here on Earth.

First all NBC isn’t exactly flushed with good programming.

Second, they get plenty of money from the commercials they do.

Third why on Earth should anyone spend $5 for an episode of any TV show that can be recorded, converted and put on your iPod or Apple TV unit for free. I wasn’t even willing to spend $1.99 per episode.

Lastly at $5.00, no that would have been $4.99 per episode (we must be accurate now) and with a season having 22 episodes that is a whopping $110.00 for a season that is delivered in something that is far below even standard definition quality. Given that a DVD set will run $50 (much less on sale) why on Earth would anyone with half a brain pay more than twice the price for half the quality? Again I ask does greed know no boundaries? How about stupidity.

The problem is all of these “media” companies thinking their junk is worth the price of gold and it isn’t even worth the price of a piece of bubble gum.

Robert

I quote from the Chronicle article: “They’d like more flexible pricing,”

Not true. What these entertainment moguls want is higher pricing for premium content. What NBC wanted in this case was $4.99 for top-rated TV shows that they also broadcast for free with ads. I’ve not heard of a single case where they’ve wanted to cut pricing. If they wanted to do that, they could always license their content to online stores that’d sell “I Love Lucy” reruns for pennies. That’d take that business away from the iTunes Store and end the issue. Remember, the market price is set by the one who sells the lowest. Apple would be pricing themselves out of the market for 50s and 60 sit-coms.

The entertainment industry is forgetting two unique aspects of this market.

1. Their more popular programs will make more money because they’ll sell more copies. That’s how their profits ought to come in an industry where the cost of additional production is zero.

2. They’ve yet to face the fact that their chief competition is bootleg copies distributed for free via the Internet. The price they set has to be less than what most viewers perceive to be the hassle and risks of getting TV shows other ways. And the more popular a show is, the more likely an underground distribution system will develop, the easier it is to steal, and the less willing viewers are willing to pay premium prices for legit copies. “Quality Sells More” ought to be their mantra and not “Quality Sells for More.” The latter simply doesn’t work when the competition’s price is free.

Apple has judged that $1.99 is about as high as you can go before stealing looks better than buying and they’re probably right. Steve Jobs is trying the save the industry from their folly and greed. Only time will see if he’s successful.

[DR – Thanks for your comments Mike. I think you’ve got some interesting points.

As I’ve already mentioned above, $4.99 or $5.00 is a figure that has been mentioned by Apple and not NBC. That being said, any company, especially public companies want to make as much money as possible. In fact, I’d go so far as to disagree with you and posit that the marketplace is set by customer demand. If NBC has terrific shows and people pay more, then NBC wins and customers are in theory satisfied with their purchase.

I agree with you in the idea that there is a balance between price and velocity of sales. If you sell X at $100.00, you may sell twice as much if you lower your price to $75.00, which gives you a net gain. Figuring out how to get that right balance is the key, and one which NBC wasn’t able to play with given it’s current contract with Apple. Again, I’m not an Apple hater here, in fact I’m typing on my MacBook Pro, but I also don’t see things with ‘Apple-colored glasses’ either…

Bootleg is competition: Agreed, hence the need for DRM. And, I think that NBC is very aware of the fact.]

NBC’s price increase meant that Apple would have to charge 5 dollars for each episode of a show.

5 dollars!

I mean, why buy single episodes for five dollars a pop—who knows how much the price for a whole season would’ve gone up—when you can wait for the DVD set to come out and get them for even less than the current price of 2 dollars?

Sure, a company is in business to make money, but whatever happened to the idea of being fair to the customer? Not only did NBC want to increase the prices but they wanted even more restrictive DRM. Don’t companies—Adobe included—realise that all DRM is ineffective? All you need to get around DRM is an empty weekend and a bored 16 year old. Meanwhile, the legitimate customer is stuck on the phone for hours trying to figure out why their copy of Photoshop won’t activate while the people who download it just press a button and don’t have to worry about activation at all.

There is no DRM scheme that will not be cracked eventually. NBC is basically saying to their customers: “we think you’re a bunch of dirty thieves and we’re going to put even more restrictions on you because of it and we’re also going to charge you more money for the privilege!”

It will be a sad day for American consumers if NBC is able to successfully move to another service, raise their prices, increase their DRM, and still have people buy their offerings at the same rate as they do now.

I don’t think any of the other companies are going to do anything until they see what happens with NBC. And with any luck NBC will fail miserably without iTunes.

[DR – Thanks for the comments and let me address some of your thoughts.

The $5.00 is I think the stopping point for almost everyone here. As you and other posters mention, $5.00 is rather high for most people. You’ve got to REALLY like a show to pay that much.

However, what’s missing is an understanding of the profit margins for each company. Apple in their press release states that they would have to sell each episode for $5.00, but they don’t talk about any numbers on either NBC or Apple’s side. It’s kind of a ‘he said, she said’ statement don’t you think? We do know that many companies have had problems with Apple’s model and their ability to make money on it.

So, I can’t agree with you that NBC is being unfair to its customers.

DRM is a large issue and one that I’m not an expert at nor am qualified to truly comment on. DRM is out there because some people are stealing from others. Just because someone doesn’t steal something physical (media like a CD), doesn’t mean that illegal downloading isn’t wrong. Yet, I understand when people are turned off by DRM because they feel it’s limiting a fair usage (at least in their minds).

You said, “NBC is basically saying to their customers: “we think you’re a bunch of dirty thieves and we’re going to put even more restrictions on you because of it and we’re also going to charge you more money for the privilege!”

I just don’t see where NBC said that. They haven’t announced what they’re doing, they didn’t say “$5.00.” That was Apple.

It’s an interesting news topic and one that will affect the creative industry regardless of the outcome.]

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