Apple yields to NBC Universal on price, packaging

Steve Jobs announces that NBC Universal is returning to iTunes.

(Credit: Jared Kohler/CNET )

To get TV shows from NBC Universal back on iTunes, Apple yielded to some demands on pricing and packaging made by the media conglomerate, NBC executives said Tuesday.

Apple CEO Steve Jobs announced at the company's "Let's Rock" press event on Tuesday that NBC shows such as 30 Rock and The Office would return to iTunes a year after the entertainment company pulled out of iTunes.

Examples of how NBC can set its own prices on some shows came after the event. NBC announced that it would offer some catalog titles for 99 cents rather than the traditional $1.99 that Apple charges for TV downloads.

JB Perrette, NBC's president of digital distribution, said in addition the company will be allowed to set its own prices on special packages. For example, NBC could elect to offer a best-of Heroes compilation at a price that might offer consumers a better value than buying individual shows for $1.99.

What this means for consumers, however, is that Apple is slowly losing control over pricing of video content at iTunes.

Earlier this year, Apple allowed the studios to set multiple prices for movie downloads. Having a greater say over what to charge for content on iTunes has been a thorny issue with content companies. The question raised by NBC Universal's apparent victory is how long before the music labels demand the same concessions?

Apple stuck to its guns for a long time, say sources close to the negotiations. NBC, which claimed to have once accounted for 35 percent of TV-show downloads on iTunes, announced in August 2007 that it was pulling out of iTunes. The company said then that it was unhappy Apple wouldn't allow it to charge what it wanted for TV shows. Since then, the companies have held talks, but it took a year to get a deal done.

"To their credit, what (Apple) has realized is that having the best content and the widest breadth of content is more important than being too rigid," Perrette said.

A source close to the negotiations said that under the old terms, Apple wouldn't allow NBC to charge less for shows. This meant that selling catalog titles for 99 cents couldn't have happened.

Apple representatives could not be reached for comment.

Click here for full coverage of Apple's "Let's Rock" event.

[ewsachse]

Ha Ha!

All those Apple fanbois predicting the end of NBC Universal are now eating crow.

[myles taylor]

I am what some people would consider an Apple fanboy, although I like to think that I can be objective. I never claimed the end of NBC, but you can bet they lost millions of dollars in sales and that they made a few concessions too.

[sciontcya]

I think not.
Who left?
Who's eating crow?
As you Obama supporters might say, they "re-calibrated"
LOL
It's business you fool - and NBC lost on Amazon downloads.

[paulej]

"(Apple) has realized is that having the best content and the widest breadth of content is more important than being too rigid"?!?! Who is being rigid here? Sounds to me like both sides were a bit "rigid". That's funny. It sounds like two kids saying "he did it!"

[Lerianis]

I have to agree. The fact is that BOTH SIDES were being arrogant and pig-headed, thinking that 'they knew best'.

[gsekse]

Until the day that the only way NBC can get it's content to the consumer is through Apple only, there will be no control by Apple. The creator of a item has more control if it has multiple ways to get the item to the consumer (who has the most control of all, to buy or not to buy). Since NBC has other ways to sell it's content, iTunes was not that big of a deal. Did they want the iTunes income stream, by this latest deal, the answer is yes. Did they want it at their terms, the lack of a deal for the last year also says yes. Let the market argue it out and it will come up with something, sooner or later. Any company that thinks it is top dog, in control forever is doomed to fall. Not Apple, not Microsoft, not even NBC.

Who really cares? The last time NBC had something on that was worth watching was Studio 60 or the West Wing, but they dropped those in favor of the garbage they have on now.

I say let NBC go and have their own crappy site in Hulu.

[ncalishome]

The millions that watch Heroes, 30 Rock, even Chuck might care. What's crappy about Hulu now?

http://www.hulu.com/companies/2

Granted there are some lemons, which network would someone with perfect taste such as yourself recommend that craps nothing but gold?

[The_Decider]

Millions listen to Fergie or 50 cent, what is your point?

[jypeterson]

What we aren't hearing is from Apple. What about NBC conceding on HD content? What else did they give up on that isn't being reported? The perceived deal to the other side of the negotiation table is what is most valuable. If you can get the other side to think that they are getting a great deal, then that should be your goal. I bet NBC had to make some concessions as well for Apple. From what it seems, Apple could have cared less if NBC was on iTunes since NBC has been gone for a year.

Either way, I would have loved to have been a fly on the wall in the negotiations. It would have been a great learning experience and I am sure will make its way into some business school case study in the future.

[themrwhite]

Uhhh, why would iPod users/iPhone/iPod Touch or as one person said Apple Fanbois would be eating crow? I see it the other way around, NBC failed with Zulu and probably missed the extra 5 to 10 million in revenue.

If you use a PC doesn't that make you a Windows anal loving butt monkey fanboi? Get over the fanboi crap already and grow up.

[MadLyb]

Uhhh...it's Hulu and it is actually pretty darn successful

[travelscott]

I believe the whole tone of this article is incorrect.

NBC made two key demands which have not been met at this time:

1. The right to charge HIGHER prices for the most popular shows, or force consumers to buy a bundle to get the most popular shows, effectively forcing users to buy content they did not necessarily want. This has not happened.

2. NBC wanted iTunes to help identify and block 'unauthorized' electronic copies of NBC shows and take other methods to battle NBC content that is traded online - Apple has apparently not done this either

Since Apple is charging more for HD content, and will offer it from many sources (not just NBC), not sure that this is a capitulation to NBC's demand for higher prices.

And with regards to lower prices for older shows, it's great for everyone, but again not sure it really helps NBC since what they wanted to do was to raise the average price of shows by charging 'what the market would bear' for the most popular content.

Overall, I think Apple carried the day. NBC has tried many avenues in the past year to setup viable alternatives for either paid content or ad-driven content distribution (aside from iTunes) and nothing really caught on.

[whoperson]

Indeed, that's what I remember too: NBC wanted to charge MORE than $1.99/episode for some shows in SD (not less), and Apple said no. So that's some crazy spin on this article. It seems like part of the deal is making the egos at NBC feel good?

[Seaspray0]

It seems there may have been compromise on both sides. That happens alot, you know.

[hhh1969]

travelscott, you nailed it. In your twelve lines of text there is less bias and more intelligence to be found than in Greg Sandoval's entire, apparently NBC commissioned, piece. What could Sandoval have been thinking, running this "story" without neither any reply from the Apple side nor any insight at all into, or knowledge of, the very public way in which the negotiations broke down and NBC left in the first place.

[toosday]

NBC wanted to charge higher for television shows, true. But how do you know they aren't?

Several other digital stores are selling NBC shows for $1.99 and less to customers also, but are giving NBC Universal a larger share of the price for newer shows than they are for catalog shows. (i.e. For an episode of "Heroes", NBC may get 60 cents, whereas for older shows like "Cheers", they may only get 45 cents.)

There's a good chance that Apple may have conceded to that structure, also. After all, NBC doesn't care if the end user pays more or less, as long as they can control the amount of money going into the company's pocket.

Your assumption that "Apple carried the day" may be inaccurate. Apple is the largest distribution model, but NBC Universal is the largest content holder - and the dealmakers know that. Both corporations had to compromise, but due to legal reasons, you may never know what they are.

Disclosure: I work for a subsidiary of NBC Universal. I do not negotiate licensing deals at all, but I'm very very close to them.

[open-mind]

At least for music sales, Apple has publicly stated that most of the sale goes to the content owner, not to Apple. Apple gets a small percentage, just enough to break even or make a little profit.

Not sure if that still holds true or applies to video sales.

[Edwin-]

Apple freakin' rules. Jobs' ego wouldn't let Apple cave to NBC's demands and that's why they have been absent from the iTunes store for so long. It obviously hasn't hurt Apple's bottom line. NBC came crawling back with their tails between their legs begging to be let back into the clubhouse.

[ncalishome]

"Apple yielded to some demands on pricing and packaging made by the media conglomerate" huh, interesting take you have

[ncalishome]

Title: "Apple yields to NBC Universal on price, packaging"
First line: "To get TV shows from NBC Universal back on iTunes, Apple yielded to some demands on pricing and packaging made by the media conglomerate, NBC executives said Tuesday."

Are you lost or attempting sarcasm?

[MadLyb]

First, realize that I don't own an iPod or iPhone. Just don't like them.

What I do like is that Jobs and team have literally forced the Media industry to rethink how to do digital distribution instead of pushing the same old byzantine offline model onto the Internet. They pretty much single handedly changed the landscape.

So, I consider this a mixed blessing. Apple needed some more flexibility in their pricing model, but it needs to be simple and transparent. I don't see a failure like I did with the new iPhone where they basically caved to AT&T to go back to old model of business which I hate. My concern, just as the author's is will other media companies see this as a crack in the armor and start pushing Apple for more concessions?

[MrStuckless]

ONCE AGAIN CANADA IS LEFT OUT IN THE COLD!!!!! Man I hate Apple's lack of interest in us north of the border. We finally have movies and Tv content... just nothing worth watching. I can (barely) swallow the live streaming restrictions as supposedly advertising dollars for US companies are wasted outside the country... however, for iTunes... the broadcast companies are getting paid directly and as it is a purchased product, there shouldn't be any restrictions on what content we want to purchase north of the border. I can watch the shows on TV and thanks for PVR... but sometimes, it would be nice to have choice.

[lauchlinmac]

I'd like to know how people think that hulu.com is a failure. Have any of you actually been to the site? I've been watching movies and tv shows on demand for months now all on my HDTV, all from my computer, ALL FOR FREE. The only thing I can see is that they aren't getting alot of people there, but all it would take is a big advertising blitz on their shows to get people there.

[solblack]

Why do people pay for TV shows? You can't own it! Tivo it! To many suckers makes it bad for the whole!
1.99. Sony doing the same thing with PS3. 9 bucks for an old movie 14 to 19 for a new. Pleasse. This is why people pirate. Hero is alright just not for 1.99. NBC they are a joke.

[synstelien]

Did a hedgie tell you to write this?

You need to do your homework. NBC wanted complete price variance. The ability to set variable prices to whatever they wanted. They did not get that.

I don't think it's fair to call a 2.99 "new product" the same thing as Apple caving to NBC demands. All the HD movies in the store also carry a premium price to SD movies.

Apple "gave" them access to a 2.99 tier that is limited to HD videos only and that is available to all studios. That is the only thing added. The 1.99 and .99 cent price were available last year at this time. If you compare apples to apples (sorry) the prices on all the SD shows that were removed are the exact same.

[kxmmxk]

As someone else said, NBC doesn't have much anyways.

Howeer, I'd be more interested in details. Right now NBC is pushing that they will sell for cheaper, but media companies aren't known for that. I bet they can also sell for more, and will. The music companies wanted to be able to sell for more the 99 cents the current hits, and Apple said no. Media companies don't usually want to make less money, they are greedy. These are the same people that have killed TV by loading way to many ads into an hour show so it's down to under 40 minutes now (trailers and credits included). The know how to bleed dry the golden goose.

I also wonder what Apple's cut is. I bet they are still getting the same amount or it wouldn't be worth their while. So this move will hook people, then NBC will start raising prices once they have another hit (someday).

[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. The add revenue NBC can command this year is reported down over 1 BILLION dollars! Ouch!

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 newly added offerings of HD and older shows - a simple given) 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??? Apple has a lot of 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?

[mattskisfast]

HELLO!!!!!!! the reason NBC left itunes was because Apple wouldnt let them charge $4 an episode, not 99 cents an episode. Apple didnt bow to NBC, NBC bowed to Apple.

[S R]

Suck it up Greg,

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