Today Apple announced NBC would not be renewing its contract to sell television shows on iTunes. The announcement comes a few weeks after sister company Universal Music Group (both companies are owned by General Electric) also refused to renew its contract with iTunes.
NBC, according to today’s New York Times, wanted higher prices for its shows as well as more piracy control and bundling options. Apple has responded saying NBC wanted to raise wholesale prices causing retail prices to increase to $4.99 per episode from the current $1.99. NBC provided iTunes with approximately 30 percent of its TV show sales.
Universal Music Group, the world’s largest music company, will continue to sell its music on iTunes without a contract. Universal also wanted more control over pricing and rumors speculate they even wanted a cut of each iPod sold, a deal Universal has with Microsoft’s less successful Zune.
With these two market leaders posturing against iTunes, Apple has big PR fires to deal with (which is likely why Apple released NBC’s price demands to the press this afternoon). Apple also risks some lost revenue as NBC pulls all its content. And worst case scenario, other media companies might start envisioning a world apart from iTunes.
Of course, as Techdirt points out, music and media companies only have themselves to blame for iTunes’ power position in the digital media realm. By pushing DRM specific to iTunes, only iPods can play music sold on iTunes. And DRM run by another company, like Microsoft, will not play on iPods. So the 80 percent market share iPods control force music buyers to buy from iTunes. The only solution media companies have would be to sell DRM-free MP3s, which can be played on all digital music players.
Universal Music Group will be trying this strategy on Amazon’s new download service, but the impact is questionable. Unlike television shows, most music listeners don’t know which company publishes their favorite artists. Unless Amazon can provide the same or better selection than iTunes with 100 percent DRM-free songs, iTunes will reign supreme, even with its lost revenue.
And, of course, as the case with any DRM/price/service/selection war, the consumer looses. Now fans of U2, Heroes, and Battlestar Galactica are likely going to have to surf various sites for downloadable music and movies, most of which might not be compatible with hardware and software they’re used to. Or they can just pirate it, just giving media companies more justification for DRM and taking away from iTunes’ revenue. That sounds a little extreme (though I would argue it’s impossible to give media companies more reason for DRM since they already make up most of their justification already
So Apple looses face and sales; NBC Universal looses sales and fans; and consumers loose convenience and well, they’ve already been loosing in this DRM-crazed archaic media business world. I would love to see peace be made, DRM removed, and new business models explored, but that’s unlikely. I would expect more announcements of non-exclusive iTunes contracts in the coming months. iPods will still sell amazingly this holiday season, so I guess Apple’s the winningest looser of them all.
UPDATE – September 1st – NBC has responded to Apple’s claim that NBC wanted higher prices on TV shows. NBC says they only wanted to offer bundles at bargain prices or free episodes with movie purchases.