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July 30, 2014

NBC to Apple: We never wanted to sell episodes for $4.99

by Brad Linder, posted Sep 1st 2007 1:41PM
Bionic WomanThe spat between NBC and Apple continues. Yesterday NBC said it would terminate its contract with Apple when it expires in December, to which Apple replied that it would stop selling NBC Universal programming before the start of the fall season.

At issue is Apple's pricing scheme. But while Apple had said that NBC wanted to change the wholesale pricing of TV shows so that individual episodes could cost as much as $4.99, NBC disputes that figure.

Apple currently sells shows for a flat rate of $1.99 per episode. Since most American television shows run for 20 to 24 episodes per season, that means you can pick up a whole season for about $40 to $48, or about what you'd expect to pay for a DVD box set. So the pricing seems fair to us.

But NBC says it didn't want to raise prices. Rather, the network wanted to be able to offer special promotions that would bring the prices down, for example by bundling TV episodes with other special content like movies starring the same actors. Like The Office? Why not buy Evan Almighty and get a "free episode?"

Of course, this is sort of like the fact that my cable company keeps trying to get me to "save money" by signing up for additional services. Sure my price for each individual service, like cable, internet, and phone would be lower but somehow at the end of the month my cable bill would still be higher.

In other news, as things stand right now, all of NBC's existing shows on iTunes will be available through December. So you'll be able to continue downloading The Office, Battlestar Galactica, and Heroes until mid-season. New shows like Chuck and The Bionic Woman will not be offered at all.

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Eric H

Well if NBC really wanted to charge more for their episodes then why haven't we heard of a price hike on Xbox Live? The fact of the matter is they wanted to try something else, apple didn't like it so they moved on. Like what has been said it's Apple's store and NBC Universals content, they each have the right to do what they want. Plus they make much more on Xbox Live.

September 04 2007 at 9:21 AM Report abuse rate up rate down Reply
shaygb

NBC are idiots. They just can't figure out where the power lies in downloading television shows. It is the audience. For the most part the audience watches the shows for free or for a negligible cost. Radio works the same way hence the advertising. Just as a cigarette is a nictotine delivery device, the television episode is an advertisement delivery device. All, NBC needs to do is embed advertisements into their show and then sell the rights to the adverts. It wouldn't matter how the episode was disseminated as every viewer will be watching the ad anyway. If they could measure how many times an episode was actually viewed then they could charge the advertisements accordingly. It's not rocket science. I am certain that some bright spark has figured out how to do such things.

If NBC actually understood what they were delivering they could make so much more money. There are marketing people who analyse this stuff for a living and all of the demographic information is readily available. NBC just doesn't seem to understand how providing free content can be used to their advantage. Think Black Donellys and Studio 60 as specific examples. They were shows that tended to have a older, more educated, wealthier audience. Prime targets for financial management companies, luxury car companies, etc. But NBC shafted both of them because they couldn't see the forest for the trees.

Everyone understands how big a drawcard the superbowl is and how much advertisers will pay for a big audience. But it is a one-off. Great televisions shows are like great books - people watch the same episode again and again and again. There is a whole world out there that can be exploited with that in mind.

There is so much more you can do with a show a median audience that is 42 with an income of $80,000 than a show which has the median audience is aged 16 and has an income of $300. The show for 16 year olds, has fast food, clothes and phone advertisements. The worth of advertisement has been superceded in a month perhaps less. In ten years time those 16 yo's are now 26 and will be trying to figure out why they spent so much money on a phone that matched a pair of shoes and why they weigh 30 kilograms more than they should. A show for 42 year olds, in ten years time can still work magic especially for luxury cars when those 42 year olds and now 52 and have spent the last decade drooling over the latest high performance motorcycles.

Trees come and go - forests are forever.

September 03 2007 at 2:32 AM Report abuse rate up rate down Reply
sujal

I tried to run down the total revenue for an episode of a TV show. It sure seems like iTunes is priced either fairly or too high based on my math:

http://www.fatmixx.com/2007/09/02/how-much-advertising-money-does-one-tv-episode-bring-in/

Sujal

September 02 2007 at 1:51 AM Report abuse rate up rate down Reply
Navie Poo

Pretyy short sighted of NBC. They are giving up 100% of iPod owners as potential customers. Apple doesn't license FairPlay, so NBC will have to distribute it DRM free (yeah right!) or go with WMV or Real. (Neither of which play on iPods / iPhones)

Maybe there's some corporate shenannigans with MS paying NBC to get content exclusive to the Zune.

September 02 2007 at 12:37 AM Report abuse rate up rate down Reply
Nahid

I think $1.99 is too much for a TV episode. At that price I'll just record it myself or go buy/netflix the DVDs. As someone said above the Friday Night Lights DVD costs $20. That's a reasonable price since you get the full season at better quality than iTunes, and you can play it on your TV without having to buy an Apple TV. You also get special features and physical media and packaging unlike with iTunes. The only way I'd buy off of iTunes is if they were cheaper than the DVD since there's no way it costs less to make the DVDs than distribute the shows on iTunes.

September 01 2007 at 9:21 PM Report abuse rate up rate down Reply
malren

NBC content is 40% of Apple's video sales. given that NBC has the properties and all Apple is is a distributor of one small niche format, it looks to me like NBC doesn't *need* Apple, Apple needs NBC. Guess we're all about to find out come the winter.

September 01 2007 at 9:17 PM Report abuse rate up rate down Reply
Big John

XVID

Learn It.
Live It.
Love It.

September 01 2007 at 8:44 PM Report abuse rate up rate down Reply
1iPete

I think the major problem here is that the Itunes business model really only benefits Apple in selling more Ipods while the content providers get very little in return.

It's very likely that NBCU's only benefit is to grow a fanbase for their programs. The problem is whatever growth they get from Itunes offering does little to enhance their actual live audience which drive their advertising rates. Like it or not, ad revenue is what sustains prime time television and actual live viewers are declining each year as people have more options in viewing their favorite shows.

NBCU has to be wary of the download piracy/pricepoint issue as they look no further to the negative impact Itunes' success has had on the music industry. Apple is currently viewing their next big growth potential in video and you know that the TV and movie industry companies have to have serious concerns on what impact a succesful Itunes-like store for video would have on the way their industry currently works and derives it's profits from.


September 01 2007 at 8:07 PM Report abuse rate up rate down Reply
Jon

One other small inaccuracy in the article - you won't be able to download Battlestar Galactica until mid-season, because Season 4 won't be starting until sometime in January. (You might have heard the anguished screaming of all the fans at the end of the Season 3 cliffhanger, when the words "BATTLESTAR GALACTICA will continue in 2008" appeared on the screen...)

September 01 2007 at 6:08 PM Report abuse rate up rate down Reply
fog city dave

Brad, I can't believe that you actually think this whole thing fell apart because NBC wanted to charge less for shows! Please...

And you were very selective with the small portion of NBC's response that you chose to focus on. Why didn't you include this little gem from NBC spokesman Cory Shields: "NBC Universal was determined to change what it saw as Apple’s underpricing of video. Apple’s retail pricing strategy is designed to drive sales of Apple devices at the expense of those who create the content that make these devices worth buying.”

That sure doesn't sound like NBC wanted lower prices to me!

September 01 2007 at 5:42 PM Report abuse rate up rate down Reply

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