NBC Chief Says iTunes ‘Destroyed’ Music Pricing, Video Pricing is Next

Forgets that TV content is already being beamed into the homes of cable TV subscribers unlike music.

This past weekend Jeff Zucker, NBC Universal’s chief executive, warned that Apple’s iTunes was undermining the ability of "traditional" media companies to sell their content online at profitable rates, and he urged them to take a stand.

Zucker claimed that NBC only made about $15 million from Apple in 2006, despite being responsible for some 40% of the television downloads on iTunes. Zucker said that Apple sold tens of millions of dollars in hardware "off the backs of our content."

Without offering specifics he then blamed Apple for destroying the music business. “We know that 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,” Mr Zucker said at a breakfast hosted by Syracuse’s Newhouse School of Communications.

His much publicized argument over pricing with Apple centers around Jobs refusal to "experiment" with higher pricing for some TV content. As part of NBC’s push for more flexible online pricing, Mr Zucker said he urged Apple for months to price one program at $2.99 per download – as opposed to the current $1.99.

Zucker’s move to raise prices however, still makes little sense when one considers that the same content can be found for free quite easily online or simply TiVO’d or DVR’d to make full use of an existing cable TV subscription. Unlike music, desired content isn’t already being beamed into your home, so it would seem that getting people to shell out an extra $1.99 per episode fro content they already paying for is already incredulous in itself, so it’s hard to believe they wanted to raise that to $4.99.

Plus unlike end of the season DVD boxsets, digital episode purchases require no packaging mechanism or distribution.

A comment on Digg also points to the hypocrisy of Zucker’s efforts. He writes:

So, popping over to Amazon, the current average pricing for a new season box set is approximately $40-50.
Now, that is for an average season of saaaaay, 22 episodes. Conservative.

According to the article NBC demanded of apple: "a twofold increase in the wholesale price of its TV show content, which would have resulted in the retail price to iTunes customers increasing to $4.99 per episode from $1.99. "

So let’s do the math. For a net cost to NBC per episode of hmmmm, $0 per episode sold on Itunes. They were getting, let’s say, $1.50 with a really really big cut for apple. That nets them about $34 per season, not bad considering it costs them nothing in packaging, and people are quite likely to pay that $1.99 for an episode rather than worrying about taping it and so on and so forth. In fact, i’m betting people are more likely to buy those episodes than download them. Whereas they might be more likely to download them if their only option was a straight out $50 buy AFTER they’ve seen all the episodes.

They wanted to up that to $4.99. With a major cut to apple, they would make about $4.00 per episode. For a season of 22 eps, that makes…… $88. For a season box set complete with nice covers and a big box worth $40-50.
Yah, I’m calling BS on that one.

During his remarks, Mr Zucker also discussed how traditional media companies were struggling to develop economic models for emerging forms of digital distribution. "Nobody has figured out the economic model yet. And if we don’t figure it out soon, those dollars will turn to pennies" he said.

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