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September 11, 2007

Did Amazon "Beat" Apple in the Tiff Over NBC Shows?

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Posted by Alan Wexelblat

Meh, maybe. This story is far from over, but I liked the Motley Fool's writeup by Rick Aristotle Munarriz.

Let's step back a moment for context. As usual, there's a good coverage piece on ars technica, this time by Jacqui Cheng. Anyone who has followed iTunes for a while knows that they've been pretty firm in sticking to a uniform, fixed, and relatively low price-point for downloaded material. This has irked various parts of the Cartel, which would like to get more money for popular content. Considering the prices people pay for ringtones and pay-per-view movies it probably seems pretty logical to them that people would pay more for iTunes-sold content.

For much of last month, NBC and Apple bickered semi-publicly over issues of pricing and incidentally whether Apple would be willing to deploy more DRM. NBC threatened to take its marbles and go home when its contract expired in December. Then Apple decided to call NBC's bluff and said "take a hike, now." No NBC shows on iTunes for the fall line-up.

Oops. Probably what was supposed to happen was that NBC would continue to get revenue and connect with show fans through iTunes until its own ad-supported digital download service (currently called Hulu) launched next year. Not wanting to be stranded, NBC struck a quick deal with Amazon, which is currently offering individual shows at $1.99 and "bundles" at $34.99.

So did Amazon win by scooping up iTunes' cast-offs? Probably not. For one thing, Amazon is now competing against itself again because these downloads and bundles cost more than the comparable DVDs Amazon sells. Sales of one are going to hurt the other. For another thing, Hulu is still coming, which means Amazon is either going to be stranded with orphan content or is going to have to compete with an apparently free service that has the marketing might of NBC behind it.

Munarriz also points out that one of the unsung big winners here could be TiVo, which has a deal with Amazon to download purchases and rentals directly. TiVo owners can now order NBC shows with their remote controls, without having to engage the PC. Is this enough of a benefit in user experience to make a difference? I doubt it, but it may serve as a model for future deals that will drive more content into this platform. It's all about marketing, right? And this is a good marketing point for TiVo in appealing to people (like me) who are still considering a DVR purchase.

As I said, the story is probably not over. Both NBC and Apple are going to lose money this way and neither is likely to sit still for that. If NBC stays off iTunes and makes its own service work then that could embolden other Cartel members who'd like to break free of the iTunes lockdown to try going out on their own. TiVo or another aggregator could also win big as there's virtually no downside to NBC or whoever doing deals that let people download to a DVR rather than a PC, so long as they get the pricing and DRM structures they want.

Comments (5) + TrackBacks (0) | Category: IP Markets and Monopolies


1. SonyaLynn on September 11, 2007 2:41 PM writes...

Actually, in a development I found yesterday, NBC's offering Amazon Unbox users some of their fall premiere/pilot episodes for free. I was able to snap up both "Chuck"'s and "Bionic Woman"'s debuts.

So they're very much trying to prime the pump, so to speak, and get people used to the idea of using Unbox to get NBC programming.

I haven't had a chance to watch them yet and see if there are embedded ads, though.

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2. Ronald San Pedro on September 11, 2007 10:19 PM writes...

I'm very impressed with your analysis of the NBC/Apple tiff but you do ignore something most tech "analysts" and pundits do. You fail to mention that NBC just abandoned a distribution channel to roughly 70% of the portable video player market. (That number is probably lower, since not the entire user base of iPod owners have video-capable iPods. I'm just taking an educated guess since I don't claim to be a tech "analyst". I'm just someone with a little bit of common sense who likes to see the whole picture.) It's almost like NBC is abandoning VHS (just go with the analogy and take a trip back to the 80's with me) and going to Beta.

I do give you credit for pointing out the TiVo angle but its impact will most likely be minor. There are a few constants you can count on American consumers having. They like their convenience, their value and their "coolness" factor. We are a nation of "keeping up with the Joneses", so unless the sales and market share of iPods themselves take a nosedive, iTunes will continue to exert market power and old-school media companies will have to learn how to deal with it.

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3. Rich on September 12, 2007 1:41 AM writes...

Yes, I haven't had a chance to watch them yet and see if there are embedded ads, though.

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4. drwex on September 12, 2007 8:09 AM writes...

Thanks for the tip Sonya - do let us know what you find out when you watch the downloads. I'd also be intereted in what DRM is wrappered on these free offerings.

Ronald: you make a good point, but one that's hard to quantify. How many people will watch full-length television show episodes on those portables? Do most folk use them for short-form content like music vis and YouTube segments? Leaving aside niche situations like when you're trapped on an airplane I can't see these being attractive things to stare at for any length of time.

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5. Neil Anderson on September 23, 2007 10:21 AM writes...

Wouldn't be too surprised if NBC comes to the Apple table with an eleventh hour agreement. There's a lot of money NBC is flushing down the toilet otherwise. Not to say their programming stinks or anything.

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