NBC cancels iTunes contract

Ouch. Another in a long line of disagreements with Apple about the pricing of content on iTunes, another somewhat unexpected blow to the internet's largest digital media etailer. NBC Universal, iTunes's number one seller, apparently backed out of renewing its contract with Apple after failing to get Cupertino to come around to its point of view on pricing, bundling content together, and -- get this -- more restrictive DRM. We weren't present for the discussions, but here's how we expect it went:

NBC: Ok. So. We'd like to re-negotiate our contract -- top priority is, well, basically we want more money.
Apple: No.
NBC: No what? No re-negotiation? Or no more money?
Apple: No.
NBC: Why don't you guys just charge more money for our shows? That's fine by us.
Apple: Are you new around here?

We don't yet know if NBC has in place the same kind of at-will sales agreement that Universal has, but apparently sales will continue through December. Then we guess everyone jumps ship for NewCo, er, what's it called now? Hulu? Whatever.

[Thanks, LordFarkward]

[BREATHEinBREATHEout @ Aug 31st 2007 3:41AM]

Steve Yobs, you can start crying now.

[Hawkman @ Aug 31st 2007 9:27AM]

Who's he?

[smurf22 @ Aug 31st 2007 3:43AM]

Watch them come back in a month after no one buys their shows. People use itunes because of ease of use, enough people have trouble getting music on and off their ipod much less go to other websites.

[That One Guy @ Aug 31st 2007 4:31AM]

I agree.. I think Universal and NBC will realize their mistakes when they see profits plunder over the next 6 months. Perhaps they think this whole "internet" thing is a fad...

[b1663r @ Aug 31st 2007 7:02AM]

Given engadgets biases... I wonder why they didn't post the other half of this story... That is this content is now available on the xbox, only you can buy a whole season at a discount, and they are offering it in HD formats.

Then they could have put some sort of Apple is a charity worthy of your donations and Micro$oft likes to eat puppies spin on it. Seems like engadget missed an opportunity here.

[Joe @ Aug 31st 2007 7:15AM]

Sorry, ain't buying shows from ANYONE until I get HD at $2 per rental.

[Cleverboy @ Aug 31st 2007 8:38AM]

@b1663r

So, what you're saying is that you've never seen "whole seasons" on iTunes at a discounted price? I see (looking over my season purchases of Battlestar Galactica and Lost). BTW, iTunes also offers season passes, which are pre-paid season purchases as the season occurs. Take a look sometime. Regarding HD, let's be serious. iTunes has no huge need of HD at this point, and it no doubt trying to negotiate consumer friendly pricing on it without changing their DRM model.

If you don't think that's the case, then we'll just disagree, but I'll offer that most everyone else sees this. Right now that "season" you buy, is more restricted on Xbox than the season I buy on iTunes, HD or not. Personally I like "any number of iPod devices and up to 5 personal computers". iPod devices include AppleTVs, iPhones, and iPods. Good stuff there.

[b1663r @ Aug 31st 2007 7:34AM]

Joe,

Well then you better hurry up and buy an xbox then, becuase there are free episodes right now!

[James @ Aug 31st 2007 3:46AM]

Cool, Universal just gave everybody permission to torrent their shows. Great choice guys!

[404error @ Aug 31st 2007 3:47AM]

Well that's a shame. Greedy greedy greedy

[G @ Aug 31st 2007 4:00AM]

Universal corporate strikes again.

Hint to media companies: I don't want to know who makes what and venture to your many proprietary outlets just to buy it. Don't do that.

[FatMax @ Aug 31st 2007 4:16AM]

So, this is the end of the iTunes era ? Even before any shows get put out here in Europe ? Not to mention that Norway really is forgotten i all the iTunes hype-asteria....

[MuteflY @ Aug 31st 2007 4:27AM]

And in unrelated news, the first episode of Heroes is available for free on Xbox Live Video Marketplace.

http://www.xbox360fanboy.com/2007/08/30/free-heroes-hd-episode-available-on-the-xblm/

[Ang @ Aug 31st 2007 4:41AM]

Very interesting, looks like maybe Micro$oft gave them an offer they couldn't refuse as well, Think Paramount?

Just a thought.

[Law82 @ Aug 31st 2007 10:35AM]

Ang,

I see what you did there. Replacing the s in Microsoft with a $. That's hilarious! Did you come up with that yourself? Replacing the s with the $ to indicate that a company that makes billions of dollars likes making billions of dollars is comedy gold. I bet you could even take the abbreviation, MS, and write it as M$ and it would be just as funny.

You, sir, are truly a pioneer of internet humor!

[Matteo @ Aug 31st 2007 4:34AM]

Universal leaves iTunes, others might follow...

Ecosystem is going to break up in many tiny little peaces, unable to communicate with eachothers because of wonderfully tight and restrictive DRM. Consumers will get frustrated.

Back to square one: PIRACY EXPLODES AGAIN.

Thanks Universal. Thanks a lot for being so wonderfully greedy. How on earth could DRM in iTunes get "more restricive"? iTunes has, in my humble opinion the BEST DRM SYSTEM out there (partly because no one else is besides Apple can use it).
If they want to weaken iTunes to make them accept the "price raise" they want, I think it would have been best to take some content out, not all of it. But that would have been a rational move.

What might Apple do to counter that? Easy...

Build IPTV capabilities in iTunes and AppleTV, allor show recording... Maybe even on demand (à la Elgato) when people are not even in front of their TVs. And then wipe out commercials.
Maybe Universal will come back then, as they will loose millions because people:
a) don't buy content but get it legally for free on IPTV
b) don't watch commercial making the selling of such spaces very hard and plummeting prices

That is how I see it...

[JT @ Aug 31st 2007 4:35AM]

If majors leave, nothing will prevent apple from implementing xvid support in their players anymore.

[Adam @ Aug 31st 2007 4:59AM]

Here at Sofa King, we like to negotiate a better price with you...SOFA KING STUPID!!!

[Matthew.T.Noel @ Aug 31st 2007 5:05AM]

WTF do they not want my money? I get many shows off iTunes when i could just watch them on tv for FREE...these people are idiots.

[404error @ Aug 31st 2007 5:22AM]

Oh they want your money alright. They just want MORE of your money and Apple won't let them.

[Matthew.T.Noel @ Aug 31st 2007 5:24AM]

yeah true...i am not paying more than 1.99!

[Anders Serigstad @ Aug 31st 2007 5:26AM]

This is the 2 company in a year. First Universal and now NBC. Finally I can go to BitTorrent and download. And here in Norway we don't have the possibility to buy movies from iTunes. I have bought the 2 first Seasons of Las Vegas, but now I can finally download them again. I do not support companies who don't support iTunes.

[John @ Aug 31st 2007 11:05AM]

You, sir, are the reason that people who talk about "apply fanboyism" are so, so right about it.

[John @ Aug 31st 2007 11:06AM]

*Apple, not apply, it was a very short night >.

[Anders Serigstad @ Aug 31st 2007 5:37PM]

I did forget to tell you that here in crappy Norway we cant buy movies like you can in the US on iTunes. We do not have any store like that not from Microsoft and not from Apple. And when NbC cancel a deal like this I just download instead of buying. And no I do not buy my music on iTunes.

[freakmarket @ Aug 31st 2007 5:41AM]

I record my TV on my computer with my TV tuner card ... i can convert it to any format if i want to take it to go.

I won't pay more than $2 for a TV episode.

[riffola @ Aug 31st 2007 6:13AM]

They are not two different companies. NBC Universal is one single company. NBC bought Universal, and is now known as NBC Universal which is a GE company.

[John K @ Aug 31st 2007 7:04AM]

Not renewing a contract is quite a bit different than "canceling" a contract. Nice reporting, though.

[brad77 @ Aug 31st 2007 12:09PM]

How so, when at the end of the day you'll have to go elsewhere for NBC content?

[Jonathan Allen @ Aug 31st 2007 7:18AM]

I have an idea for a new business model:

Find the number one distributor of digital content, then don't sign renew a contract with them.



In the retail world, a Wal-Mart contract is gold. Your stuff will sell if walmart carries it. In the digital world, iTunes is the way to go. iTunes is so iconic at this point that people use it like the word Kleenex. It doesn't matter what brand you use, it's always Kleenex. That's a great place to be for Apple.

I am one of those that really tried to be good about getting content legitimately. For example, I bought Heroes on iTunes last season because I really like the show. I have purchased other shows on iTunes as well. I am working on a doctorate right now, so I am fairly busy and can't always watch the shows when the air. Meaning - digital content for me. If they pull out of iTunes, I will pull out of paying for it.

[dfsdfsfsf @ Aug 31st 2007 7:33AM]

What a tragedy. NBC does not realize their foolishness. I'm sure Steve Job will somehow take care of this problem. After all he did invent the Iphone and we all know that Iphone>all others

[fredmant @ Aug 31st 2007 7:52AM]

Who watches Tv on an iPod??? Yuck

[Michael @ Aug 31st 2007 7:58AM]

I hate to break the news to all the smart people on here that get "free tv" and do not want to an extra $2. Your TV is not free unless you are stealing cable from your neighbor or watching TV (without DVR) at your local pub. Cable TV ain't free. Unless you watch TV (new content) everyday, you could save money by dumping your cable and buying what you want. News on TV is not worth watching - it's better to read the news paper or subscribe to online content - it's more up to date.

No one likes a monopoly. Whether Apple chooses to be a monopoly or not, they have monopoly power when it comes to online music and TV content. NBC however offers many of the current TV shows for free on their website. The market will dictate that content should be available from any source and not be confined to specific devices.

I doubt that NBC wanted to increase prices and to increase their share. I suspect tat NBC wants to be able to have flexible pricing. Apple's current pricing strategy does not allow NBC to more of their older, less popular content.

[Patrick @ Aug 31st 2007 8:10AM]

Two acronyms:
OTA HDTV

[yoshi @ Aug 31st 2007 8:07AM]

Are you really that stupid? Yes, I think you are.

Apple offering NBC content does not prevent NBC from offering that same content in any other medium NBC sees fit. Even free. As far as the pricing issues, good god, go read some very recent history before you comment.

[Bizo @ Aug 31st 2007 12:28PM]

Michael- I have a antenna I don't pay to watch tv. Stop assuming everyone uses cable or satellite.

[Michael @ Sep 1st 2007 9:24PM]

You are correct that TV is free over the air (plus commercials). Many people however do use cable... my comment was mostly for them. If you are recording TV and then converting it, your time must not be worth much. There is nothing wrong with this approach. A similar concept applies to people that cut coupons - they have the time to devote to this activity and they are rewarded with the same item that I purchase for a reduced price.

[dcny @ Aug 31st 2007 8:41AM]

looks like Vivendi is trying to flex the mussels on both the music and tv show sides of itunes

[Luke @ Sep 5th 2007 10:09AM]

Vivendi owns a majority stake of Universal Music Group.

Vivendi owns 20% of NBC/Universal. GE owns the other 80%.

Vivendi doesn't have any muscle to flex in what NBC does. GE does.

[warrenpeace™ @ Aug 31st 2007 8:48AM]

I'm tired of hearing about Apple's monopoly. We choose to use the software and the service. There are lots of other services and other media players, but so many people use iPod/iTunes because it's a great product. If I don't want to buy from the iTunes store, I can rip cd's or get music online or share files or cd's with friends. No one is limiting me.

And since iTunes can handle different media formats, NBC Universal is going to have a lot of people downloading their stuff off Torrents.

I bet there's specific management behind this, who think dropping iTunes is a brilliant idea. I predict they're all ousted within a year when shareholders see profits dropping.

[Chicksta @ Aug 31st 2007 8:50AM]

So Microsoft is now resorting to bribing media companies it seems. I'm sure the allure of crack economics will work on most, sad as it is (make stuff 'free' or cheap until they are the market leader, then keep raising the prices). Stuff suddenly appearing on XBL sounds like a really bad thing to me (and I have an XBL account, so it's not an anti-XB issue). Methinks some reporter would have quite a story if they could uncover what sort of negotiations Microsoft had w/Universal...

[Magallanes @ Aug 31st 2007 9:05AM]

Itunes can sell well music but you cannot extrapolate saying "also sell well videos and another kind of material", specially since NBC is selling HD material, and HD is currently the achieles heel of Ipod.

[CF @ Aug 31st 2007 9:36AM]

The people who are *really* driving this are the advertisers or should I say the advertisers that pull the string of the big old fashioned TV networks are driving this.

They do 'sort of' understand new digital media and what they see is millions of folks buying content via iTunes which is then sent direct to the Apple TV device.

NO ADVERTS. NO PUSH PROGRAMMING CONTROL.

If Apple TV incorporated a 'free to watch first' Ad-feed version then Universal and NBC would be back in line with their tongues hanging out and their tails wagging.

[nodnetni @ Aug 31st 2007 9:43AM]

Going to XBLM is not the alternative, at $(200 * $20.00+tax/1600) that is more then the 1.99 I am willing to pay, and that isn't even a portable medium.

I for one would like to thank apple for always sticking to it's pricing. Apple has figured out the break point in pricing, when will the entertainment providers figures this out.

Last time I look NBC wasn't doing the best in the rankings. I would say get your shows out to as many people as you can, this usually means give them away, create interest in your shows. if you are going to give them away you might as well make money on them too.

[joel @ Aug 31st 2007 10:52AM]

What you guys are missing is the other half of the story. They mentioned it above. HULU. If you have no idea what HULU is, you should really look it up. NBC Universal has partnered with Newscorp (Fox)and Providence Equity Partners (a group that is set to buy all of ClearChannels TV stations) to deploy a competitor to Youtube. They intend on allowing user uploaded video as well as shows from FOX, and NBC. Obviously it would be nice to not have to compete with iTunes when distributing your own shows. It is common sense that they would try and get out of the contract before their competing site launches. The big question is whether HULU will charge for shows, or be ad driven.

[Gary @ Aug 31st 2007 11:01AM]

Article is kinda misleading. The current NBC contract runs through December. After that well who knows as that is a ways off. So my suggestion is don't by any season passes to NBC shows until every can agree on a correct $$$$ amount.

[Herbert Neal @ Aug 31st 2007 11:34AM]

Who cares. iTunes suck ass.

[JL @ Aug 31st 2007 1:26PM]

Wow, talking about drinking the kool-aid

A lot of you sound like shills for the great Apple - Oh!!! No one touches
Apple - Apple cares about its customers - oh please, give me a break.

At the end of the day Apple is just another corporation with a monopoly.
You mean NBC/Universal doesn't have the right to ask for more money for their
content??

I personally think they're all ripping you guys off, but if you choose to spend your money on degraded content, so be it.

I know i'm not the first one to say this but it bears repeating - Why is it ok for Apple to be a monopoly yet Microsoft is some evil enterprise?

I just mention them because yes, some NBC/Universal content is available on xbox live and from what i've seen of it - it is competition for the great all mighty iTunes (the p.o.s. application on windows that it is.. sorry)

[Bart @ Aug 31st 2007 1:57PM]

Reading your post, it's quite clear who drank the "kool aid".

[James @ Aug 31st 2007 2:01PM]

Because way (WAY) more people use the free iTunes than who pay for an XBox 360 and then get ass-pillaged for Xbox Live every year. I know this will be tough to swallow, but this thing is bigger than videogame consoles.