Jeff Zucker says iTunes deal only netted NBC Universal $15 million
By Donald Melanson 
posted October 29th 2007 3:54PM
posted October 29th 2007 3:54PM
Not that it comes as much of surprise given recent developments, but NBC Universal's Jeff Zucker is clearly still none too pleased about the company's deal with Apple, as evidenced by his recent comments at a benefit for Syracuse University. According to Variety, Zucker lamented the lack of flexibility on pricing, and the fact that NBC U wasn't able to get a cut of Apple's hardware sales, saying that "Apple sold millions of dollars worth of hardware off the back of our content." He also dropped the bomb that the iTunes deal netted NBC U "just" $15 million in revenue, despite the fact that NBC's programming accounted for 40% of video sales on iTunes. Not coincidentally, all of this comes on the same day that NBC Universal (and its partners) launched the beta version of Hulu.com, which it hopes will provide some competition to iTunes, not to mention be better for its bottom line.
This is illogical. They make nothing off the sale of T.V.'s or the couches we use to watch their poorly written programming.
Get a grip, Apple has an excellent client base with an effective and profitable delivery method. They should get their greedy heads busy doing things like writing compelling shows. Increase viewership is a novel way of increasing revenue.
Or does my logic not make sense here?
Heres the issue. Sony, Toshiba, HP, etc. didnt piss off NBC. Otherwise they would say the same thing.
Even if you didn't get your iPod to watch NBC programming, there is bound to be a person that did. Also, take into account that the prospect of buying TV shows to watch your iPod makes up a certain percentage of what you want an iPod for, otherwise, your decision would go towards another player. Take into account that 40% of videos purchased were NBC Uni. Logically its sound that iPods were sold due to NBC.
What some of you don't seem to get is that NBC is venting. They don't want the hardware sales money. They are just pissed that Apple wouldn't budge on their pricing scheme and forced themselves to come up with their own model of distribution.
It seems pretty simple to me. In this scenario, NBC Universal is the creator of the wholesale content, and Apple is the retailer. NBC wanted to increase the wholesale cost for some or all of their content. Apple knew that is would be required to pass these price increases on to their customers. In the world in which we live, when prices go up, its the RETAILER that gets the brunt of the blame. Apple did not want to be perceived as raising prices, so they did not budge. NBC wanted more money for their content, so they did not budge.
In the end, everyone lost...
I agree that NBC should be more focused on making good content and doing a volume business, instead of raising prices and killing demand for the growing online TV market.
I also think that Apple ought to be more focused on improving iTunes video offerings and their own video solutions for the Mac and Apple TV. Interesting article related to this can be found here:
http://www.brianholdsworth.com/apple-tv-coming-attractions
ONLY $15 million?! What these networks need to appreciate is that it's $15 million more than what they'd have if people weren't more savvy with how they aquire their television shows over the internet.
$15 million ... ON TOP of all their other revenue. It's practically free money for NBC.
My problem isn't that NBC wants to make more money, it's that they totally snub iTunes when they can't have their way. I purchase from iTunes legally or I torrent something, but I purchase first. I like iTunes because everything I want is there, the prices are marginally fair, and it's straight up easy. I just don't get why NBC didn't go off and make Hulu as an Addition to iTunes. That's how you create competition. Dropping iTunes just smacks of pettiness (not that Apple is never petty). Or why didn't NBC try to throw in 2-3 minutes of advertising to the iTunes shows to make up some more money. I wouldn't mind it too much. I just think there were other ways to do this, and NBC and iTunes have gotten into a "who's d*ck is bigger" war in which only the customer loses. I don't care how free Hulu is, I want to play it on my iPhone and watch it on FrontRow. Maybe that makes me a loser for liking the idea that I don't have to mess with a lot of stuff to make it work, but I'd rather spend time watching content than figuring out how to watch it.
Hulu.com is the biggest load of C#$%. It's just another youtube. It doesn't allow you to put content on a portable device. The web is one way of watch video, yes. But what about when I am on an Airplane over the Atlantic, where there isn't an internet connection?
This idea of his is just as bad as Apple's idea to only have 3rd party iPhone apps available via Web 2.0 and not actually on the device.
Mr. Zucker is clearly delusional. He doesn't get money for every TV manufactured. Why should iPod sales be any different? I think this whole thing has to do with the fact that Universal is getting a kick-back from Microsoft with every Zune that is sold (Which in my opinion is very shady to begin with). So why shouldn't NBC Universal get a kick-back for every iPod that is sold?
Apple was selling millions of ipods before NBC was ever brought into this whole thing. So the iPod is clearly not riding on the coattails of NBC's content. This whole "piss on iTunes" thing and create a web site thing is going to cause people to go back to solutions like BitTorrent to get the downloadable versions of those shows to put on their media players. Which means he won't even get "only $15 million."
I say, make Hulu if you want, but do it in addition to and not in replace of. To me though, at this point it looks like a recreation of the Youtube wheel.
Does anyone else think this could have been a part of the plan in the first place from NBC. I mean they must have been considering Hulu for more than a minute and they should have known that Apple was not going to change their prices or give them shares of hardware income... It just seems odd. They made a ugly fuss about something they knew wouldn't be considered, used that as an excuse to break off from itunes so they could launch their own ...hmm... commotion is promotion.
So is he saying that NBC U makes a kick off of every TV sold? Since TVs would be useless without their content, right??
Oh Brother.
Users do not pay for airwave television content, so you are comparing apples and oranges. If a user specifically selects an ad-free piece of content, obviously the value is in that piece of content. Think about it.
i disagree. viewers pay for airwave television content by spending time watching ads. Ad-free content always comes at a premium cost, either you have to pay for the channel (like premium cable channels) or pay for the content itself (like specific programming on any medium, be it hard or soft media).
What I don't get is why any network would feel they have to go with one venue for distribution. How about iTunes, Hulu, NBC.com and everywhere else? Distribute it everywhere, make money from everywhere. It's call diversification.
Why NBC can't resolve this with Apple is beyond me. This only hurts the consumer, and frankly, I'm damn sick of it.
Thank you.
Hulu? How did that name make it out of the marketing department alive. Horse would have been a better name.
That's $15,000,000 more than they would have had otherwise. I, personally, would be happy with $15 million dollars for Apple to provide me with another avenue for my content to be enjoyed.
Did I somehow miss the part where NBC demanded a cut of the sales revenue from all television manufacturers, who are, after all, making a fortune on the back of NBC's content.
Does NBC really want to get things to the point where no one is interested in building devices taht can display thier content because of their childish demands? You make money from content, so sell content, you idiot. I fyou want to make money from hardware, start building hardware. You can even make your own content exclusive to you hardware. Let's see how well you do with that.
I gather the $15Mln is all what's left after Apple collected its DRM tax...
Only $15 million? Awwww the poor dear. Now he'll have to settle on only solid gold for his 5th jacuzzi, instead of platinum. Play the world's smallest violin.
It's still "free" money for no real work on their part; the iTunes Store hosts it all and sell the same content over and over. I don't understand his logic.
So they're disappointed they made an additional $15 million? I don't get it. Isn't that a good thing? Or they could spend a few million on making their own program/website and pull out of iTunes and lose money there. It's a toss up.
The comparisons between the iPod and the Television are way off base.
TV manufacturers allow shows from any station to be viewed. TV manufacturers do not make a profit on any of the shows being played whether they're popular or not. TV manufacturers make money on selling TVs...not the content.
Apple's closed ecosystem means if you wanted to legally watch a television show on your iPod (easily) you had to purchase it via iTunes...where surprise-surprise...Apple makes profit on top of selling you the hardware to begin with.
What?
http://elgato.com/eyetv
Good point.
Not only should NBC get a percentage from TV sales, but also for VCRs, TIVOs, videotapes, and DVDs, etc. Sometimes I think about something funny I watched on the Office and get a good chuckle. They should charge me for re-occurring thoughts and after-effect chuckles.
It is ridiculous that I pay $2 for it when I'm only going to watch it once anyways. Honestly, the only reason I even pay the $2 is because I want to support Apple and it's move to help legitimize the download market. I can watch an entire season on DVD from NetFlix for just a few dollars. I wonder how much of my $3 NBC gets from that.
Seriously though, NBC can't complain about what Apple charges to cover its production costs - and that doesn't seem to be the issue either. The issue is that NBC thinks it can charge more but is being hindered by Apple. So, if Apple won't allow special privileges to NBC, then NBC can charge more somewhere else. The fact is that NBC is trying to exercise some control over Apple and show some sort of dominant position like it owns iTunes. That will never happen though.
Ultimately consumers are the ones who decide what they will accept from the media buffet line. Consumers have spoken and said, "We like iTunes and are willing to pay that price for shows. Oh, and we love Steve Jobs too."
It just seems like there are already too many free options out there that allow people to watch TV shows to pay anything. To me, it's amazing that somehow, people would rather pay $2 and spend time and bandwidth downloading these shows. NBC needs to be a little more grateful for their extra, virtually-free income. It needs to keep in mind that it's also getting 40% of the NI from all the purchases from the iTunes store.
There's an old saying that says, "Don't look a gift horse in the mouth." The additional revenue is a sweet gift to NBC - even if they do provide the iTunes store with more content.
NBC's deep thoughts are really, oohhh, look at the elasticity of this demand curve! How can we fully exploit this and gain some strong-arm equity over this petty pawn Apple.
He wants money from hardware sales? Why doesn't NBC ask Sony, Westinghouse, Sanyo, Samsung and the other 30000 LCD TV manufacturers for money also? I mean, the sale of TVs rides on NBC's content of course, so by all means they are entitled to a piece of the pie!
Questioning Apple is heresy .... You should be grateful that our benevolent deity Steve Jobs was gracious enough to let the undeserving masses purchase iPods and other people's content ....
Any one experiencing doubts should immediately go to there local Apple store for iRe-Education.
iRe-Eduction Apple latest exciting product for a worry free existence, once you use you will never question Apple again.
There is only one god and his name is Steve.
The way I see it, video providers have to go through the same groing pains as music companies did. It's a bit misleading to think just because iTunes is hot that video would immediately take off. Best believe that market will continue to grow steadily especially now that the iPod nano (the biggest selling iPod) does video. NBC got off the bus waaay too soon.
Here's the problem with Zucker:
As head of NBC-U, he can decide they want to raise prices and Apple can decide they don't want to. That's a business decision - right or wrong, that's his to make but he's so afraid of that, he tries to cloud it with other issues when we can see right through him vecause really, he's not bright.
In other words, he's walking away from $15 million from a retailer for the cost of a couple dozen hours of compressing a video to load into a jukebox that NEVER needs physical reloading AGAIN?
He's walking away from about 7.5 million impressions of his TV shows that people will willing to pay for ...
Was Apple asking for an exclusive? No. So what is his babbling about distribution? Apple is just a store just like Best Buy & WM sell DVD's of the SAME SHOWS. All itunes is is ANOTHER choice or ANOTHER $15 million versus ZERO.
As others point out, his contention is people buy ipods to buy NBC shows is idiotic - maybe the auto makers shoudl pay Goodyear - after all, cars without tires aren't very much fun ... or hey, isn't NBC using OUR AIRWAVES? Where's our take from NBC? Has anyone asked him that?
So, sure, it's fine to walk away from $15 million in revenue but then to spend HUNDREDS of MILLIONS to launch other "choices?" Hulu isn't even on the internet yet (in private beta) but it has MORE employees than Facebook ... plus the headcount at NBC.com?
Well, at least another bald guy in Redmond can appreciate that kind of spending of bilions to make millions.
Zucker is about 5'6". Napoleon complex?
I was looking forward to my office season pass this year. Thankfully NBC saved me $35 or however much it was going to be. Thank you internet for BitTorrent, thank you NBC for twisting my arm so I use it..
Yes, $15m for shows you can see otherwise for FREE ON TV.
That's $15m for NOTHING, assholes.
There sure is a lot of sour apples err...sour grapes on this board.
Does it really matter what platform NBC chooses to put their content on? From reading comments here it seems like there is plenty of armchair Apple Board Chairman that are pissed about their cut of 15+ million. Then the other half are like spoiled babies that are going to go torrent their stuff. NBC can take their ball and go home because they produce it and own it.
If NBC wants to double dip advertising revenues for shows on their site, then they have every right. Yet, you want to get on some stupid NBC exec who said he would want a slice of hardware sales. Lord knows Apple is paddling AT&T for $432 dollars on each activated iPhone account. Last time I checked Apple doesn't own towers or spectrum. Someone should introduce the pot to the kettle sometime.
I think I can answer this. Apple developed relationships with companies offering an alternative media distribution model. Some have adopted this model moderately and a small sum fully rely on this distribution model (I know many people who have cancelled their cable for ala cart television).
Because NBC cannot control the distribution model Apple offers, they opted out hurting primarily the consumers relying on it. And to make matters worse they opted out because they want to charge the consumer MORE and prior wanted to take revenue from a similar but unrelated venture (iPod sales) from the two-company relationship. Now they are on a campaign to destroy relationships with Apple. It’s all kind of rotten.
Consumers are pissed at NBC for their price increase intentions. Consumers are pissed that they are dropping a means of distribution they rely on. NBC can choose to deliver their content in any way they want, but this is like NBC pulling from Comcast because they can make more money and/or have more control with Dish Network. It was a company screwing over the consumer in a very obvious and blatant way.
So people are deciding to not play NBC’s game and get their media in other forms that don’t benefit NBC such as torrents.
And I think a lot of this has to do with Apple's tie to ABC/Disney via Steve Jobs and NBC's tie to Microsoft.
(the AT&T and Apple’s agreement with the iPhone is only partially comparable since it was an agreement between both parties before it was offered to the consumer –not changed or dictated by Apple at a later point)
"I think I can answer this. Apple developed relationships with companies offering an alternative media distribution model. Some have adopted this model moderately and a small sum fully rely on this distribution model (I know many people who have cancelled their cable for ala cart television)."
No matter the language you use like develop relationships with content providers or others could say strong arm content providers, the bottom line is the content providers are always going to hold the cards against the platform. Gadgets would not be important to people without content. That is why it is important for people to choose their platform wisely. Is the closed eco system of Apple the best model for finicky content providers that can pull out of deals? Sure you can spew venom at the content provider but the closed system is just as at fault.
"Because NBC cannot control the distribution model Apple offers, they opted out hurting primarily the consumers relying on it. And to make matters worse they opted out because they want to charge the consumer MORE and prior wanted to take revenue from a similar but unrelated venture (iPod sales) from the two-company relationship. Now they are on a campaign to destroy relationships with Apple. It’s all kind of rotten"
Divorces are rotten, somebody always gets hurt. That is why you have the babies crying about torrenting. It wasn't like they weren't torrenting to begin with. Don't give me this Robin Hood act.
"(the AT&T and Apple’s agreement with the iPhone is only partially comparable since it was an agreement between both parties before it was offered to the consumer –not changed or dictated by Apple at a later point)"
I am failing to see the difference. NBC's contract was up and open to negotiation. Just like Apple and AT&T had no contract at the time to negotiate its terms. Their could have been an agreement but there isn't.
The majority of these posts slamming the content provider should also look at the device synching to their computers. That is all I am saying.
Just to add to this developing relationship idea. That developed relationship is causing Apple to track their phones to make sure they are getting their $432 dollars from AT&T per activation on AT&T's network. Apple has become so greedy they won't even accept their own gift cards. Now people are complaining about NBC trying to get theirs.
Am I wrong to think that many here only believe Apple deserves to get their money? I guess there are many Chairman of the Board for Apple that post here.
NBC is the worse network on TV. Their entertainment sucks, their news broadcasts suck. They have ruined their primary business by not understanding their audience and now they want to make up some of what they have lost by having Itunes' gouge Apples customers. Apparently they think they should get an Iphone style deal. They haven't earned it. Apple had a great NEW product that AT&T paid to be a part of. I can't see anything NBC does that I would call world class.
Itunes has motivated many consumers to PAY for product that was ( and is) obtainable without paying. NBC needs to hire Jobs as CEO and let Zucker retire to Florida. Jobs makes his stock holders money.
Hu-Cares.
Zucker is an idiot.
What an idiot.
They wanted to experiment with $2.99 per episode?
For downloads that end up being more expensive than the price per episode when you buy box dvd sets???
When their resolution is lower than SD DVD resolution of 720x480?? (itunes is 640x480)
When you get no added material??
If they sell current shows at $3.00, are they going to sell episodes of Leave it to Beaver, the Twilight zone, or Gilligans Island at 50 cents because they are older???
And they want to test selling it at $2.99? or force apple to sell items in combination of a loser show with a winner show at a price of $4.99. at a loss to Apple??
Get real. These guys are greedy idiots who are dumping iTunes for a an old school business model that allows no portability, no revenue other than ad revenue. A model that maybe worked 40 years ago when consumers had no other way of delivery, but doesn't work today when people don't want to watch 3 minutes of commercials to view their show.
Heh, reminds me of a much more powerful media mogul from Disney who went against Jobs, what was his name? And now Jobs owns a majority stake in Disney and all of his cohorts run their animation studio.
Zucker is strictly bush league compared to the horns Apple has locked with in the past. I doubt he'll win this one...
If one retailer controls a commanding share of the market for a given product, the manufacturer often has no choice but to play by the retailer's rules. Ask Wal-Mart. Many, many manufacturers have had to slash their own prices (and upstream costs), change their packaging, branding, and bundling, their business processes, shipping/distribution, and inventory-control systems, even create products specifically for Wal-Mart, all because so many customers prefer to shop at Wal-Mart. I think that this is really a case of sour grapes on the part of NBC and other media companies. None of them had the vision, balls, proven online marketplace, relationship with the customer, seamless user experience, or mindshare/marketshare/buzz to pull this off. I repeat: none of the media companies was strong (or even really adequate) in a *single one* of these areas, and you need *all* of these factors to make the business of online media distribution work.
Apple made a huge bet bet in herding all the cats, and they made all the up-front investments and took all of the initial risk. They proved conclusively that all the companies involved could make money, while (mostly) pleasing the customers. At the same time Apple instantly created the first viable way to monetize fringe, archived, or otherwise unmarketed content, at essentially zero cost or risk to the owners of the content. And what do the old-line media companies do as soon as they see that the whole model can work? They whine, cry, and take their balls home. Who loses? No one, really, except the customer.
Walmart gets it's way because it has purchasing power. The more product you buy from a vendor the better price you get. It isn't as simple as dictating your terms because your the big guy on the block.
Of course content providers are not going to have the "balls" to produce hardware to sell. That isn't what they do. That is not the model they were born in. Don't be naive. That would be like telling photographers to make their own cameras to take pictures. I can't understand how people can think that Apple is more than just a platform. They are not content providers. That would be like looking at your Pioneer Elite plasma and pretending it is the content maker for your television.
NBC is not ripping off a model, they are changing platforms to deliver their content. As for the 100 million customers? Only 15 million made. Obviously NBC content isn't something that interests the majority of iPod users. Why are you whining? I am sure NBC feels they can get 15 million from Ford, Chevy, Budweiser, etc in advertising. Could be more if Hulu takes off.
If you think about it, from a branding perspective, even though they may not have profited hugely from iTunes, they definately enhanced their brand...at least until they bailed on the thousands of loyal fans. They're going to continue to lose viewers to the net, P2P, gaming, etc. but those downloaders were getting a postive experience from NBC with iTunes. Now they've shot it all down the drain and alienated lots of people who may jsut as soon actaully avoid their programming since it's not convenient to get if they miss an episode.
The way I see it, NBC should have been willing to make no money on the iTunes partnership, and chalk it up to marketing cost.
The main point is the value for money. There is an immense amount of entertainment of great value on the internet and its free, there is TV and radio which are both free. With all this free entertainment and people getting more and more busy its pretty surprising that they do make 15mil off their content which they showed for free in the first place. I understand its not free cos of advertising etc but it is free for the consumer. It is ridiculous to claim that apple is making its profit on the back of their content if they are only making 15mil and they probably get more than 50% of the revenue then what this means is that only a tiny fraction of the millions of people buying Ipods/Iphones are paying for their shows, this completely destroys their argument. Thats without mentioning greed.
The reason why piracy is such a great problem is because of people like him who through greed alienate their consumers and expect excessive payment for content that is worth very little compared to other free content that is available. It is stupid to calculate every pirated show as a loss of revenue because 95% of people who pirate would not watch or buy the show if piracy were not available.
The ITunes model of marketing content is not the best in my opinion the ideal way would be a subscription model where you can consume what you want for a fixed price if that were the case i would probably actually buy something off ITunes, until that happens my credit card stays in my pocket while i watch free stuff on the web.
this just shows the greed of NBC and the other big media outlets that are watching this playout in hopes of also getting more money
good thing there is youtube, podcasts, and other alternative forms of independent media nowadays
what these big companies dont get is that Apple didn't make millions on the backs of their content.... I have a 4th gen ipod that doesnt even have video playback. I just use it for music and podcasts. I was here with itunes/ipod before they were and will be with itunes/ipod after they leave... I am sure I am not alone.
These companies like nbc just try to nickel and dime us to death too bad they can't create a rip off of the air we breath and charge us 4.99 more for it and call it hulu_air_bs.com
this greed has made me sick i haven't watched any nbc shows since this happened
shame too I loved the office and heroes
If it wasn't for Apple, they would have NO money from iTunes... and Apple would still be selling iPods. Apple doesn't need NBC to sell iPods - NBC does benefit from selling shows on iTunes. NBC has a video feature on its Web site to watch its shows... and it sucks... bad.
That's the beauty of free enterprise though. If NBC doesn't like it, they're more than welcome to take their business somewhere better. Good luck.
It is kind of funny though that NBC on TV sells iPods, and that iTunes online sells NBC.
If I was in charge of a network, I wouldn't be pulling content from the best known and most easy to use download service, I'd be digitizing every episode of every show the network has ever aired and making them available for sale on iTunes. DRM is already taken care of. No physical discs to press or ship. It's all gravy and for stuff that's just taking up shelf space in storage and could be bringing cold profit.
Imagine if old eps of Conan or Johnny, or Letterman were available for download. I think they'd sell like hot cakes and right now they are doing nothing but collecting dust. Welcome to the future networks. Giving us what we want when we want it is how you will be making your money.
I guess if people want NBC content now they'll have to just RIP it from a borrowed DVD. I'll stick to watching my favorite TV show the old fashion way... on a TV. The music and film industries should get with the times, less ways to get content, equals more illegal downloads or copies.
V3LOCIP3D3, ever heard of something called the Apple II or maybe a Graphical User Interface? You're right. No one heard of Apple before 2003. What are you, 10?
I love how no one talked about how much people paid for a ipod over other mp3 players. where did they get the hype tv, where did people more than likely see a ipod tv. Content providers should be free to control pricing of there product. these shows are not free so get over it you ipod spazs
I eat Doritos while watching TV. Maybe they should contact them, too.