Switched On: Fruit versus fowl

Each week Ross Rubin contributes Switched On, a column about technology, multimedia, and digital entertainment:

As most Americans were getting ready for a peaceful Labor Day, it was war between Apple and NBC as the two companies couldn't agree to terms for carrying the network's shows on iTunes. A punchy media had a field day with the headlines -- Apple "Scrubs" iTunes Contract, NBC, iTunes Headed to Divorce Court, and Apple Peels Back NBC-iTunes Deal were just a few of the laf riots.

Apple said that it moved to act in the interest of consumers, but the financial impact for both companies is practically nil. Engadget's sister blog TV Squad posted that it wasn't about the money for NBC, but about the flexibility to bundle programming.

We are very early in the era of downloaded video. As long as this continues to be an opportunistic purchase, e.g., "I missed that episode last night," the market could probably bear more than $1.99. Where it breaks down is looking at buying TV shows as an alternative to DVD or subscribing to cable or another TV service provider (even though the big NBC hits are all on broadcast television). The comparison between getting shows via iTunes versus, say, a DVR is something that Switched On has addressed previously, and another Engadget column even ran the numbers.

Let's see how buying Heroes on iTunes compares to other options. The full first season (23 episodes) of Heroes is $42.99, a discount of almost $3 when compared to buying the episodes individually. Amazon sells the 7-DVD set for (a comparable when including shipping) $36.99 (and the 7-disc HD-DVD set for $69.95!). But Amazon does an excellent job of steering the visitor toward the Unbox version of Heroes, where episodes also sell for $1.99. However, the season sells for $36.62, a difference of $6.62 versus the iTunes series price.

Unbox' usage terms are more restrictive than iTunes', but as with iTunes content there is a path to the living room via TiVo as well as a wide range of compatible portable video players, none of which, unfortunately for Amazon, has enjoyed anywhere near the iPod's popularity.

If this was really about cross-promotion, than NBC should have probably been more patient as Apple has started to experiment more with promotions such as ticket sales for music artists now that music is becoming a more mature offering in the digital store. If it was about money, specifically raising prices per episode, it will be easy to see which company was being more truthful as we watch prices for NBC shows on alternative services.

If it was just a negotiating tactic, we probably won't see any change. Both sides have lost in the short-term and hopefully will reconcile at some point. Until then, you may want to read a book.

Ross Rubin is director of industry analysis for consumer technology at market research and analysis firm The NPD Group,. His blog can be read at Views expressed in Switched On are his own.