The Blogs and news wires are abuzz over the recent comments from NBC Universal chief Jeff Zucker who told an audience at Syracuse University’s Newhouse School of Public Communications, "Apple has destroyed the music business…" this seems to be the hot-button that everyone is jumping on.
Senior Analyst and Editor
In fairness to Zucker, here’s what he said at the breakfast meeting: "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."
While this sounds more like a quip than a declaration of war, there are issues behind the statement and the timing is no accident. The company is launching a rival download site together with NewsCorp called HULU that goes into a limited Beta this week offering over 90 different television shows and 10 movies. Not only that, from the Apple perspective, they’ve moved to the dark side syndicating with Microsoft as well as AOL, MySpace, Yahoo and Comcast. But here’s the rub. The site is going for an "ad supported model with revenue being split between the content creator, HULU and the distribution site," according to Shelly Palmer’s MediaBytes.com.
But like all stories there is much more going on here. AppleInsider reported that Zucker’s overtures to Apple weren’t just a seemingly modest price raise from $1.99 per episode to $2.99. The $2.99 figure was the "wholesale" price, according to Apple, that Zucker wanted Apple to pay him per episode. Retail customers would see a 2.5X increase to $4.99 per episode for iTunes videos and that number was just unacceptable to the iTunes team.
Not only that, AppleInsider also reported that Zucker wanted Apple to give them a cut of hardware sales. "Apple sold millions of dollars worth of hardware off the back of our content and made a lot of money," he said. "They did not want to share in what they were making off the hardware or allow us to adjust pricing."
The concept is just so outlandish, it’s ludicrous. Imagine that. Apple didn’t want to cut NBC Universal in on its hardware sales. Taken to its logical conclusion, Zucker will next be demanding fees from TV manufacturers, PC makers (for users accessing the new HULU site), and hey, why not radio, set-top box and satellite converter box makers as well?
I think Steve Jobs nailed it back in 2005 when, after iTunes was a run-away success and the music industry was pressing for price increases, he called the industry "greedy." Ok, here’s what he really said:
"If they want to raise the prices, it means that they are getting greedy," said Apple’s CEO, Steve Jobs. "If the price goes up, they (consumers) will go back to piracy and everybody loses." He added, "Theft is bad," and the Buddhist [Jobs] joked that "You don’t want to burn in Hell."
What poor Mr. Zucker doesn’t get is that the world has shifted and "Buddhist" Jobs discovered a workable way around the curse of digital piracy. It’s simple really, offer people fair pricing, and they will gladly pay for content. Try to cheat the folks with excessive prices simply because "you can" and the folks will rebel. Want proof? Blogger "waytogobuddy" on the AppleInsider forum said it best:
"Hey NBC: As a member of the demographic you are marketing to, I say Apple corrected pricing schemes. And that was up from zero (i.e. torrents) while taking down hyper-aggressive DRM. Welcome to the age where s*** media content and s*** usage rights only gets you s***."
The world changed in another way too. Just look at these two bloggers reply to the recent news about NBC pulling out of iTunes:
First blogger: "Not happy about it. But i dont watch TV anymore - if i want something i download it from itunes. And watch it when i want! As long as they have BSG and Lost im ok with it."
Second blogger: "That’s my take … I watch what’s in iTunes … if I have to go somewhere else, I watch something else. And that’s not because of my unwavering love for iTunes, it’s just the way it is. It’s what I have become used to." (Originally posted: October 29, 2007 on the blog Goodbye, NBC. And good riddance).
I guess one’s own Kool-Aid really does warp reality. By asking Apple to share in hardware sales because of his content, Zucker actually believes iPod and iPhone customers were lining up in front of the Apple Stores with just one thought on their minds — to get this piece of "hardware" in order to download the really cool, super great NBC programming content.
Sip away at your Kool-Aid Mr. Zucker, but be careful, the sweet fruity taste may turn bitter come end of quarter when the sales numbers come in. -SS