Is the Party over for Apple?
Posted by shadmia on September 5, 2007
Recently NBC announced that it would not be renewing its contract with Apple to sell its video content through the iTunes music store. In a move that has surprised industry watchers, NBC has chosen to use Amazon’s Unbox service as an outlet for some of its most popular shows. The Office, Heroes and 30 Rock will all be migrating from iTunes to Amazon’s digital video download service on TiVo. These shows will be available for download on Unbox the day after they are shown on the network.
Amazon hopes NBC Universal’s inventory will give Unbox a much-needed boost. Unveiled in September 2006, the service is a distant competitor to iTunes and has suffered from scattered service problems, including lengthy waits for downloads. While Amazon has solved many of the problems, Unbox is still limited in one important aspect: It is not compatible with Apple’s iPods, which are by far the most popular portable video players.
NBC had been trying unsuccessfully to negotiate a new pricing structure with Apple before announcing that it would not renew its contract. Apple sells episodes of television shows for a flat $1.99, with movies priced at $9.99. While the prices on Amazon will remain the same for per episode downloads ($1.99), NBC plans to offer “deals” on bundled content for as yet unannounced prices. Taking an obvious swipe at Apple, NBC praised Amazon on the new deal:
“Amazon is a company that understands the value we provide as content owners to its business,” said Jean-Briac Perrette, president of NBC Universal Digital Distribution.
In addition to new episodes of returning series, NBC Universal said it would allow Unbox customers to download free — in advance of their network premieres — the pilot episodes of new series, including a “Bionic Woman” remake and “Journeyman,” about a man who travels through time to help people in trouble.
“We are excited to bring NBC Universal shows like the award-winning The Office, 30 Rock and Battlestar Galactica to our Amazon Unbox customers,” said Bill Carr, Amazon.com Vice President for Digital Music and Video.
NBC video programming had accounted for 40% of Apple’s iTunes offerings. It is not yet clear whether the move by NBC will result in iPod users moving to Amazon’s Unbox and following the “content” or NBC will simply be depriving itself of the vast audience (and revenue) of the iTunes faithful. In a statement about the controversy with Apple, NBC issued a statement which in part accused Apple of a strategy designed to boost iPod sales.
“It is clear that Apple’s retail pricing strategy for its iTunes service is designed to drive sales of Apple devices, at the expense of those who create the content that make these devices worth buying.”
Whatever happens, one thing is obvious, Apple is losing its ability to get companies to go along with its pricing strategy. If NBC is willing to jump ship, will any of the others follow? Is the era of iTunes dominance coming to an end?