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NBC abandoning iTunes

NBC Universal accounts for roughly forty percent of the videos downloaded on iTunes and they’re ready to walk. 

itunes split

Echoing a similar story with Universal Music in July (expanded on three weeks ago), unable to come to terms on a new agreement with  Apple, news wires are buzzing that NBC will not renew its long term contract with Apple.  Neither side has issued a public comment. 

Is this negotiating brinkmanship?  The end of partnership? A consequence of Hulu?   Theories abound.

At issue, and often reported, are a combination of factors.   For one, major media companies have been increasingly vocal about their frustration with Apple’s fixed pricing model.  They want more leeway to bundle products together or premium price new releases.  Apple, fearing such structures would complicate the user-experience and alienate customers has refused.

Criticisms have also been levied that Apple intentionally under-prices content and keeps right management technologies proprietary in order to sell hardware.  It’s a matter of incentive, some argue.  Apple’s profits are in hardware sales, not content.  For content providers, it’s the opposite. They want pricing options and open DRM. So far, Apple has had the strength to force their hand.

It also doesn’t help that in the press, and court of public opinion, Apple is continually championed for its breakthroughs while big media is derided for their shortcomings. That fuels a possible rift.

Arguably one of the biggest reasons explaining the split is Channel-Conflict.   Unlike in the music industry, and Universal Music’s bailout, NBC is far from dependent on Apple for digital sales.  The Internet video marketplace is still young and the distributors are plenty.   Not only can NBC look to companies like Amazon, or Wal-Mart, to jump in (likely with better pricing terms)  but they also have their own video property to rely on.

Hulu, the recently named joint venture between NBC and Fox (News Corporation) has a planned Beta launch in October, and a scheduled full roll out a few months later.  The company, which aims to be a YouTube rival, could be home to a tremendous amount of NBC content (both paid and ad supported).  The company already has a plus $1billion valuation, and the hopes and expectations are huge.   Giving exclusivity to Hulu could theoretically help drive to the traffic to the site.  And the timing of the planned launch coincides almost exactly with the expiration of the Apple contract.

Whether the move by NBC Universal will reveal itself as a small revolt or a brinkmanship negotiating strategy will flush out over the next few months.  For consumers, NBC’s current deal with Apple runs through December so there will be little immediate impact.  Between now and then, a new deal may be cut. Much could change.

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