For Media 1.0, it’s always about control

Here’s one that bears watching. NBC Universal has told Apple that it’s not going to renew its contract with them to provide programs via iTunes. According to the New York Times, NBCU wants to do things with its programs — such as bundling — in order to increase revenue. Apple’s model is one of simple, straightforward pricing, $1.99 per episode, $9.99 per movie. Rafat Ali at PaidContent summarizes:

NBC was in early on iTunes’ video offering, and now accounts for about 40 percent of downloads…The current two-year deal extends through December, so the 1,500 hours of NBCU programs will remain available on iTunes at least until then.

…This also comes as NBCU-Fox video joint venture Hulu is about to get off the ground, where NBC will be putting most of its shows for free streaming and distribution.

This could be just rhetoric in negotiations (after all, the NYT story is based on “a source close to the negotiations,” which is mediaspeak for someone who stands to benefit from releasing the information), but I think there’s an important element to note.

If NBCU’s content accounts for 40% of downloads, they are making the assumption that it is their content that drives those downloads. They no doubt use that number amongst themselves for high-fives and encouragement that content is still scalable via the Web. Why else even think of playing chicken with iTunes? The assumption is that “the people” so love our content that they’ll come where WE want them to come in order to get it. It’s the same logic that drove Viacom’s decision to sue rather than work with YouTube.

Apple, on the other hand, would argue that it is the presence of the content on iTunes that drives the downloads, that people download their products, because, as an aggregator, iTunes makes it easy for people to find them and download them.

So who is right? On this question rests much, and it’s the stickiest of all wickets for traditional media, because the business model of Media 1.0 doesn’t play well in an age of distributed media.

The gamble NBCU is making is that they can still make business decisions with their content that don’t include their customers. While I do believe that serious “Office” fans will go where they have to go to get their downloads, forcing everybody to do this is ultimately a fool’s folly, for most people will opt for the path of least resistance.

“Let’s see, Office isn’t here anymore, so what else do they have?” It is a critical mistake to assume that iTunes downloads will go down by 40% simply because NBCU decides not to play. Every other content creator that does business with iTunes is hoping NBC will go away, and this is the essential problem. NBCU may be able to increase its revenue, but eyeballs that go away are eyeballs that aren’t coming back.

If NBC were to leave, it would also hurt iTunes, because its ability to aggregate and present everybody’s content is its value proposition. So it’s not an easy matter for Apple either.

In the end, though — and as has been evidenced so many times in recent years — it is foolish to mess with empowered consumers. Who negotiates for them?

Comments

  1. As it happens, I’m an ideal test case for this situation, so I’ll expound on my situation a bit. I spend a huge chunk of my disposable income on iTunes. Most of what I buy is audiobooks, but I do buy some TV, mostly as a coping mechanism for long car rides and long waits in doctor’s offices. (I don’t own a TV set, so iPod is the only way I ever watch.) My iPod currently holds three shows: CSI, Law and Order: SVU, and (only two episodes of) Queer Eye for the Straight Guy. I am not sure which network provides these three shows. If it’s NBC, and thus they won’t be there anymore when I go to iTunes, um, gosh. That would suck. Um, I think that if I get there and my three shows have disappeared, I probably wouldn’t even go check on Queer Eye. Can take it or leave it. On Law and Order: SVU, if I had a huge need for a Chris-Meloni’s-brooding-intensity-and-hopefully-bare-chest fix, and it was available somewhere in just as simply and easily and streamlined a process as it is on iTunes, for the same price, I would probably go buy an episode from time to time. I doubt I would keep up with it weekly the way I do on iTunes, simply because I always hop over and check TV/Drama when I’m buying a new audiobook (something I do every week, as they keep me sane at my job). It’s such a cinch — I doubt I will go out of my way if it becomes otherwise. CSI is my favorite of the shows, so I will definitely follow CSI elsewhere if it’s going to vanish, but if it’s not JUST AS EASY and for the same price (or less) as it is now, then I won’t go out of my way. Who has time? If it becomes a pain, I’ll wait until the end of each season and go rent the whole season at Blockbuster, keeping up in one weekend binge a year instead of weekly. So, basically, if NBC yanks my shows, they have a small chance that I will keep buying weekly, but they are going to have to make it exceptionally easy.

    Sorry to blather on about my personal viewing habits; I just thought I’d make a revealing test case since I’m a heavy iTunes consumer, and as I choose not to own a TV set I don’t have the option of re-arranging my life to catch it over-the-air.

Trackbacks

  1. […] Terry Heaton also has some thoughts. The gamble NBCU is making is that they can still make business decisions with their content that don’t include their customers. While I do believe that serious “Office” fans will go where they have to go to get their downloads, forcing everybody to do this is ultimately a fool’s folly, for most people will opt for the path of least resistance. … […]

  2. […] Terry Heaton’s PoMo Blog » Blog Archive » For Media 1.0, it’s always about control “If NBCU’s content accounts for 40% of iTunes video downloads, they assume their content that drives those downloads. Apple would argue that it is the presence of the content on iTunes that drives the downloads. So who is right?” (tags: video business syndication distribution tidbits+fodder) […]

  3. […] NBC pulls its content off of iTunes, thinks it can force Office fans to pay $4.99/episode from a site called Hulu. The gamble NBCU is making is that they can still make business decisions with their content that don’t include their customers. — Terry Heaton […]

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