All Things Digital

QOTD

We’ve never told anyone they can’t lower prices. We’re glad to have NBC back and they are participating under the same terms with all of the other content providers.”

– Apple VP Eddy Cue says that NBC Universal’s iron will ended up being quite a bit more flexible than the flexible iTunes pricing scheme it claims to have won from Apple

I got into a pretty public fight with Steve Jobs about our TV. We were the market share leader at iTunes, we had 35 percent of the market share at the iTunes store. What we said to Steve and his team was that we wanted there to be some variable pricing. There’s no example in the world of where the retailer sets the price–there’s no example, except at Apple. We’re very conscious of what happened in the music industry. … We offered do a test with one show, you pick the show, I don’t care, and charge $2.99 for that and everything else at $1.99, and in fact we’ll give you the whole library at $0.99, and they didn’t want to do it. Granted none of it is as mobile and successful as iTunes. … We agreed to put up our film stuff on Apple just a few weeks ago and the reason we did that is variable pricing.”

–NBC Universal Chief Executive Jeff Zucker, Feb. 27, 2008

Apple today announced that it will not be selling NBC television shows for the upcoming television season on its online iTunes Store. The move follows NBC’s decision to not renew its agreement with iTunes after Apple declined to pay more than double the wholesale price for each NBC TV episode, which would have resulted in the retail price to consumers increasing to $4.99 per episode from the current $1.99.”

–Apple Press Release, Aug. 31, 2007

We’ve said all along that we admire Apple, that we want to be in business with Apple. We’re great fans of Steve Jobs.”

–Zucker, Jan. 20, 2008

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.”

–Zucker, Oct. 28, 2007

Nearly a year after being eighty-sixed from Apple’s iTunes store over a pricing dispute, NBC Universal is returning to the service, Apple CEO Steve Jobs announced Tuesday. Beginning immediately, NBCU programs in standard definition will be available from iTunes at a price of $1.99 per episode, programs in high definition for $2.99 per episode. Catalog titles will be sold for 99 cents.

It’s not entirely clear what led to the warming of relations between the two companies, though NBC Universal CEO Jeff Zucker said the new cooperation was due to a concession from Apple (AAPL). “What happened a year ago is we got into a dispute over pricing and thought there should be flexible pricing on the television content in the iTunes store,” he told CNBC. “They didn’t want to, we withdrew our content. The fact is, we have flexible pricing, and the programs will be on there at the 99 cents price point, $1.99 price point, and for HD episodes of the program, that will cost $2.99. So basically we were able to achieve our goal that not all contents should be of the same value. When we achieved that, we were happy to be on iTunes.”

That’s certainly an interesting re-imagining of NBCU’s recent negotiations with Apple. But it’s not entirely accurate. Because while Apple did agree to flexible pricing for NBCU (GE) programs on iTunes, it didn’t really agree to the flexible-pricing scheme the network was seeking. NBCU wanted flexible pricing based on popularity. What it got is flexible pricing based on video definition, which Apple had already agreed to with other networks. NBCU wanted complete price variance. It didn’t get it. The company also wanted Apple to double the wholesale price it pays for each TV episode sold on iTunes. And it clearly didn’t get that either, because if it had, “The Office” would be priced at $4.99 per episode instead of its current $1.99./$2.99–according to Apple, anyway.

So sure, NBCU got flexible pricing. But it got it on Apple’s terms, which presumably started looking quite a bit more attractive when the network’s other online video distribution deals didn’t prove to be as successful as it had hoped.

If there was an Emmy Award for legislation production, NBC Universal Chief Executive Jeff Zucker would surely win it. Last October he called upon Congress to pass a bill that would create a dedicated intellectual-property enforcement bureau and today it’s looking more and more like he’s going to get it.

This week members of the House Judiciary Committee passed the Prioritizing Resources and Organization for Intellectual Property (called “PRO IP” groan…) Act of 2007, legislation that would create an “anti-piracy czar” at the White House level, a separate IP-enforcement division at the Justice Department and ratchet up already high civil penalties for copyright infringement.

The measure is backed by many of the most powerful politicians on the House Judiciary Committee, including John Conyers (D., Mich.), Lamar Smith (R., Texas) and “Hollywood” Howard Berman (D., Calif.), the content cartel and, of course, Zucker, who likes to tell everyone that it dramatically advances the cause of protecting innovation, technological invention and creativity.

Said Zucker, “This is such an important step in combating this incredibly serious piracy and counterfeiting problem that’s getting worse, not better.”

In Zucker’s eyes, maybe. But not in the eyes of consumer folks like Google Senior Copyright Counsel William Patry who calls Pro IP “the most outrageously gluttonous IP bill ever introduced in the U.S.” and consumer advocacy group Public Knowledge which feels it is in sore need of adjustment.:

This bill takes already extraordinary copyright damages and increases them, expanding the threat of litigation intended to stifle competition and innovation. … Increasing penalties is one of the least necessary, and quite possibly counterproductive, actions the committee could take, particularly when current law is adequate to deal with most infringement issues and because the higher penalties serve only to force faster and larger settlements potentially from innovators. … Instead of following the course of this bill, the committee should look to the future, to a more realistic and rational copyright regime that can adapt pre-VCR copyright laws to a post-YouTube world.”

I got into a pretty public fight with Steve Jobs about our TV. We were the market share leader at iTunes, we had 35% of the market share at the iTunes store. What we said to Steve and his team was that we wanted there to be some variable pricing. There’s no example in the world of where the retailer sets the price–there’s no example, except at Apple. We’re very conscious of what happened in the music industry. … We offered do a test with one show, you pick the show, I don’t care, and charge $2.99 for that and everything else at $1.99, and in fact we’ll give you the whole library at $0.99, and they didn’t want to do it. Granted none of it is as mobile and successful as iTunes. … We agreed to put up our film stuff on Apple just a few weeks ago and the reason we did that is variable pricing.”

–NBC Universal Chief Executive Jeff Zucker, Feb. 27

Apple today announced that it will not be selling NBC television shows for the upcoming television season on its online iTunes Store. The move follows NBC’s decision to not renew its agreement with iTunes after Apple declined to pay more than double the wholesale price for each NBC TV episode, which would have resulted in the retail price to consumers increasing to $4.99 per episode from the current $1.99.”

–Apple Press Release, Aug. 31, 2007

We’ve said all along that we admire Apple, that we want to be in business with Apple. We’re great fans of Steve Jobs.”

–Zucker, Jan. 20

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.”

–Zucker, Oct. 28, 2007

If Yahoo is looking for a deus ex machina to resolve its seemingly insoluble difficulties, it best not look to News Corp.

The company, which just acquired Dow Jones (owner of this site) and which posted a moderate rise in fiscal second-quarter profit yesterday, has no plans to yank Yahoo from the jaws of Microsoft. “We are definitely not going to make a bid for Yahoo,” News Corp. Chairman and Chief Executive Rupert Murdoch said during a conference call to discuss the company’s earnings. “We’re not really interested at this stage.”

So who is interested? Well, apparently no one. Comcast has declined to make an offer, NBC Universal Chief Executive Jeff Zucker dismissed rumors that NBC was considering a bid during a conference call with JPMorgan analysts earlier this week, and the financing and operational risks are likely too high for a private-equity bidder. Seems the $44.6 billion price tag Microsoft’s slapped on Yahoo has given everyone a bit of sticker shock.

Everyone but Google, that is. And Google can’t really make an offer for Yahoo. With its absolute dominance of the search market, the “troubling questions” a Yahoo-Google alliance would raise are far, far more troubling than the “troubling questions” Google claims Microsoft’s hostile bid for Yahoo raises.

So what are these “many options” Yahoo claims to be evaluating? There are only two, it seems:

1. Accept the deal.
2. Turn it down flat and then accept under duress after an acrimonious shareholders meeting.

Market research has uncovered yet another rift between Mac and PC users. According to the NPD Group’s Digital Music Monitor, Mac users are far more likely than PC users to pay to download music.

They’re also more likely to buy CDs. Of all Mac users surveyed by NPD, 50% paid to download music during the third quarter of 2007 compared to just 16% of PC users. During the same period, more than 32% of Mac users purchased CDs, compared to just 28% of PC users. “There’s still a cultural divide between Apple consumers and the rest of the computing world, and that’s especially apparent when it comes to the way they interact with music,” said NPD Group analyst Russ Crupnick. “Mac users are not only more active in digital music, they are also more likely to buy CDs.”

Course, they’re also “more likely” to have Apple’s iTunes digital music store pre-installed on their machines. That might have something to do with the discrepancy here as well.

In any event, it would seem that, contrary to the claims of NBC Universal Chief Executive Jeff Zucker, Apple hasn’t “destroyed the music business.” “While the market for digital music is growing, it’s growing slower than many would like it to–CD sales are still declining and digital music has not entirely replaced those lost sales,” Crupnick added. “The more consumers become comfortable paying for digital music, the more chance they will evangelize to others. And at this point in the game, it’s the growing base of Apple consumers that are the industry’s low-hanging fruit when it comes to migrating from physical CDs to digital music.”

Many, many years ago, when the digital-music business consisted of little else besides Napster and the Recording Industry Association of America’s lawsuits against it, Apple proved that there was indeed a decent business to be had in selling music online for $1 per song. With iTunes, it quickly established a market for paid downloads as the music industry wrung its hands in utter incomprehension at this new age of digital distribution that was dawning.

So it is ironic, enormously ironic, to hear NBC Universal Chief Executive Jeff Zucker accuse Apple of ruining the music business (like that second Lindsay Lohan album didn’t do any damage at all). Speaking at a breakfast organized by Syracuse University’s Newhouse School, Zucker said Apple “destroyed the music business in terms of pricing” and will invariably do the same to the online video business.

Noting that NBCU booked just $15 million in revenue during the last year of its iTunes deal, Zucker described the company’s deal with Apple’s digital media store as one that was corrosive to its media business. “We don’t want to replace the dollars we were making in the analog world with pennies on the digital side,” he said. What Zucker does want is a piece of Apple’s iPod business. “Apple sold millions of dollars worth of hardware off the back of our content and made a lot of money,” Zucker said. “They did not want to share in what they were making off the hardware or allow us to adjust pricing.”

Can’t imagine that’s going to change anytime soon, either–no matter how loudly Zucker whines. Apple CEO Steve Jobs would probably rather swallow a Zune whole than be pressured into handing over a percentage of iPod sales to record labels, as Microsoft has done with Zune.

Nothing like an alarmist study to get Washington lawmakers worked up into a pro-legislation lather. Which is exactly what NBC Universal Chief Executive Jeff Zucker gave them at an antipiracy summit hosted by the U.S. Chamber of Commerce today.

Citing an Institute for Policy Innovation study that estimates that copyright-industry piracy costs the U.S. economy $58 billion per year (Holy cow! That’s like Mitch Bainwol’s and Dan Glickman’s salaries combined!), Zucker called upon Congress to create dedicated intellectual-property enforcement bureaus in the Justice and Homeland Security Departments and to offer federal grants for state and local governments to escalate their own policing efforts. “The unfortunate truth is that today we are losing the battle,” Zucker said. “We need, across the board, to move IP enforcement up the agenda of the federal government. … [This issue is] absolutely critical to our economic prosperity.”

Lawmakers, especially those with musical aspirations, were predictably roused by Zucker’s spiel, though it conveniently obscured the fact that the entertainment industry’s business models are clearly in need of serious work. Said Sen. Orrin “I Write the Songs” Hatch (R., Utah, pictured with Barry Manilow, right), “Our challenge is to come up with viable economic solutions that will not only protect existing intellectual-property rights, but encourage the free flow of information and ideas necessary for creativity and innovation to thrive.”