Friday, August 31st, 2007
“..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. ABC, CBS, FOX and The CW, along with more than 50 cable networks, are signed up to sell TV shows from their upcoming season on iTunes at $1.99 per episode. ”
Um, wait a minute. The wholesale cost was absorbed by the original $1.99 price tag. Doubling the wholesale cost caused the retail price to increase by a factor of 2.5? The redistribution cost didn’t increase at all. That’s some pretty screwy iMath. If the wholesale cost doubled, at most the increase for Apple’s price should be around half to three quarters of that of the original iTunes price, depending on the margins. The margins on songs are rumored to be around .30 per, so a guess would be that for a television show, they’re making .60 cents. Sounds like Apple more than doubled their margins in making up these numbers.
Since other services charge much less and have newer contracts (XBLM – $3.00), I sense these numbers are just, well, sour apples.
“Apple’s agreement with NBC ends in December. Since NBC would withdraw their shows in the middle of the television season, Apple has decided to not offer NBC TV shows for the upcoming television season beginning in September. NBC supplied iTunes with three of its 10 best selling TV shows last season, accounting for 30 percent of iTunes TV show sales.”
Wow. Now that’s ballsy. This is going to be fun to watch. Apple never made much off the margins on songs and shows compared to the hardware. Apple is biting the hand that feeds it, because it’s the content that sells the hardware. Jobs has always had a habit of screwing himself over things like this. History repeating itself? NBC is the first, but not the last network seeking to renegotiate a contract with Apple.
Another thought, when the Zune came out, the deal with Universal involved a cut of player sales. So possibly the $4.99 includes the cost of a player percentage Apple isn’t willing to give up.
The blogs are of course, blaming this all on NBC, which is what Apple wants. But I think they are missing the bigger picture in their zeal for Apple. NBC chould counter with more accurate figures in a similar press release. Hopfully some more level headed reporting by the MSM will help clarify the situation as well.
Overall though, this is a huge opportunity for the other players. It will be interesting to see if they take advantage of it.
Update - wholy crap, it’s not just NBC –
“Availability of Web-popular programs like USA’s “Psych,” NBC’s “30 Rock” and Sci Fi’s “Battlestar Galactica” are all affected. Programming from NBC and cable properties like USA, CNN, Bravo and CNBC will be cut off from iTunes at the start of the season on Sept. 24, Apple said.”