Saturday, September 8, 2007

Make NBC an offer they can refuse

Variety updates the NBC-Apple tiff with an interesting tidbit.

Sources close to people who resent the heck out of Steve Jobs claim that the price disagreement is not that NBC wants to raise prices, but Steve Jobs wants to cut prices — from $1.99 to $0.99. Apple (correctly) notes that volume will go up and (speculatively) asserts that profits will go up too. But of course there is the cannibalism risk too, in this case in competition with the DVDs. Since DVDs are the only major Hollywood revenue growth of the past decade, such cannibalism is a big concern:

Such pricing concerns echo the problems Apple has had recruiting movie studios to iTunes. Only Disney, in which Steve Jobs is the largest individual shareholder, has agree to sell new movies for $12.99 the same day they are released in homevideo. Others have balked at undercutting, and potentially angering, DVD retailers.

Despite those problems, Apple’s move to cut the price of TV shows indicates that it's only getting more aggressive on video pricing.

Insiders at several networks and studios, all of whom spoke only on the condition that their companies not be identified, seemed skeptical about Apple's price proposal -- but not completely closed to negotiations.

Some believe that prices on library titles could easily be reduced to the 99¢ price Apple wants. They admit that it doesn’t make sense to charge the same amount for an episode of “The Brady Bunch” as for “Lost.”
Notice how the story prompted by Hollywood leaks puts the best possible light on the proposal of different prices for different TV episodes. It continues in the same vein:
But Apple has proved to be resistant to multiple price points for video downloads, preferring to keep things as simple as possible. At the same time, the computer giant has shown some flexibility, allowing nets to cut prices on full-season collections of shows. Indeed, last month, iTunes offered several NBC shows at reduced prices as part of a summer sale.

If cooler heads prevail, it seems possible Apple and the nets will come to a settlement in which shows are sold via tiered pricing, perhaps 99¢ for library titles, $1.99 for current hits and $2.99 for megahits or shows on premium cablers such as HBO or Showtime.
Where the Hollywood spin contradicts Apple’s, the story reports the former as fact and the latter at the bottom of the page. The industry must be grateful to read its side of the story presented in the hometown paper, but of course what matters is how consumers will view things when the price of “megahits” (how is that defined?) is increased.

Hat tip: WSJ (and former SJ Merc) blogger John Paczkowski.

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