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"So that's a 'No' on a cut of the iPod hardware sales? Well, I had to ask."  (Source: NBC)
New allegations emerge which indicate more possible causes for the NBC and Apple split.

The story of NBC and iTunes' breakup is well known to DailyTech regulars.  Back in August DailyTech first reported the split.  It then went on to cover Apple's decision to prematurely drop its contract with NBC, which would have last until year's end. 
The coverage included a blast at NBC in which Apple alleged that the split resulted from NBC's greed $4.99 per episode pricing demands.  NBC fired back, finding a new home at Amazon's new Unbox download service.

NBC previously stated that it wanted to be able to offer free pilot episodes, control the packaging of content and have more flexibility in pricing.  It also wanted additional protection from piracy.  It stated that Apple was unwilling to work with it on these issues.

Now new allegations have emerged, which may provide shocking testimony to NBC's audacity, if they are true.

NBC President Jeff Zucker, according to a report in Variety, allegedly shared with The New Yorker's Ken Auletta during a benefit for former football powerhouse Syracuse University that NBC had wanted a cut of every iPod Apple sold as part of NBC's negotiations to renew their contract. 

Zucker is quoted as saying, "Apple sold millions of dollars worth of hardware off the back of our content and made a lot of money.  They did not want to share in what they were making off the hardware or allow us to adjust pricing."

This revelation is being met with incredulity in the media industry.  After all, NBC was not alone in most of its complaints against Apple -- for example, iTunes’ fixed price of $1.99 per episode.  However, no other television network would dare make as audacious a demand as a cut of hardware revenues.

More surprising is how little money NBC was really making for Apple and itself.  In the first year of its contract Zucker is quoted as placing its iTunes revenue $15 million USD.  In comparison to the $16 billion USD in revenue that NBC Universal, this is only 0.3 percent of the company's total revenue.

It was noted that NBC Universal's theme park business did $100 million USD in revenue. On the other hand, this does mean that iTunes sold approximately 7.5 million NBC TV episodes.

It seems relatively obvious that such demands were the realm of fantasy.  Otherwise every television maker from Sony to LG would have to pay a slice to NBC, Fox and the other studios.  The “iDevices” would have to pay cuts to Fox, ABC and many more.  This is obviously an untenable business model, considering the drive for low cost expensive hardware that often is only slightly profitable at best.

Other networks such as FOX and ABC have not dared make such demands.

NBC has a chance to prove itself on its own with the new HULA service it is starting with FOX (coverage later today at DailyTech), its deal with Amazon Unbox and its NBC Direct service, reported about at DailyTech earlier this month.

However, until NBC shows a far larger business volume, its demands may appear undeniably like gold-digging of a hardware giant.



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Bravo, Apple!
By leonowski on 10/31/2007 12:21:01 PM , Rating: 2
If this story is true, I really admire Apple's stand against NBC and UMG. This is in contrast to Microsoft's Zune deal.

Microsoft's "deal" with UMG sets a dangerous precedent that pays money to UMG even if a device will never have UMG content on it! Why should a company that doesn't develop the hardware or own the hardware IP make any money simply off the sale of the device?




RE: Bravo, Apple!
By clovell on 11/1/2007 3:18:25 PM , Rating: 1
Because businesses can enter into contracts freely within the law.


RE: Bravo, Apple!
By leonowski on 11/2/2007 2:20:13 AM , Rating: 2
I don't understand the point you are trying to make. Your statement is obvious, but I do not understand where you are going.

My point is that hardware has the potential to become more expensive if hardware manufacturers are forced to pay money to content providers FOR JUST HARDWARE SOLD. Do you think a CPU or hard drive manufacturer should pay Microsoft because Windows MIGHT be used with the hardware products?

Sure, Apple could certainly share hardware revenue with NBC or UMG. But, that would allow future contract negotiations with other providers to go against Apple. Other content providers will also stick out their hands. Do you think that would be a good position to be in as a business? Come on, tell us - you seem to be the expert on business contracts.

Jackass. Why don't you reply with some meaningful points instead of spewing out a sentence? I guess every topic needs a Captain Obvious.


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