NBC Universal is trying to take on Apple in the budding video-downloading business. NBC provides a big chunk of the TV shows sold through the iPod maker's online iTunes Store, although video downloads are still a minuscule portion of Apple's revenue. Now the General Electric subsidiary has said it won't renew its video contract with Apple after it expires in December. This looks more like a bit of brinkmanship than the end of the relationship.
Content providers don't like Apple's pricing and think its simple digital-rights management policies don't do enough to limit piracy. For its part, Apple claims flat prices of $1.99 for an episode of, say, NBC's "The Office" are popular with users. And it thinks placing cumbersome antipiracy restrictions on users can discourage downloads. To media companies, this just looks like Apple using low-cost content to push hardware sales.
The media groups may have a point. Although Apple doesn't break out results for various product lines, digital downloading appears to be marginally profitable. Meanwhile, Apple's operating margin is now close to 20% in large part due to iPod sales, say analysts.
To prevent Apple domination, NBC and News Corp.'s Fox are rolling out Hulu.com, an online-video site, which will stream content from both companies. And the signs are it will eventually move into downloads, taking the fight directly to Apple. But Hulu is probably more useful as a negotiating tactic with Apple than a means of dominating the video-downloading business.
Apple's online store provides some benefits to media companies. Users like sites with large selections. Hulu will struggle to equal iTunes' size because networks are unlikely to co-operate too closely. It's hard, for example, to see ABC using Hulu so long as Apple's Steve Jobs is helping direct strategy as a board member at Walt Disney, which owns ABC and ESPN.
Inexpensive and easy downloading may benefit Apple, but content producers should heed the music industry's experience. Make content too expensive or difficult to use, and consumers will just download it illegally without paying.
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Content providers don't like Apple's pricing and think its simple digital-rights management policies don't do enough to limit piracy. For its part, Apple claims flat prices of $1.99 for an episode of, say, NBC's "The Office" are popular with users. And it thinks placing cumbersome antipiracy restrictions on users can discourage downloads. To media companies, this just looks like Apple using low-cost content to push hardware sales.
The media groups may have a point. Although Apple doesn't break out results for various product lines, digital downloading appears to be marginally profitable. Meanwhile, Apple's operating margin is now close to 20% in large part due to iPod sales, say analysts.
To prevent Apple domination, NBC and News Corp.'s Fox are rolling out Hulu.com, an online-video site, which will stream content from both companies. And the signs are it will eventually move into downloads, taking the fight directly to Apple. But Hulu is probably more useful as a negotiating tactic with Apple than a means of dominating the video-downloading business.
Apple's online store provides some benefits to media companies. Users like sites with large selections. Hulu will struggle to equal iTunes' size because networks are unlikely to co-operate too closely. It's hard, for example, to see ABC using Hulu so long as Apple's Steve Jobs is helping direct strategy as a board member at Walt Disney, which owns ABC and ESPN.
Inexpensive and easy downloading may benefit Apple, but content producers should heed the music industry's experience. Make content too expensive or difficult to use, and consumers will just download it illegally without paying.
Discuss Add this link to... Bury
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