Jeff Zucker, head of NBC Universal, as quoted by Ken Auletta in reference to his split with Apple's iTunes: "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." Let's fly down from corporate, Jeff, and join the real world.
Apple "did not want to share on what they were making off the hardware (iPod)." Okay, Jeff, by that logic Sony or LG should pay you a piece of every TV they sell, right? Doesn't your 4th ranked network make millions off the backs of the public TV airwaves? Aren't you making millions of the backs of Comcast?
Apple is simply a distributor, a la Wal-Mart. Are you going to pull NBC Universal DVDs from Wal-Mart? Isn't Wal-Mart using NBC DVDs as a loss leader to increase foot traffic in their stores? Yes, they are. By Jeff Zucker's logic then, NBC should get a cut of every diaper sold in Wal-Mart. Especially those fancy NASA diapers for long trips.
Zucker complains NBC made "only $15 million" selling shows on iTunes. That's pure profit, Jeff. People can watch it over the air for free. But many choose not to, which is why Fox gets better ratings. Apple has figured out how to distribute your content at no cost to you at a price the consumer is willing to pay. They are conditioning consumers to pay for downloaded content. In most businesses $15 million marginal revenue with no fixed cost is a good thing. If NBC had better shows, maybe they would have made more money on iTunes.
Battlestar Galactica and The Office were built in large part by people discovering the shows on iTunes, buying them, and then tuning in to NBC for new episodes. Logic would dictate that helps NBC. Does NBC honestly think consumers are going to come home at night and eagerly log on to their new website Hulu.com to view NBC content, chock full of ads and non-downloadable? Two words, bit and torrent.
Jeff Zucker has proven himself adept at the Vatican politics at GE, and he's in a tough spot because GE is thinking of selling NBC Universal. But spurning Apple, who developed a new, proven distribution model for NBC for free, and then turning around and sinking millions into Hulu.com to replicate what Apple already gave NBC, ahem, for free, is not the Six Sigma way.
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