NBC Says Sayonara to iTunes

It's a sad time for all of us who rely on endless entertainment from our iPods and iPhones. We take them for granted for long car trips, excessive airport layovers, and, yes, the occasional pretending-to-pay-attention-in-class lectures.

NBC Universal confirmed that it won't renew its contract with the uber-popular iTunes. The move should be no surprise to anyone monitoring the bickering between Apple (Nasdaq: AAPL  ) and NBC. Negotiations failed in August, although content was available until the contract officially expired recently.

Every step I take, I'll be missing you ...
As of last week, all NBC programming had been yanked off iTunes for good. NBC, a unit of General Electric (NYSE: GE  ) , had provided about 40%, or 1,500 hours, of iTunes video download content -- everything from Telemundo programs such as Pasion de Gavilanes to hit shows such as Law & Order and Heroes.

So what gives? Is Steve Jobs losing his apparently iron grip on the entertainment industry with the seemingly bulletproof hardware/software bundle that iPods and iTunes created? Not exactly -- Apple still holds about 76% of all music downloads.

Is NBC out of its mind for ditching such an innovative and effective way to distribute video content? Probably not -- it's got other tricks up its sleeve. Most importantly, will they kiss and make up -- and for Jiminy Crickets give me my Third Rock From the Sun back? Not these guys.

He said, she said
On the surface, the conflict seems to be just an unsuccessful pricing battle. NBC had been pushing for an increase in the skimpy $1.99 price per episode Apple currently fetches, but Apple refused to budge. Speaking in late October, NBC Universal CEO Jeff Zucker proclaimed, "We wanted to take one show, it didn't matter which one it was, and experiment and sell it for $2.99. We made that offer for months, and they said no."

Apple in its own defense fired back, claiming NBC pushed for a far steeper $4.99 per episode and wanted bundling packages that might cause iTunes to become clunky and less effective. At certain points, the feuding made a Judge Judy court case look sophisticated. 

Despite the loss to those who matter -- consumers who can't fathom a day without a ready dose of The Office on their iPhones -- neither NBC nor Apple is likely to feel much burn from the split. With no kids involved, no alimony to speak of, and, thank goodness, no real estate to divvy up, this breakup probably won't be too pressing financially for either party.

Apple's incentive for keeping the price on videos low was to drive sales of iPods and iPhones that use the video content. The one-stop-shop iTunes provided for all your media needs certainly appealed to consumers who had been fumbling with Napster (Nasdaq: NAPS  ) , Kazaa, and BitTorrent for years. The more streamlined iTunes became, the more appealing the profit-generating hardware would become. In recent years, for Apple the rest was history.

When two didn't become one
But NBC's departure will be less of a loss and more of a negotiating monkey off Apple's back than anything. Let's be honest here -- even with the absence of some of our favorite TV shows, iPods and iPhones are way cool, and people will undoubtedly continue to scoop them off the shelves en masse.

Silicon Alley Insiderestimated that Apple earned about $20 million in revenue from selling NBC flicks; for a company like Apple that isn't much more than bartender's tips. NBC's take from iTunes is estimated to be around $50 million a year, which for a General Electric-sized company doesn't even count as lunch money.

NBC won't have too much trouble finding its next mate in the online video market. You can still watch full episodes of popular NBC shows for free via NBC Direct, but only from a PC (talk about thumbing their nose at Apple again.) With Hulu.com up and running in a beta version, NBC also seems to be taking the online video market into its own hands.

On top of that, Amazon's (Nasdaq: AMZN  ) Unbox recently began selling NBC programming that can be downloaded straight to your TiVo (Nasdaq: TIVO  ) box: pay-per-view meets web 2.0. And if you're a Netflix (Nasdaq: NFLX  ) subscriber, popular NBC shows will be available to view on Netflix.com after they air on TV.

Fools, take a deep breath and a sigh of relief. Your favorite companies won't be bruised too badly by the lost business, and more important, your favorite shows are still available to download online -- you might just have to go elsewhere to find them.

Until the next episode, check out this related Foolishness:


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