Apple’s iTunes has been challenging major media conglomerates for the last 2 years as more people download favorite TV shows at $1.99 than spend the time to watch ad-driven programmed entertainment dictated by media behemoths. Yesterday, NBC Universal announced that it would not be renewing its contract with iTunes, which supplies such popular iTunes shows such as “Heroes” because they say they want more flexibility to package shows together and more power to charge different prices. However in reality, like Vivendi’s Universal Music Group which also doesn’t offer shows to iTunes, NBC is moving towards gaining more revenue in online entertainment through the traditional model of increasing advertising.
The reason Apple is not going to renew the contract either, according to spokespeople, is that NBC’s new plans would require iTunes to increase prices to $4.99 per show. What’s interesting about all of this is that NBC is going back to the ad-revenue model—and trying to force people to suffer through ads for entertainment—but now online.
“TV folks are saying, “We’re all about advertising revenue. That’s how we understand how to make money,” according to Mike McGuire from Gartner. In addition, NBC is getting ready for their own launch of an ad-supported online video program called Zulu with News Corp. which basically will mean people have to view ads in packaged deals with programs.
As we’ve noted in many previous stories, the advertising model today in many ways, is broken. However because the machine is in place, entertainment conglomerates simply cannot and will not leave the cycle. Unfortunately for them there’s now a whole new generation of consumers who expect more control of their entertainment, including figuring out a way that does not include having to watch ads. iTunes matched the needs of this new consumer group and tapped into the DIY expectations of young people to watch their entertainment when they wanted, where, and for a reasonable fee. This new move by NBC represents yet another media empire that’s not thinking outside of the box. People will figure out how to watch their entertainment without ads and on their own time whether NBC is with Apple or not. Either that or they’ll simply create their own entertainment, which continues to be the trend anyway.
