iTunes Content Providers Complain to Apple Too Much

The current model of iTunes pricing for music and video content has been extremely successful and has helped music companies, film studios, and television networks get their content out to the masses in a fresh, cutting-edge way. But more and more of these content providers are beginning to complain about Apple's fixed pricing on the content sold through the iTunes Store.

Take NBC for example. According to the L.A. Times NBC ranks 4th among the major television networks. This does not put NBC in the best position to negotiate. Yet NBC wants to increase the wholesale price of its content. Then there's the New York Times piece stating that Univeral Music Group who, among others, has pushed for a variable pricing scheme that would charge more for newer music, has decided to end its previous deal with iTunes and opting instead to sell its content on an "at will" basis. Why don't these companies get it? Consumers are thrilled at the current pricing on iTunes which is born out by the iLounge.com report which declares that iTunes is now the 3rd largest music retailer.

But the bigger issue in this whole debate is why are television companies getting greedy and pushing iTunes to adopt a different price point model than what we are currently getting? Furthermore why is variable pricing all the rage? Television companies do not seem to mind that video rental stores such as Blockbuster have a fixed pricing model when it comes to video rental. Furthermore Netflix also has a fixed pricing model (depending on which package you go with). But in either case whether you check out last season's Heroes or a classic show like Knight Rider, your cost is always the same. It seems that NBC is trying to take a bigger bite of the apple (no pun intended) than it deserves. And what about NBC's low ranking? Traditionally re-negotiating in any segment of business, from contracts down to employee pay raises, requires validation of the reasons for re-negotiation. An employee does not demand a pay raise bases solely on the fact that he just wants more money. He must make the case that he has reduced waste or improved overall output. Or he must prove that he has somehow gone over and above the call of duty to put out the best product possible. Coming from a defense contracting background, I understand the importance of pointing to past performance as the basis for future contract negotiation. A company wishing to place a bid for a contract must prove its worth. The bidding company must show the soliciting potential client that it can outperform its rivals and offer a superior product while still giving the potential customer the best value. Regardless of which of these analogies you apply to Apple and NBC's current situation, it is clear that NBC is not in a position to drive such a hard bargain.

Universal Music Group and any other music company that tries to pull the same stunt is going to basically be cutting off their own nose. The ubiquity of the iPod/iTunes platform dictates that music companies should be doing all they can to play nice with Apple. Apple continues to make strides with its iPod line and the iPod will be king for many years to come. Content providers need to wake up to this fact and begin to make sound business decisions based on this fact.