NBC/Universal goes to the mattresses

Today’s announcement that NBC will not be renewing their contract with Apple to distribute content through the iTunes Store shouldn’t come as a surprise to anyone. NBC is just the latest content provider to look at iTunes, scratch their heads and say “why are we letting a third party company dictate the terms of our content distribution?”

I’m of two minds on how this can play out. Scenario one involves NBC soldiering on with their new video site partner (FOX) and successfully launching Hulu.com. Of course, if this happens, NBC/Universal is vindicated and Apple becomes a diminished player in the content distribution space.

Scenario two has NBC launching Hulu.com, and for one reason or another, it is a huge flop. We’re talking an URGE sized flop. In this scenario, NBC takes it on the chin for pissing away a lucrative revenue stream (iTunes sales), and the shareholders demand that NBC find a way to quickly fix the problem. Of course, NBC goes crawling back to Apple and we’re back where we were before this announcement was made. Except that Apple has now played chicken with one of its major content partners, and won.

I’m sure NBC (and Fox) feel pretty confident about their chances with Hulu.com. However, they should learn from the failed wreckage of Napster, Urge, and Sony Connect and realize that customers flock to the iTS because Apple makes this simple and affordable.

I’m not an expert in what makes a successful audio/video content distributor, but by looking at what all of the failures had in common, you can deduce the following:

1) DRM must be as flexible as Fairplay or better. Apple’s Fairplay is pretty generous as far as DRM goes. Having no DRM would be much friendlier to the consumers, but these are television executives we are talking about. They care as much about their consumers/customers as I care about Fidel Castro.

2) The content must be iPod friendly. This really is the defining factor on whether the distributor will succeed. Napster? Not iPod friendly. Sony Connect? Nope. URGE? Nope. All three are huge failures. Outside of the successful iTunes Store, the next successful digital content distributor is eMusic. And guess what? eMusic distributes DRM free tracks that are iPod friendly.

I’m pretty certain Hulu will “screw the pooch” on both of these items. After all, it will take a technology company partner to provide them with their precious DRM. And who do you think they will be partnering with? Yep, good ‘ol Microsoft.

Category: Opinion