NBC Exec Says Apple's Business Model Has No Core

Last Updated Oct 30, 2007 7:50 PM EDT

rotten-apple.jpgYesterday was the beta launch of Hulu.com (a joint venture between NBC Universal and News Corp. that will compete with iTunes by offering ad-supported TV and film downloads.) The timing was perfect for NBC U chief executive Jeff Zucker to explain why the company will not renew its deal with iTunes in December:
"Apple sold millions of dollars worth of hardware off the back of our content, and made a lot of money. They did not want to share in what they were making off the hardware or allow us to adjust pricing. We don't want to replace the dollars we were making in the analog world with pennies on the digital side."
NBC U, which brought in just $15 million in revenue through the iTunes deal over the last year, accounted for 40 percent of iTunes video sales. As the Unofficial Apple Blog pointed out, if NBC represents 40 percent of iTunes video sales -- and if other media companies have a similar revenue split agreement with Apple -- total revenues by video content providers would total approximately $38 million. Media companies might as well offer their content to a web-based service like Hulu if their content will be essentially given away.

At this point, it's all speculation whether or not Hulu will be successful. But Zucker's smart to experiment with business models to see how "content providers are going to profit commensurately" when their content helps "others build their businesses."

David Schatsky of Jupiter Research spoke with Zucker about experimentation:

"Nobody has figured out the economic model on the digital side," Zucker said.

I had the opportunity to ask him how NBC Universal was navigating this uncertainty. These times call for experimentation, he said. Thus NBC's multiprong Internet video distribution strategy, with the support of NBC's branded destinations like nbc.com as well as "superstores" like the just-launched hulu.com, for example. [See David Card's brief initial thoughts on Hulu.] And Zucker's insistance (sic) on variable pricing.

Even today, even to Zucker (and I've said so myself), figuring out Internet video is all about experimentation. Companies who allow themselves to be locked into a business model too soon may put themselves at a disdvantage (sic) as the contours of the internet video future begin to emerge.

Related Reading: (Rotten Apple image courtesy of markbarkaway, CC 2.0)