I was reading the Wall Street Journal last night when an article caught my eye. NBC Starts an Apple iDuel (Weekend edition, Saturday/Sunday, September 1-2, 2007, Section B, page 14) Apparently, GE, through its subsidiary NBC, is in a dispute with Apple concerning the cost of NBC’s video downloads and the “antipiracy” protections Apple offers.

NBC’s Position:

The article claims that NBC provides the bulk of video downloads to Apple, but that over all revenue for video downloads is a “minuscule” portion of Apple’s profit. By starting a competing site for video downloads NBC hopes to challenge Apple’s dominance in this area. The article also notes that this is a negotiation tactic.

Confusing Tactic:

Ok. This is a true confession — I am confused. How is the world will this tactic work? Can you tell me? Apple has one of – if not the most well known – sites for downloading music and video in the US and Apple is going to negotiate with NBC because it started its own site? The confusing part to me is how this will create leverage to bring Apple to the table.

I get that NBC has some great content that young people want to download like the Office (of which I am a huge fan!). But, video represents such a small part of the content downloaded. More importantly, no one knows about this new site, and everyone, possibly even my 91 year old grandma knows about the iStore.

The article correctly notes that other studios like Disney, ABC, HBO or Showtime, all of whom also have video content will not likely join NBC and Fox (who is teaming up with NBC). Which means I have to shop at many different stores for my content? I have an iPod, and so do all of my friends. (My husband has a Creative Zen, but he’s cranky about supporting anyone who dominates a market. I must say, I have the cooler of the two devises!)

Where is the Leverage?

So, how does this tactic get GE leverage? I teach negotiation skills and I am not clear. Is NBC like my cranky husband and wants to challenge Apple JUST because Apple owns the market today? Would it then be wiser to court Creative Zen to have NBC be exclusive to their software like ATT and the iPhone? Would that give NBC leverage?

Is History Repeating Itself?

This story reminds me of stories I read a long time ago about a movie studio that fought with Sony over the Beta tapes (for the younger readers, these were like the VHS tapes.) The studio spent over 11 million dollars in the ‘80’s and lost the battle. Then in the ‘90’s the studio used the technology to make even more money on its movies through rentals and purchases. Today, DVD sales make up a huge percentage of film profits.

My question is this: Does NBC’s competing site actually give NBC any leverage with Apple or will they be spending millions of dollars to fight a losing battle? I really don’t know. If you have thoughts, please let me know. I am curious.

This entry was posted on Thursday, September 6th, 2007 at 8:16 pm and is filed under Tactics, Leverage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.