Monday, 4 October 2010

Why I think NBCU are right to turn Apple down

Jeff Zucker has been getting some press for saying NBCU are unlikely to go into Apple's scheme to rent popular TV shows for 99c an episode (link). Personally I think he's right to keep out of it.

Why? I'm increasingly of the opinion that even premium TV is somewhat commoditised. How much would you pay for your favourite show? And how much for your 10th favourite or your 20th? Besides live, I think the answer would be pretty much the same for 1, 10, 20...

And therein lies the issue. NBCU makes a lot of money selling its channels into the bouquet packages of cable networks. If it enables customers to buy a la carte then it risks the cable networks reducing the price they will pay for those bouquets. And that would be bad, because even if Apple TV really takes off and gets massive penetration in the home, replacing the lost bouquet, NBCU's revenues would become rather variable.

A la carte is fine if you're guaranteed to have success after success, but it seems unlikely that enough hedging of programs can be done to replace what is effectively a constant revenue stream from the networks. Yes, if NBCU persistently fails to produce hits, then the networks could turn around and negotiate prices down, but that seems highly unlikely. Or at least less risky than poking them by supporting a model that threatens the networks' core business (through cord cutting).

In my opinion Zucker is right to wait and see - I don't see an obvious first mover advantage in this case.

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