Napster introduced the concept of downloadable media. Viewing this behavior as theft rather than an opportunity, media companies’ reaction was to shut it down rather than quickly offer a viable alternative legal solution. Even after Napster’s shutdown, users moved over to alternative peer-to-peer (P2P) programs like Kazaa, iMesh, and Bittorrent. Media companies, the RIAA, and the MPAA continued its attack on people downloading their media illegally. These are the same people who are buyers and consumers of their media. Throughout the whole process of issuing one lawsuit after another these organizations continued to tarnish their brand and reputation. Before Napster and Bittorrent do you remember one negative announcement about the RIAA or MPAA? Today I can’t think of one positive one.
Listen to the Spark Minute (John Scott and David Spark from Green 960 in San Francisco, CA) talk about Jobs’ lowering the price of the iPhone and how he’s flattened the entertainment model of tiered media pricing (Run time: 6:33).
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Viewing the online downloading behavior as an opportunity rather than theft, Steve Jobs became the first to introduce cheap simple purchasing of highly sought after music and video content in digital form. He had the combined desktop software and portable interface (iTunes + iPod) to make it an attractive solution and people flocked. Consumers didn’t want to be criminals. It’s just the media companies were not giving them a choice. Apple did.
While music labels and TV networks appreciated Jobs setting up a popular storefront for them to sell their media, they didn’t like the zero negotiation policy when it came to pricing. All content is equal according to Steve Jobs. Every song, whether it came out today or 50 years ago is worth $.99. All TV shows were priced similarly at $1.99. The only legal way in town that anybody used was iTunes. Steve Jobs flat priced the music and video market essentially negating an industry model that’s existed for decades. People will pay more for new just released media and they’ll pay less if it’s old. Problem is none of these media players had an online storefront open to sell their own content so they had to rely on iTunes to do it for them. One thing they didn’t expect was iTunes was going to set the pricing for them without negotiation.
Media companies are trying to take back distribution and pricing ownership of their media. Universal Media Group has stepped away from iTunes and NBC Universal announced that it’s leaving to sell its media on its new yet-to-be-opened property, Hulu. Playing the public relations card in iTunes’ favor, stories started to fly that the reason NBC left is Jobs wouldn’t let them price its shows at $4.99 a pop on the iTunes storefront. NBC responded that the reason is not 100% true. Offering the least quotable and least exact way to explain itself NBC said that some episodes in demand could run $4.99 or $3.99 but Apple left out the part about the average episode cost being projected to stay about the same. There’s a good defense. Let’s recap.
On iTunes: All TV shows are $1.99.
On NBC’s Hulu: Some TV shows will be $4.99 or maybe $3.99 if they’re really hot. But in most cases they’ll be $1.99. Oh, and for really old stuff we should be giving away for free it’ll be a little less than $1.99.
The media companies are right though. If people are willing to pay as much as $5 for a new show, then sell it to them at that price. Jobs says that the market for buying online is so nascent and confusing to most that the only way you’ll attract and keep buyers is through simplicity. The problem for the media companies is Jobs has set the standard and their pricing will always be compared to that. The problem for Jobs is if the media companies are finally fed up and leave, he won’t have the hot content to sell. If Jobs doesn’t have “The Office” he can’t sell it for any amount. And if Hulu is the only site that has “The Office” and they’ll only sell you the latest episode for $4.99 and you really want it, you’ll pay it. Or maybe you’ll look for an alternative.
Jobs has another trump card. He still has a lock on the iTunes + iPod interface. If Hulu can’t figure out a simple way of getting its video onto the variety of iPods, it’ll be sunk. It’ll be interesting to see how this plays out. In the interim until Hulu’s debut, NBC says they’ll be selling its shows on Amazon Unbox.
