Big Media Risks Hardball with Apple

Big media wants to avoid, in their view, the mistakes of the music industry made with Apple, and may be considering joining Universal/NBC in hardball tactics. However, the business opportunity with Apple is compelling, and media executives are carefully weighing their options, according to Reuters on Wednesday.

The stakes are high on both sides. The media industry wants to attract new customers and secure control of pricing. Apple has a stake in its iTunes and iPod line to be the front runner in the hand held video delivery market.

"If there isnit any video you want to watch, the device itself is worth less money," said Forrester analyst James McQuivey referring to Apple video products.

The problem media executives face is rolling their own expensive and market segmented solution or working with Apple. Some, who declined to be named, appear to be seriously looking at what NBC just did. If they did follow in NBCis steps, it would cast doubt on the viability of iTunes as a premiere video delivery system. "Maybe itis not a long-term type of content to stay on iTunes," Gartner analyst Mike McGuire said.

Another executive blamed Apple for its arrogance. "Thereis a substantial amount of hubris in the way Apple approaches the content industry," another [unnamed] media executive said. "It would behoove Apple to be a bit more cooperative."

The biggest gripe the media has is control over the pricing of content. Apple, in their view, believes that every TV show is worth $1.99, however the media executives want the flexibility to charge based on the timeliness of the episode. They claim that a TV show that ran 20 years ago isnit as valuable as one that ran the previous evening. Concerns about the specific mechanism for copy protection have also been raised.

Amazon appears to have met NBCis demands and will soon offer customers a variety of NBC TV packages.

Other analysts say that the big mediais demands are too extreme and underestimate both the potential of iTunes and the difficulties Apple would have in variable pricing. "The conundrum we face here is [that Apple] has the highest probability of success than anyone. You need to figure out a way that you work with them," said another media industry source. "Iim motivated to make something work with them."

Which way the big media goes as a result of negotiations with Apple could have a major influence on the TV habits of viewers for years to come as well as influencing the financial fortunes of both sides.