Aside from the iPhone price drop and the release of the new iPod Touch, the next biggest news coming out of Apple this week was the announcement that NBC doesn’t intend to renew their contract with iTunes once their current contract runs-out in December. The reason is because neither party can agree upon a price to sell NBC’s TV shows at. Apple reported that NBC wanted some of their shows to be priced at more than double what they currently are ($1.99) and Apple just wouldn’t have that. While it may seem as though this is all NBC’s fault, it appears as though there’s more to it than what we originally thought.
According to Variety, NBC and Apple couldn’t agree to a price because while NBC envisions their prices going up, Apple envisions the price of TV shows going down to 99 cents. Apple’s retort was that NBC would end up making more money anyway because more people would take advantage of the downloads at the cheaper price. Clearly both parties are headed in a different direction with this situation.
Now of course we know that Apple’s motives aren’t just to give the consumer a better price. They’re in business and they have to look-out for themselves. So what’s really their motive behind wanting to slash the prices of TV show downloads? Well, if you think about it, the new iPod Touch is a perfect place to watch TV shows, isn’t it? The change in price that Apple is requesting would place TV shows at the same price as what iTunes sells DRM-infested music for, which could ultimately help them sell more iPods.More sales make Apple and their investors happy.
While some people have given up hope that Apple and NBC will be able to work something out, Wired reports the deal isn’t dead yet. A comment from NBC Universals’ Executive VP of Communications provided this insight : "NBC is hopeful that we can reach a resolution with Apple before the existing contract expires." It sounds to me like both parties are going to have to compromise here, otherwise it’s a lose-lose situation for them and all their users.
Source: Ars
The iPod Touch looks awesome! I’m gonna get me one.
Apple won’t cave, but with the new ipods’ I can see NBC maybe giving in.
My theory says Apple planned this from the beginning.
Hear me out. This is how Apple might have calculated this approach. Assume Apple decided $399 was a profit sweet spot for the iPhone before they even released it. By tacking on another $200 at the launch announcement in January, they got a lot of heat from the blogosphere and the tech punditry, but demand/hype for the thing remained in the stratosphere (perhaps to Apple’s surprise?). Had it not, Apple could have simply announced a new lower launch price in the weeks leading up to June 29. Bam, instant hype boost. But it turns out such a move was unnecessary. Tens of thousands of customers lined up outside Apple and AT&T stores all over the country, snatching up every iPhone they could when the doors were thrown open despite the $599 price. Suddenly you have a product with huge perceived (and real) demand that still commanded a very high price tag. And a $599 product that is flying off the shelves and being waved about gleefully by ecstatic mobs of buyers on TV news suddenly has a perceived value of $599 for millions of customers, including those who wouldn’t (or couldn’t) pay the $599 entry fee.
Now, two months later, you drastically slash the price $200, to your originally-decided price point of $399. Wow, only $399 for a product with a perceived value of $599??? What a deal! Waves of customers swarm the Apple Store once more snatching up these new “bargain-priced” iPhones for “only” $399. Talk about keeping the momentum going.
Now, of course, you are left with the serious problem of hundreds of thousands of irate Apple customers (like me) who feel burned by the too-much too-soon price cuts. Brand loyalty is not a commodity tossed aside with little regard. So what to do? Why, offer previous iPhone buyers a $100 credit at the Apple Store, of course! “Apple loves us!” the customers cry, and the company image rises even higher than before due to their good will and stellar customer service. And the $100 we suddenly have to spend at the Apple Store doesn’t really cost Apple $100 at all, yet boosts sales quantities (read: market share) going into the holiday buying season, and we customers are just grateful to Apple for letting us spend $100 more dollars at their store.
Well played, Mr. Jobs, well played.
Comment from Engadget explains it well.
That’s actually a pretty good theory, and I’m sure that they had planned out the market well in advance. You’ve got to expect that Apple knows what they’re are going to do months before they actually do it…that’s just clever marketing. And once again Apple fans praise Jobs!
The iPod touch should be pretty sweet, I’m going to get one. I can see why all the people are angry about the price cut, but that’s what you get for buying something when it first comes out.
Those were my thoughts too – if you buy something new, you can’t expect that you’re going to be offered the best possible price! While the drop in price happened rather quickly, it’s not that uncommon to do in the phone industry.
At least they get the $100 credit though.