UPDATE: A lot of bluster under the bridge since this was posted early Friday morning. A couple hours later, Apple (AAPL) issued a press release calling NBC Universal’s bluff (see Apple to NBC: Drop Dead). Later that day, NBC issued its own thumb-in-the-eye statement, letting Steve Jobs know that GE’s (GE) lawyers intend to hold Apple to the terms of the contract that NBC has decided not to renew. Staci D. Kramer at paidContent has that scoop. Negotiations are going to be tough with so much face to lose on both sides, which makes this post’s premise — a future iTunes without NBC (or should that be an NBC without iTunes?) — seem even more relevant today.

——–

Almost as shocking to Apple watchers as the news that NBC Universal is not renewing its iTunes contract is the news that the network’s content, according to the New York Times, represents 30% to 40% of digital video downloads on Apple’s site.

When did that happen?

NBC is hardly the Must See TV powerhouse it was in the days of
Friends and Seinfeld. It routinely runs fourth in the Nielsen broadcast
TV ratings, and on iTunes it has to compete with not just ABC, CBS and
FOX, but with 63 other networks, including youth-oriented powerhouses
like Comedy Central, MTV and Nickelodeon. Comedy Central alone offers
the Daily Show with John Stewart, the Colbert Report, South Park and
the Sarah Silverman Show, just to name their top sellers.

NBC’s top sellers on iTunes, as many commentators have noted, are The
Office (currently the  No. 2 season download on the site, after
Showtime’s Weeds) and Heroes.  But scroll down the page and you start
to get a sense of how NBC could be racking up all those $1.99 charges.
The network has a strong bench. Number 3, 4 and 5 downloads are Scrubs,
30 Rock and Studio 60. Below them you’ll find series like Friday Night
Lights, My Name is Earl and the Law and Order franchises.

And unlike Comedy Central, which offers only the last dozen or so episodes of the Daily Show, NBC has gone for the Long Tail
play, digging deep into its archives to repackage old Saturday Night
Live episodes, Gen-X nostalgia like the A-Team, Xena and Saved by the
Bell and Baby Boomer classics like Dragnet, Rod Sterling’s Night
Gallery and Alfred Hitchcock Presents. All told, it has put some 1,500
hours of programming on iTunes, all of which could disappear in
December when the two-year contract with Apple runs its course.

Viewed with the benefit of hindsight, it’s almost as if Jeff
Zucker’s NBC were using the iTunes Music Store as a proving ground to
test the format and audience appetite before striking out on its own –
or rather with Rupert Murdoch’s News Corp. — on Hulu.com, scheduled to launch in October.

Could Apple have made a strategic blunder, letting NBC slip through its fingers? As the Times
points out, NBC’s defiance, following Universal Music’s rebellion
earlier this year, could embolden other networks, whose contracts will
presumably come up for renewal in the months ahead.

"No The Office, no Battlestar Galactica, no Heroes?," writes MG Siegler at ParisLemon. "Suddenly I’m starting to rethink video on iTunes. No Universal Music
Group tracks, no Fox movies? Suddenly I’m starting to rethink iTunes in
general. Apple is still in an utterly dominant position even
without NBC — its the music sales, not the video sales that drive the
service — but it could all come crumbling down rather quickly." (link)

Steve Jobs, asked recently what he most admired about Bill Gates,
answered that he envied Microsoft’s ability to work with its partners (link).
Both men bargain hard, but Gates seemed to be better than Jobs at
keeping his frenemies inside the tent. Has Jobs learned that lesson? We
may see next Wednesday, when we find out how he responds to Zucker’s
challenge, and what he plans to do next with iTunes, the iPods and
Apple TV.

In a rare display of pique and public one-upsmanship, Apple (AAPL) has answered NBC Universal’s (GE) decision not to renew its iTunes contract by halting sales of NBC’s fall season.

In a press release issued shortly after news of NBC’s decision appeared in the New York Times, Apple went public with what had been private negotiations, characterizing NBC’s latest bargaining position as a "dramatic price increase" and painting Apple — and its customers — as the aggrieved parties. The release read in part:

Apple declined to pay more than double the wholesale price for each NBC
TV episode, which would have resulted in the retail price to consumers
increasing to $4.99 per episode from the current $1.99. ABC, CBS, FOX
and The CW, along with more than 50 cable networks, are signed up to
sell TV shows from their upcoming season on iTunes at $1.99 per
episode.

“We are disappointed to see NBC leave iTunes because we would not agree
to their dramatic price increase,” said Eddy Cue, Apple’s vice
president of iTunes. “We hope they will change their minds and offer
their TV shows to the tens of millions of iTunes customers.” (link)

Although many press reports make the assumption that Apple intends to pull all NBC programming off its site starting Sept. 1 (see for example here), the language of the press release is ambiguous. The key sentence reads:

"Since NBC would withdraw their shows in the middle of the television
season, Apple has decided to not offer NBC TV shows for the upcoming
television season beginning in September."

Which when carefully parsed seems to be saying that Apple will not put up any new NBC material so as to avoid showing the beginning of a new season without being able to show the end.

NBC Universal, with nearly 1,500 hours of programming on iTunes, is Apple’s single largest content partner for digital video. Many Apple watchers were surprised to learn today that NBC’s programs — from current shows like The Office and  Heroes to archive material from Saturday Night Live — represent between 30% and 40% of the video downloads on iTunes. (See What iTunes Looks Like Without NBC.)

Although NBC and News Corp are scheduled in October to start putting content online in a joint venture called Hulu.com, it was expected that all of NBC’s content — old and new — would stay on iTunes until its two-year contract with Apple ran out in December.

Apple’s preemptive move this morning to call NBC Universal’s bluff and cancel, in effect, the network’s fall season — at least on iTunes — deprives NBC of whatever revenue and promotional push a presence on Apple’s Music Store brings them. It also strengthens Apple’s hand should negotiations resume. 

As one might expect, much of the analysis among the Apple commentators was harshly critical of NBC.

"Bottom line? Apple’s looking good here, championing users," wrote Michael Gartenberg, a tech analyst Jupiter Research. "Sometimes I think God put video content guys on the planet to make the music guys look progressive and visionary."

Curiously, some of the content NBC sells on iTunes is available for free on NBC’s websites, although not in a form that’s as easy to search or download. In any event, $4.99 sounds more like a bargaining chit than a final price. An investor at the Apple Finance Board points out that at $5 a show, 24 episodes of Heroes would cost almost $120, more than three times the price of the DVD set. "What are they thinking?" he asked.

Almost as shocking to Apple (AAPL) watchers as the news that NBC Universal is not renewing its iTunes contract is the news that the network’s content, according to the New York Times, represents 30% to 40% of digital video downloads on Apple’s site.

When did that happen?

NBC is hardly the Must See TV powerhouse it was in the days of Friends and Seinfeld. It routinely runs fourth in the Nielsen broadcast TV ratings, and on iTunes it has to compete with not just ABC, CBS and FOX, but with 63 other networks, including youth-oriented powerhouses like Comedy Central, MTV and Nickelodeon. Comedy Central alone offers the Daily Show with John Stewart, the Colbert Report, South Park and the Sarah Silverman Show, just to name their top sellers.

NBC’s top sellers on iTunes, as many commentators have noted, are The Office (currently the  No. 2 season download on the site, after Showtime’s Weeds) and Heroes.  But scroll down the page and you start to get a sense of how NBC could be racking up all those $1.99 charges. The network has a strong bench. Number 3, 4 and 5 downloads are Scrubs, 30 Rock and Studio 60. Below them you’ll find series like Friday Night Lights, My Name is Earl and the Law and Order franchises.

And unlike Comedy Central, which offers only the last dozen or so episodes of the Daily Show, NBC has gone for the Long Tail play, digging deep into its archives to repackage old Saturday Night Live episodes, Gen-X nostalgia like the A-Team, Xena and Saved by the Bell and Baby Boomer classics like Dragnet, Rod Sterling’s Night Gallery and Alfred Hitchcock Presents. All told, it has put some 1,500 hours of programming on iTunes, all of which could disappear in December when the two-year contract with Apple runs its course.

Viewed with the benefit of hindsight, it’s almost as if Jeff Zucker’s NBC were using the iTunes Music Store as a proving ground to test the format and audience appetite before striking out on its own — or rather with Rupert Murdoch’s News Corp. — on Hulu.com, scheduled to launch in October.

Could Apple have made a strategic blunder, letting NBC slip through its fingers? As the Times points out, NBC’s defiance, following Universal Music’s rebellion earlier this year, could embolden other networks, whose contracts will presumably come up for renewal in the months ahead.

"No The Office, no Battlestar Galactica, no Heroes?," writes MG Siegler at ParisLemon. "Suddenly I’m starting to rethink video on iTunes. No Universal Music
Group tracks, no Fox movies? Suddenly I’m starting to rethink iTunes in
general. Apple is still in an utterly dominant position even
without NBC — its the music sales, not the video sales that drive the
service — but it could all come crumbling down rather quickly." (link)

Steve Jobs, asked recently what he most admired about Bill Gates, answered that he envied Microsoft’s ability to work with its partners (link). Both men bargain hard, but Gates seemed to be better than Jobs at keeping his frenemies inside the tent. Has Jobs learned that lesson? We may see next Wednesday, when we find out how he responds to Zucker’s challenge, and what he plans to do next with iTunes, the iPods and Apple TV.

UPDATE: Apple has called NBC’s bluff. See Apple to NBC: Drop Dead.
 

The Apple (AAPL) event set for a week from today has unleashed a torrent of speculation, including two particularly enticing rumors that surfaced overnight.

Wi-Fi Music: MacDailyNews and 9to5Mac both posted brief reports suggesting that Steve Jobs next Wednesday might introduce new iPods that could download music and other content over the airwaves. MacDailyNews  framed their tip like this:

Apple will debut "wireless-capable iPods"
next Wednesday along with "wireless iTunes Store sales," enabling users
to buy content "directly from iPod, iPhone," a single source often
familiar with Apple’s digital content plans tells MacDailyNews…. This is a rumor. We have no other information. We
cannot confirm this information independently at this time, but felt it
plausible enough to bring to your attention. (link)

"I think it would be a bold and killer move by Apple to go with a wifi iPod and begin direct to iPhone and iPod music sales," writes one Apple watcher on The Mac Observer’s Apple Finance Board. "I would be surprised and impressed by how aggressive that move would be."

High-Definition Video: Carl Howe at Blackfriar’s Marketing puts the timing of the Sept. 5 Apple event together with an Aug. 27 press release from Akamai (AKAM) and gets this:

What has gone more or less unnoticed is the fact that Akamai,
Apple’s long-time Internet content partner, has announced that it is adding high-definition video to its Internet distribution offerings.

A
coincidence? Perhaps. But add the fact that Apple TV, a product whose
revenue is being recognized as a 24-month subscription model like the
iPhone, sports high-definition outputs, yet has no high-definition
iTunes content yet, and you’ve got a high-definition shoe ready to drop
sometime; the only question is when. (link)

Two curious lines of speculation with nothing much more than wishful thinking behind them. They may not have much predictive power, but they are strong indicators of the direction Apple’s users and investors would like to see the company going.

Apple (AAPL) made iTunes subscribers in the United Kingdom wait until today for the chance to download  TV shows through the British Apple Music Store and, inexplicably, it’s making them pay extra for the privilege. Individual shows cost £1.89 — $3.81 by today’s exchange rate — almost double the $1.99 Apple charges U.S. customers.

The offerings on apple.com/uk/itunes/ are relatively limited. They are mostly American shows from ABC Studios, Disney Channel, MTV, Nickelodeon and Paramount Comedy — with a few British series thrown in. According to Apple’s press release, they are offering 28 programs in all:

• Disney’s ABC Studios’ dramas and comedy-dramas
  “Lost,” “Desperate Housewives,” “Grey’s Anatomy,” “Ugly Betty,”
  “Commander in Chief” and “Night Stalker;”
• Disney Channel’s
  renowned children’s programming including “American Dragon: Jake Long,”
  “Kim Possible,” “That’s So Raven,” “The Suite Life of Zack and Cody”
  and Playhouse Disney titles “Handy Manny,” “Little Einsteins” and
  “Mickey Mouse Clubhouse;”
• MTV’s reality favorites “Pimp My Ride,” “Barrio 19,” “Bam’s Unholy Union,” “Laguna Beach,” and “My Sweet Sixteen;”
• Nickelodeon
  children’s programming “Avatar: The Legend of Aang,” “Drake and Josh,”
  “Dora the Explorer,” “Genie in the House” and “SpongeBob SquarePants;”
  and
• Paramount Comedy hits “South Park,” “Comedy Blue,” “Jongleurs Unleashed: Part I,” “That 70’s Show” and “The World Stands Up.”

"You’ll never miss your favourites," reads the website’s promotional copy, with its charming British spelling. "Watch them on your Mac or PC. Or sync them to your
video-enabled iPod and watch them on the go. All without sitting
through a single advert."