NBC Universal, Apple's iTunes deal sours

A WAR of words has erupted between NBC Universal and Apple, laying bare the tension between media and technology companies as they fight for advantage in the burgeoning market to sell video online.

The two companies had been negotiating to renew NBC's contract to sell its television programs through Apple's iTunes digital media store. However, the talks soured after NBC told Apple it would not renew the original deal because of frustrations about iTunes' pricing policy and anti-piracy controls.

Apple accused NBC of trying to push a "dramatic price increase" on consumers and said it would drop the network's new autumn television programs from iTunes.

NBC countered that Apple's pricing strategy was "designed to drive sales of Apple devices, at the expense of those who create the content that make these devices worth buying".

The dispute is another reminder of the growing discord between media and technology companies as they try to hammer out new business models to sell film, television, music and other content on the internet.

Universal Music, the largest music company, this year informed Apple that it would not renew its long-term iTunes contract and has since begun to supply rivals, such as Wal-Mart and Amazon.com. Universal and others have long complained that Apple has used its dominance in the online music market to force them to accept a uniform, 99c-per-track pricing model while it cashes in on lucrative sales of its iPod device.

As they seek to gain a foothold in the burgeoning online video market, film and television executives are desperate not to repeat the music industry's mistakes. As such, NBC is demanding greater power to price its programs on iTunes, including the ability to bundle episodes at special rates. NBC also wants Apple to install stronger filters on the iPod to block it from playing pirated materials.

NBC first signed with Apple in December 2005. Its programs now account for about 30 per cent of iTunes' television sales, although the resulting revenues still pale in comparison with the network's traditional advertising streams. NBC says that it still hopes to reach an agreement with Apple before their contract expires in December.

But they have also drawn closer to Amazon.com, which is now selling downloads of NBC programs, and expect to deepen that relationship.

NBC is also preparing to launch an online video portal with News Corp called Hulu.com that will feature its film and television clips.