Welcome to Zuckerland (Ongoing Coverage)
In case you hadn't heard, the executives at NBC think they're freaking geniuses. They've just figured out the secret to saving the company. It involves doing good business in a fantasy world that only exists in NBC head Jeff Zucker's mind. Inside sources tell me that Jeff privately calls this realm Zuckerland.
In Zuckerland, Apple is a big, bad, bully, demanding so much of the poor, defenseless television networks that working with them no longer makes sense.
In Zuckerland, Rupert Murdoch is the nice guy who's going to help NBC fight the bully, Hulu.com is the next YouTube, and NBC will once again become the premier purveyor of quality television broadcasting, on the backs of such promising hits in the making as "Bee Movie" inspired mini episodes that Entertainment Weekly calls "most promising" among NBC's 2007 fall lineup.
In Zuckerland, customers on iTunes pay $4.99 per episode for NBC shows, which, though it may sound ludicrous at first, actually makes perfect sense within this fantasy world, because in Jeff Zucker's mind, this is war with Apple, and wars cost a lot of money. So he'll need some funding from all those hardcore customers on iTunes for the effort.
Hooray, I am the best CEO in all of Zuckerland
Of course, unfortunately for NBC, Zuckerland is imaginary, and the real world tends to operate on different rules. Rules such as, if you call out Apple wrongly for being a bully, their PR department will bite back, and reveal you for what you are: a greedy son of a bitch. Or, that Rupert Murdoch is happy to 'partner' with NBC on Hulu, but is not pulling Fox shows out of iTunes Store, because iTunes is sending Murdoch nice, fat pay checks every month in exchange for selling his shows. Or, that if you try to gouge your own fans, things tend to get ugly.
Over the past year, I've personally spent over $300 on iTunes Store purchasing NBC shows, including dozens of episodes of The Office, Heroes, and My Name is Earl. $1.99 per episode has felt expensive at times, but on the expensive side of fair, which is a price point I'm not opposed to paying, especially during stretches of high quality television. But apparently that ain't enough for Jeff Zucker.
Part of me wants to write a nice letter to NBC to try to convince them to take this back. But the part of me with brains realizes that the letter would disappear into the Zuckerland post office, and never be seen again. So screw that. NBC has lost a customer here, and said customer has a feeling that things are only going to become uglier from here on out.
Which is a pity, because NBC has some really good, struggling shows, and I doubt this will help. So sign here if you think Zuckerland is a joke.
Update: This one's almost too ludicrous to be true. But remember. In Zuckerland, even the seemingly mundane turns out to be almost depressingly misguided and unfortunate.
As my friend and fellow blogger, Gedeon Maheux, points out, it turns out that Hulu effectively translates to "cease and desist" in Swahili. The sad part is, it's obvious that this is far from a self-deprecating joke, and simply another stunning display of rash and misguided decision making, courtesy NBC. It's funny in the way The Office is funny, except these painfully awkward moments aren't scripted. This is real.
I'm still holding some hope to the theory that this is all a massive publicity stunt and intricately planned, leading towards a finale featuring Zucker comically dancing off stage hauled off by a giant hook, followed by a retraction of everything that NBC has done over the past few days along with a public apology for humor in bad taste. Then we can all clap and pretend that this never happened. But I think I'm being overly optimistic.
Update 2: This is the part where the wrecked car on the side of the road that you've been staring at with morbid fascination while driving slowly past it suddenly explodes, rather unnecessarily. Predictably, NBC is entering damage control mode, but it seems to be a case of too little too late, with some extra bullshit sprinkled in, because, you know, it's the Zuckerland national spice. Below, some key quotes, along with a personal translation that strips out the PR double talk. If you don't want to wade through the BS, what's left is the distinctive mix of paranoia, confusion and fear that is the mark of a corporation that doesn't understand its customers, is backed into a corner, and is too chicken to fess up and apologize.
We never asked to double the wholesale price for our TV shows. In fact, our negotiations were centered on our request for flexibility in wholesale pricing, including the ability to package shows together in ways that could make our content even more attractive for consumers.
We asked Apple nicely to triple the wholesale price, for us. Because, you know, our fans deserve it. Making our shows more expensive makes them feel more valuable you know. And we also wanted to spread the good word about our shows by providing our fans an easy way to download related shows together, because we feel that the whole à la carte model Apple built iTunes around doesn't serve our customers' needs. But the bullies in Cupertino refused. Can't you see?
It is clear that Apple's retail pricing strategy for its iTunes service is designed to drive sales of Apple devices, at the expense of those who create the content that make these devices worth buying.
Sure, we get more per purchase than we do with DVD sales, and sure, we get a bigger share than Apple, but how does that make sense? WE'RE the ones selling Apple's iPods. Can't you see?
In addition, we asked Apple to take concrete steps to protect content from piracy, since it is estimated that the typical iPod contains a significant amount of illegally downloaded material.
The iPod is like, used by everyone. And we're the ones who sold it to everyone, by like, making the TV shows that people watch on them. And most people who use iPods are pirates. And they're watching our shows for free. So all we asked Apple to do was to only allow DRM protected videos to play on iPods, and they refused. Can't you see?!
Recommended Reading
NBC Will Not Renew iTunes Contract (NYT)
Apple's Response (Press Release)
Biting the Hand that Feeds You (Gedeon Maheux)
What Did Apple’s Five Fingers Say to NBC’s Face? SLAP! (Cult of Mac)
NBC wants more DRM, higher prices from iTunes: report (Ars Technica)
Daring Fireball
Apple to stop selling NBC Television shows (TUAW)
An Open Letter to NBC re: Leaving Apple’s iTunes Store (iLounge)
NBC 'Disappointed' in Not Negotiating New iTunes Pact (Bloomberg)
And if you liked it, digg it!
Comments
Up until this point, there have been 40 responses to “Welcome to Zuckerland (Ongoing Coverage)”:
I do not want to pay any money for TV shows. 1.99 USD per show was stupid, but 4.99 USD per show is hilarious.
P.S I heard somewhere Suprnova.org is back. Long live Suprnova !!!
The funny part is that NBC knows what they are doing is about as far from what customers want as it gets. It will take a market failure with Hulu or Amazon to wake them up though. Same old story, and in the meantime consumers lose.
Unless NBC finds another way to get their shows online for a reasonable price AND in an easy to use distribution method, people will just pirate them. It's too bad, The Office and Scrubs are the two best shows on TV. Oh well, I'll just use my DVR and NBC will get nothing.
Phil, everything you write is awesome. Please keep it up. I love it.
Well that stinks. I guess I'll just have to go back to watching them for free.
Get it from BitTorrent for free or buy it from NBC for $5... tough decision.
Phill Ryu
wph, totally agree with that, I'm REALLY hoping that this isn't the straw that breaks the camel's back with struggling shows (in terms of ratings) like 30 Rock and My Name is Earl, and hell, even The Office. That would be truly tragic.
dabrainiac, thanks! Comments like yours help me keep this up!
the problem is that pirated MP3 files are known to rape or even murder non DRM video files... i often worry about puting videos on my ipod.
(concrete steps)
You know, IMHO, as a foreigner living abroad, where pirated movies, tv shows, and any other media can be found on every street corner, I have yet to understand any decisions that Film & TV Industry players are making. For example, why price DVDs at $20 in a land where that is 1/6 of a person's monthly income?!? In the same regard, $4.99 an episode! The only thing that will come from this, is an influx in Piracy and BitTorrent. (As Rohit said, brush off the dust on suprnova!) For those who do buy at $4.99, the money will go directly into the coffers of the RIAA and MPAA for legal battles. Zucker, we salute you!
Who pays 300$ for TV shows that were on the TV for free??? Your a tool.
I'm with you man... before iTunes, I never gave a dime directly to any TV network. I used an ariel antenna and watched whatever. I've probably spent $200 this year on NBC content between my wife and I. No more. I'll torrent the shit out of their stuff now.
While I think this move by NBC is stupid, paying for otherwise free content is even dumber ... and yet for some illogical reason people do. Then they pay 99¢ for a stupid ringtone and pay monthly charges to listen to ad-ridden TV and digital radio - things that should be free. As long as people continue to pay for content that should be free, people like Zucker will have all the reason they need to believe they are geniuses; and we all suffer for these fools.
zuckerland comes up with the 'brilliant' plan of trying to create package deals for content. let's say you're an al pacino fan & want to download SCARFACE. since they can't move that boxoffice turd GIGLI which also stars the actor, zuckerland thinks "let's package them together & make people buy both on the merits of the more popular content".
the above situation of the package deal for content is actually a point of contention by NBC. NBC wants the ability to package content & APPLE is resisting that idea (good for steve jobs!). the cited example is steve carell stars in the popular itunes download THE OFFICE. NBC wants to also attach THE 40 YEAR OLD VIRGIN since he also stars in that movie. this idea is ridiculous. the 40 YEAR OLD VIRGIN is barely worth renting, but i would never want to purchase it let alone have NBC tell me which content i also have to purchase. this idiotic greed by NBC will drive people to bit torrent sites & only make NBC the loser.
Zucker really looks like a turd in that picture. In fact, Tom Cruise couldn't be blamed for saying he looks smug. It's a fine picture to represent the most hated man in America today...the distinguished Jeff _ucker.
well i just have one word: Torrent !
I was buying from iTunes.. now ill go back to iTorrent. NBC sucks
I have no opinion in this matter. I just wanted to say you don't write very well.
Makes me sick to see this.... network executives walk with satan.
TV shows earn around US$0.25-0.65 per viewer depending on a number of factors. While the $2/show price point sounds outrageous when considering the show's ad revenue, the carry-over for the network is lost. A very large number of people are simply too lazy to switch away from some dreadful program which runs before or after a good one, so that advertising's lost. The PVR is already helping cause this loss of eyeballs.
So let's be generous and double the amount a network would earn via advertising, giving more than just some benefit of the doubt by claiming that for every hour of good programming someone chooses to watch, he'll also watch a bad hour. Even in this rather exaggerated scenario, no network can expect to earn more than $1.30 per viewer for an hour-long episode of nearly any show.
Dammit. I tried to do the math in their favour but it just doesn't work. They want $2 for a half-hour episode of some series even though if I watched it when they broadcast it they'd only expect to see four bits, a two-fold premium. For lower quality than I can get for free -- and faster -- on-line.
All of us outside the US who want to watch a particular show when it first comes out, without the crap overdubs and six-month to three-year lag, are willing to pay some price. For me that price is a buck. Knock the price down to that (still a hell of a premium) and I'll fork over the cash for something good like Scrubs. Other people I know actually think TV programs are important and are willing to fork over the higher price. Two bucks, yes; five bucks, no. At five bucks they're asking me to explain how torrents work.
NBC? Yep, they're idiots.
If I were on the board of NBC, I'd be asking for Zucker's resignation about now. It will be interesting to see what NBC's earnings are like in the next few quarters, as they've cut off a very lucrative stream of revenue, for which they have to do almost no extra work.
Sure, $4.99/show is ridiculous, but so was Apple's response to the start of negotiation: dropping NBC completely. The factoid that was completely left off of the "Zuckerland" post was that NBC content was 30% of all iTunes video sales. (NBC's parent company owns both NBC and SciFi.)
Being a major driver of a channel typically causes a renegotiation of the cost of doing business on that channel. So, rather than negotiate - which most companies do - Apple decided to throw the baby out with the bathwater...
...and the response from your posting is going to be the typical response: "I don't want to pay anything for a TV show, so I'll grab it somewhere for free." That's nice.
The story's not over yet, I suspect - at some point both NBC and Apple will wake up...
Is this color scheme almost impossible to read for everyone else, or have I somehow begun using light grey text without selecting it in my options?
It wouldn't occur to him to ASK what the audience what they might want to watch because he gets his marching orders from bean counters and he's got to bring in figures to Wall Street (who don't watch either because broadcast sucks and doesn't give them anything either.)
The problem is that we've reached a tipping point in media where we're no longer going to sit still for what the demographics say.
Its very undemocratic of us but we're sick and tired of shutting up because the 'majority rules'; so we're taking our ears and eyeballs elsewhere, like podcasts (TiVO on steroids) because we want to watch what WE want to watch and we're willing to pay for it but the crap the broadcasters isn't worth a damn or more than a buck.
The first shows are amateurish, but remember the root of amateur is AMAT which is Latin for love.
We love to create it and other people love to consume it.
Zuckerman, NBC, the whole gang of Old Media dinosaurs are so pathetically out of step. Everytime they smell an opportunity to retrench themselves in their old economic model of scarcity and screwing the "consumer" they leap for it.
Welcome to the New New World. We're not consumers. We're citizens. And we won't pay another nickel for your old greedy weasel ways any more. Those days are done.
No new NBC shows on iTunes? Guess it's back to the BitTorrent.
Losers.
Cheers.
NBC is being greedy on this. They already get more per episode than Apple. Sure Apple sells and makes money on iPods, but they are supposed to, they invented it.
Apple made a smart move. Fans will just get the shows free via Tivo and torrents. Apple's iTunes store "created" this revenue stream and now it will dry up for NBC.
I'm boycotting NBC until they come to their senses.
Agree completely. My iPod, like most peoples, is 95% filled with stuff I've paid for once already (and some of it twice!). NBC should build its own fucking media player if it wants to lock it down. And Zucker is in fantasyland if he thinks 4.99 is a fair price for a 45 minute program that people will watch once, maybe twice at the most. In all seriousness Steve Jobs should, if he hasn't already, tell Zucker and everyone like him to go blow themselves. If NBC and the other big content companies could get away with it, they'd charge your credit card every time you hummed a tune and put you in prison for making a mix CD for a friend's birthday.
@ Rob D
It is true that NBC shows make up for 30% of the iTunes Store sales. But, note that iTunes Store is a near-loss business. The 30% reduction will only result in business, whereas the profit will remain unaffected. So, it's really not that big a deal for Apple anyways.
Someone needs to drop Zucker a memo title "BitTorrent, the basics of a file sharing technology that you stupid executives have obviously missed". Honestly, who would EVER pay $5 for an episode of anything. "Hi I wipe myself with 20's when I go to the bathroom and I love the new price NBC has suggested for their TV programs."
Apple's response was not rediculous at all - a huge benefit that NBC gains from being on iTunes is that people casually interested in a new series can check out the pilot and a few episodes in a month or so, when they have some free time. That gets them hooked on a show, they catch oup on iTunes, and perhaps start watching when it airs (this is what happened to me with Heros).
If Apple kept NBC for the first half of the season, NBC would get all the benefits of people being able to check out a show a little later and then follow it when it airs, and Apple gets dumped mid-season when the contract expires. Why should NBC get this huge benefit and Apple gets shafted? Apple's move if anything is to demonstrate to NBC (if they did not understand already, which I suspect very much that they did) this hard to quantify benefit.
Furthermore NBC's plan was to keep gaining revenue from iTunes until Hulu ws fully "armed and operational" as it were. Why should Apple fund NBC's efforts to break away with shrt-terms iTunes sales?
Apple is wholly in the right on this one, as is witnessed by every other network shrugging and continuing to do business on iTunes. They know it's good for everyone, Apple and other networks.
It's a shame too because NBC had some interesting looking pilots - but I'll never know since I preferred buying shows I liked on iTunes. Perhaps in a year or two i might rent some series discs on Netflix, if any of the new series even survive that long without a way for casual viewers to watch a few episodes.
Rob D--
You claim that Apple was foolish to "drop NBC completely", but that's not quite what they did--they're simply NOT ADDING the NEW seasons of NBC's shows. In other words, you'll still be able to download *last* season's shows (up through December, anyway), just not *this* season.
This makes sense because otherwise anyone who buys a "Season Pass" will be screwed, since they'd have their subscription cut off halfway through the season.
On a separate note, bear in mind that while the TV networks may not be nearly as reliant on iTunes (yet) as the music labels are, this still is going to hurt NBC more than it will hurt Apple. Here's the proof:
As of January, iTunes had sold over 50 million TV episodes (according to a press release) in about 14 months. It's been another 8 months since then, and iPod/iTunes purchases keep on increasing, so it's safe to say that they've probably doubled that number in less time (let's call it 90 million episodes, or about 7.5 million/month).
This weeks' pissing match has revealed that NBC accounts for appx. 30% of iTunes TV show sales, and they get appx. 65% of the revenue, so we can assume that NBC has basically just screwed themselves out of (0.3 x 0.65 x 1.99 x 7.5 million) = $2.9 million per month, or over $35 million/year.
Now, that's not a whole lot for NBC, but it's still a hell of a lot of money to walk away from (especially since it's effectively pure profit).
Apple, on the other hand, is only losing $19 million per year without NBC's shows. Again, not chump change, but about half of what NBC loses.
Furthermore, the *only* leverage NBC has here is the *assumption* that losing their shows will somehow hurt iPod sales. Seriously, now, is there anyone out there who would have bought an iPod before who is now going to say "What? I can't buy HEROES off of iTunes anymore? Well, then, I'm gonna buy a Zune instead!" I seriously doubt it. They'll simply torrent/DVR/whatever the TV show and put it on their iPod anyway. Less convenient, but hardly a deal-killer.
Hey Zucker:
THANKS FOR CALLING ALL US IPOD OWNERS THIEVES. WE REALLY F-ING APPRECIATE IT AND NOW WE'LL GLADLY PAY YOUR HIGHER PRICES.
From the hulu.com website:
Objectively, Hulu is short, easy to spell, easy to pronounce, and rhymes with itself. Subjectively, Hulu strikes us as an inherently fun name, one that captures the spirit of the service we're building.
This was in a letter entitled "A Hulu hello" written by Jason Kilar, CEO, Hulu. I'm not sure why Mr. Kilar didn't capitalize the word hello in the title. Aren't CEO's supposed to know grammar?
1. "Hulu ... rhymes with itself." Doesn't EVERY word rhyme with itself, since saying the word twice sounds exactly the same both times? For example, hulu rhymes with lulu and hulu rhymes with hulu. It makes no sense to me to state that "Hulu ... rhymes with itself." Duh.
2. "Hulu ... captures the spirit of the service we're building." So then Mr. Kilar is implicitly acknowledging that the service they are building is for the spirit of "cease and desist" purposes, if the word hulu does translate to that phrase.
[...] The best coverage by far I’ve read on this whole debacle is by Phill Ryu…in a article entitled “Welcome to Zuckerland” he picks apart NBC’s complaint with Apple, their ensuing followup damage control statements, and highlights “…the distinctive mix of paranoia, confusion and fear that is the mark of a corporation that doesn’t understand its customers, is backed into a corner, and is too chicken to fess up and apologize.” Foot, meet bullet. Bullet, meet foot. [...]
On your 1st update, get the facts right, Hulu is not Swahili word. How do i know, English and Swahili are my national languages (Kenya).
The point that seems to be being missed here is that nobody has been able to come up with alternative online sales system to rival Apple's. This stuff can't be done piecemeal...you need to sell the whole ecosystem (device, store, computer, and DRM). Look, Microsoft has all the money in the world and access to some of the best people in the trade and they still royally f-ed up their online store. So what if NBC has Hulu or a dozen outlets, the content will have to be DRM'd (based on their stated level of piracy paranoia) and unless I am missing something they won't be able to use Apple's DRM scheme. This means these NBC videos will not play on an iPod (unless they are unprotected).
So I can either:
A. Ditch my iPod AND buy whatever digital turd NBC craps out to play their content AND sign up for a new pay service.
OR
B. Sign up for NetFlix and use a free application like HandBrake or iSquint to rip the video into a format I can use.
Gee, tough decision.
[...] PhillRyu.com - Welcome to Zuckerland (Ongoing Coverage): In case you hadn’t heard, the executives at NBC think they’re freaking geniuses. They’ve just figured out the secret to saving the company. It involves doing good business in a fantasy world that only exists in NBC head Jeff Zucker’s mind. Inside sources tell me that Jeff privately calls this realm Zuckerland. [...]
[...] Since the beginning of the month, I’ve been reading up entranced by the bitter fight between NBC and iTunes, which had been well covered by Phill Ryu. This is an interesting case where someone at NBC sadly thought that this was a good idea but have clearly miscalculated. [...]
[...] Welcome to Zuckerland: NBC’s Stupid Move n case you hadn’t heard, the executives at NBC think they’re freaking geniuses. They’ve just figured out the secret to saving the company. It involves doing good business in a fantasy world that only exists in NBC head Jeff Zucker’s head, called Zuckerland.[…] Thanks to DaBrainiac for providing this nice story on Digg. [...]
[...] read more | digg story [...]
William Wilkinson
September 01st, 2007 at 6:37amThe children of Zuckerland need their 2nd yacht people!