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Zucker: Paid downloads not a business - October 29, 2007

On the morning that News Corp. and NBC Universal launched the private beta of their online video venture Hulu, NBC/U CEO Jeff Zucker took a few shots at iTunes and Apple over breakfast.

In an interview with the New Yorker's Ken Auletta, Zucker suggested that his company's decision to walk away from its TV download deal with  iTunes was not a hard call.

According to a report of the interview on the Variety Web site Monday, NBC/U booked only $15 million in revenue during the last year from sales through iTunes.

"We don’t want to replace the dollars we were making in the analog world with pennies on the digital side," he said.

According to Zucker, NBC/U tried for months to persuade Apple to allow it to experiment by raising the price of a download from $1.99 to $2.99 on a single series, only to be rebuffed.

Apple also refused to discuss cutting content owners in on the revenue it earned from iPod sales, according to Zucker.

"Apple sold millions of dollars worth of hardware off the back of our content and made a lot of money," he said. "They did not want to share in what they were making off the hardware or allow us to adjust pricing."

There are a lot of reasons Zucker would be downplaying the importance of iTunes to NBC Universal right now. Their deal still runs through the end of the year, for one, so it's possible they're still negotiating. The networks and studios are also facing the prospect of a writers' strike this week, largely over the formula for sharing revenue from new digital platforms, and they've been working hard to convince the writers that there are no such revenues at the moment.

But if Zucker's $15 million figure is even in the ball park it suggests that the paid download market for TV episodes is indeed tiny. According to Variety, NBC/U content currently represents 40% of iTunes' video sales. If that's only worth $15 million, it puts total iTunes video sales at $37.5 million over one year.

Whether the ad-supported model favored by News Corp. and NBC/U for Hulu will produce more revenue for content owners remains to be seen. But the bar certainly isn't very high.




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