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NBC’s dispute with Apple over the company’s fixed pricing policy for downloads of its TV shows from iTunes is well worth tuning into.

The conflict is based on NBC’s demands for more control over the pricing of its content in iTunes, while Apple is insisting that variable pricing simply isn’t an option.

Well, here’s the kicker: Apple has already rolled out variable pricing in iTunes. It just depends on where you live. And, it’s frankly a bit of an outrage...

The NBC scuffle moved into the public domain last week following a batch of private negotiations, which failed. As such, NBC said the deal it has in place with Apple will be allowed to lapse in December.

Apple then went on the attack, describing NBC as "greedy and an attack on consumer interests", according to the New York Times.

"We are disappointed to see NBC leave iTunes because we would not agree to their dramatic price increase," said Apple VP Eddy Cue, before adding: “We hope they will change their minds and offer their TV shows to the tens of millions of iTunes customers.”

All of this is pretty lamentable, given Apple's history of greed and attacking consumer interests here in the UK.

Apple charges UK-based iTunes users £1.89 to download an episode of a TV show. Meanwhile in the US it charges just $1.99 for what appears to be exactly the same thing. One British Pound buys you two US Dollars these days. So what’s that all about? Has Apple ever attempted to explain – much less justify – the difference?

It’s the same with songs at iTunes. In the US you can download tracks for 99 cents, but in the UK it costs 79p (about 60% more, for no apparent reason). Yowzah.

With games, which Apple also sells, it costs $4.99 in the US for a download or, if you’re unlucky enough to live in the UK, a whopping £3.99 (an 80% premium to US pricing).

Can anybody logically explain why I’m expected to pay twice as much as a US-based iTunes user? Why the savage increase in price? Does it cost any more to distribute this content in the UK? Is Apple subsidising its US operations by charging Europeans double? And with the way exchange rates are going it could get proportionately worse...

The Office of Fair Trading has previously spotted this issue and referred it to the European Commission, as long ago as 2004, and consumer group Which? recently filed a complaint, but we’re still waiting on any significant action.

Apple’s NBC dispute harks back to earlier industry demands about the need for variable pricing. Music execs previously argued that archive material should be made available for a lower price, while newer songs should be priced more highly. Apple has resisted all such requests.

But why? Well, Steve Jobs has held firm in his belief that fixed pricing is the way forward, with one eye on creating and maintaining a simple proposition for consumers, and the other on a consistent framework that content owners can sign up to. If you bend the rules for one, you surely bend them for all.

Certainly there’s some sound logic in Jobs' thinking, although the content owners argue that Apple’s content pricing policy is ultimately aimed at driving sales of Apple’s hardware, notably the all-conquering iPod. Apple makes peanuts from selling music, but sales of its devices generate healthy profits.

It will be very interesting to see how all this pans out, as a move towards variable pricing is surely inevitable, even if iTunes resists. It could be a false dawn - I'm not so sure that lower pricing will drive demand for niche / archived artists, I just don't think it works like that with something like music.

Who will budge first? And who knows best? Jobs, or NBC?

Chris Lake

Published 3 September, 2007 by Chris Lake

Chris Lake is CEO at EmpiricalProof, and former Director of Content at Econsultancy. Follow him on Twitter, Google+ or connect via Linkedin.

582 more posts from this author

Comments (5)

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Bored

And Apple also does variable pricing with its computer line up too... dont really see the relation to variable song pricing but hey, it'd make a good headline.

Consumer interests??? Is it in the consumers interest to have $2 shows or to have $5 shows? Perhaps in this upside down world Apple is in fact here on the consumers side (as it is in Apples interest that consumers have lots of media to store on their ipods)

Jobs has stated that he would like to have one music store for all or Europe but is not contractually obliged to. This would also point to Apple not having the final say in UK pricing anymore, and I cant see the record lables willing to drop the price to a US equivalent, despite being in the consumers interest

about 9 years ago

Avatar-blank-50x50

Tedious

"Has Apple ever attempted to explain – much less justify – the difference?"

Apple's price is a formula based on the wholesale price of the song or album. The cost difference between regions is due to separate contracts having to be negotiated for each country or area, depending on copyright jurisdiction.

Translation: 20th Century laws are being applied to 21st Century businesses.

When the wholesale price goes up, so does the retail price. None of this has anything to do with variable pricing, as the term has nothing to do with price consistencies between outlets but price fluctuation at each store.

Google "international licensing" +movies,
and "international licensing" +music for more on your issue, and "variable pricing vs fixed pricing" for more on the issue at hand.

about 9 years ago

Avatar-blank-50x50

Jay

Check the cost of doing business in the UK and remember the high VAT in the UK and that all taxes are added after the sale in the USA not in the listed price as in the UK. Also Apple would have a separate contract to sell TV shows in the UK and so the wholesale cost for the UK may very well be higher. These separate contracts for each little thiefdom errr country in the EU is another reason the cost of goods and services are higher in Europe than the USA. The USA is 1 country with 1 iTunes store serving 300 million people, The EU claims to have a market of over 500 million people the only problem is that you have to have 27 different stores each with their own currency each with special rules and so on and so on. Once (and IF) the EU gets a clue and opens the EU up to business across all 27 member states then you will see better pricing. And while I am ranting on the EU I will through in - stop the outrageous state sponsored discrimination of the ROM people.

about 9 years ago

Avatar-blank-50x50

pippa

Well, you got your wish. Now they moved their content over to Amazon Unbox, which isn't even available in the UK.

I can't believe in this day and age, people don't realize the cost of doing business changes from region to region. I hear the same complaints from UK users on other US-based sites all the time. Yet I see no articles questioning US having to pay the VAT when we use UK sites. Last I knew, UK users didn't have to pay OUR sales taxes.

about 9 years ago

Chris Lake

Chris Lake, CEO at Empirical Proof

All good points and I'll be asking some questions about all this to the content owners.

I obviously understand that business costs differ from region to region, but I find it very hard to believe doing business in the UK 'costs' 60%-80% more than in the US, especially when we're talking about downloads, with no physical assets or distribution chain.

Much of my ire stems from the fact that we have always been charged a lot more for our music than US consumers, especially on CDs. That's no slur against US consumers of course, and certainly not anything Apple is responsible for, but there's a long standing feeling in the UK that we've been - comparatively - ripped off for years by the music industry. Is this more of the same?

Pippa - as far as I know US users shouldn't be paying any VAT. There are probably exceptions from product to product, but that was my understanding.

Jay - good points about tax, which admittedly I hadn't factored into to my percentages. Point is, the wholesale costs are higher in the UK, so Apple charges a higher price, right? I don't think it is much of a jump for it to charge a variable price within one territory using the same mechanics - that way it would have held onto NBC and iTunes would have been better for it. I do feel that this is tail wagging dog, with regards to who sets the pricing, and that NBC had no choice but to leave.

Wallace - I hear ya. My finger is firmly pointing at the content owners. I do however feel that Apple has potentially set a dangerous precedent (for itself) by not embracing NBC's demands.

about 9 years ago

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