Three cheers for Apple!

Today, Apple announced that they told NBC/Universal to take a flying leap. I’m honestly very happy about it. While I’m somewhat unhappy that I won’t be able to download Battlestar Galactica’s last season from the iTunes music store, and the same goes with Heroes, that doesn’t mean I won’t have these programs in my iTunes library. It just means that I’ll be using my EyeTV/DVR to record them, and QuickTime (and my Turbo.264 accelerator) to compress it to something I can view on an iPod, Apple TV, Xbox 360, or my notebook.

The difference is that NBC/Universal won’t be getting a dime from me anymore.

So I’m thrilled that Apple stood up to the 250% rate hike proposed by NBC/Universal, and decided (correctly, in my view) that the world would be better off without them. It sets an important precedent: Apple won’t buckle when a provider wants to charge substantially more than the wholesale value for its product. I’m very pleased that Apple stood up and acted in the way I’ve long believed they would: as a company that believes in giving their consumers a fair deal for a fair price. That Apple would have no part in NBC/Universal’s fleecing of the consumer, and stood up for my interests.

(This wasn’t always true of Apple, but I don’t count the period when Jobs was running Pixar and NeXT)

I suspect that NBC is going to find out that iTunes was a far better deal for them than they knew.

What’s going to happen? NBC/Universal will probably use Windows Media and their own portal/service, and that service will be a complete and utter failure (just like every other service that has tried to sell a ‘subscription’ or overpriced downloads that use Windows Media DRM -- something that doesn’t work on iPods and Macintoshes.

Just under 1 in 5 notebook pcs are Macs. Most PC sales are notebooks. Do the math: That’s a lot of customers to alienate, a lot of business to throw away. 75% of all portable players are iPods. Again: let’s go after less than 25% of the market, and dump the other 75%. NBC/Universal is forcing its customers to find alternate ways to get NBC’s shows on their iPod. The rest will just choose CBS, Fox, ABC, or any of the 50 other channels offering media on iTunes.

If I were a stockholder in NBC/Universal, I’d be livid. You just don’t throw away valid sales, especially with the perception of so much money being lost to piracy.

And here’s the scary thing: the alternatives are a lot more attractive to consumers than the $4.99 per episode NBC wanted to charge.

An obvious alternative is optical disc media (DVD and HD DVD -- Universal is in the HD DVD camp). So people buy the disc, and rip the content to their iPods. It’s trivial to crack the DRM on a DVD, and only slightly more inconvenient on an HD DVD.

I have yet to hear of a case where a consumer is held liable for ripping a DVD to put on their iPod -- and I think part of the reason is the courts have already said it’s OK to do with CD’s. In the eyes of most consumers (not the law- consumers), there’s nothing ‘magical’ about a DVD when compared to a CD; in both cases, it’s just ripping the disc to the iPod. If content producers start prosecuting, the public backlash will be huge, and the laws will likely be re-written or struck down. And the battle cry will be “Why should movies get special privileges that music doesn’t?”

Piracy of NBC’s product will undoubtably rise, as it’s forcing legally-paying consumers to find alternate (and illegal) ways to get their Heroes fix. I don’t see how this is a move forward. NBC is eliminating a popular (and very profitable) way to sell their wares. People are just going to find another way to get what they want, and most consumers either don’t know or don’t care that some methods aren’t legal in the US.

FairPlay does a better job of copy protection than CSS and AACS. But more importantly, iTunes gave a much better experience in buying and downloading media online. Steve Jobs was right: If you give people an easy and affordable way to get their favorite stuff, they’ll line up to pay for it.

I think NBC/Universal will soon discover a corollary: If you make it painful, expensive, or impossible for customers to get your media lawfully, they’ll just pirate it.

Aside from piracy, consumers who want to do the legal thing (like me), will just record the show on their DVR and then put it into their iTunes library.

ElGato’s EyeTV products make this as easy as downloading from iTunes. With EyeTV, you can record the HDTV signal as is, (ie. the original MPEG-2 bitstream), compress it to H.264 (for iPod & Apple TV use), and then put the show into your iTunes library, just as easily as you can set a normal DVR to record a TV show. And it probably only costs a dime’s worth or electricity.

NBC/Universal: you got greedy, and priced yourselves out of the only store I’ll download your media from. (Unless, that is, you sell DRM-free h.264. I’m not holding my breath). You shouldn’t be tossing loyal customers on their ear, and I’m sure your stockholders will say the same thing.

Three cheers for Apple, for standing up for the consumer! Thanks for refusing to sell media on iTunes at massively inflated prices. Thanks for holding the line in the sand. Thanks for showing where your loyalties lie (your customers).

Now just release a cool new iPod next week, so I can show my financial support.