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Monday, October 29, 2007, 02:00 pm PT (05:00 pm ET)

NBC chief says Apple 'destroyed' music pricing

NBC Universal chief executive Jeff Zucker on Sunday urged colleagues to take a stand against Apple's iTunes, charging that the digital download service was undermining the ability of traditional media companies to set profitable rates for their content online.

"We know that Apple has destroyed the music business — in terms of pricing — and if we don’t take control, they’ll do the same thing on the video side," Zucker said at a breakfast hosted by Syracuse’s Newhouse School of Communications.

His comments Sunday were the most aggressive yet since NBC informed Apple last month that it had decided not to renew its contract to sell digital downloads of television shows on iTunes after this year.

NBC originally claimed to be seeking more control over the pricing of songs and videos that it was selling on iTunes, in addition to better piracy controls and more flexibility to bundle video content in an effort to increase revenues.

For its part in the bitter feud, Apple responded by saying NBC was asking for a twofold increase in the wholesale price of its TV show content, which would have resulted in the retail price to iTunes customers increasing to $4.99 per episode from $1.99.

Answering questions at the breakfast Sunday, Zucker offered substantially more color on the iTunes matter, explaining that it was “a relatively easy decision” for NBC to walk away from the Apple download service because it had only earned about $15 million from the service last year in spite of accounting for about 40 per cent of the videos sold on the store.

He said NBC routinely propositioned Apple to breach its standard pricing model and experiment with higher pricing for one hit show such as “Heroes” by raising the price from the iTunes standard $1.99 to $2.99 on a trial basis.

“We wanted to take one show, it didn’t matter which one it was, and experiment and sell it for $2.99,” he said. “We made that offer for months and they said no.”

The NBC chief also revealed that in addition to more pricing flexibility, his firm was also seeking a cut of Apple hardware sales — such as the iPod and iPhone — which were capable of viewing content downloaded from the iTunes Store.

"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."

Zucker's comments also arrive just as NBC and NewsCorp. are launching their joint online video venture, Hulu.com, which aims to compete with iTunes by offering streaming TV and other commercial video content to viewers under an ad-supported model.

He said that 50 million streams of TV shows accessed on NBC.com during the month of October are proof that there is a demand for traditional TV series on the web.

“It’s extraordinary,” he said. “It’s like a small cable channel in our universe that is becoming very successful.”