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Wednesday, September 19, 2007, 01:00 pm PT (04:00 pm ET)

CBS staying clear of iTunes price war as NBC intros new service

CBS Corp. said this week it has no interest in joining the ongoing battle against Apple over the pricing of television shows on its iTunes Store. Meanwhile, ringleader NBC has taken the first step towards launching its own, ad-supported service.

"We're sort of staying out of the battle," CBS chief executive Les Moonves told a Merrill Lynch investor conference on Tuesday. "We like our relationship with iTunes."

Moonves went on to say that iTunes is not a significant source of revenue for CBS, but that the network looks at the Apple download service as much as a promotional means for its shows as a financial vehicle.

Following a standoff in negotiations last month, NBC Universal — which accounted for 30 percent of iTunes TV show sales — decided not to renew its agreement with Apple after the iTunes operator declined to allow the TV studio more leeway over the pricing of its content sold through the service.

Although Apple claimed NBC's ultimate goal was to drive the cost of its shows from $1.99 to $4.99 a piece, NBC later disputed the claim, explaining that its intention was to institute "flexibility in wholesale pricing" and bundle shows together in more "attractive" ways.

Said NBC vice president of communications, Cory Shields, "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."

Fox Television content supplier NewsCorp., which had appeared as if it was taking a neutral stance in the matter, later echoed NBC's call for a more flexible iTunes pricing structure, arguing that it should be the ones determining what the fair price for its content is, not Apple.

"We have a pretty limited relationship with Apple and we'll see how it goes," said NewsCorp. chief operating officer and president Peter Chernin. "I assume it will be prickly and dicey and contentious like all negotiations are and like all negotiations should be."

NBC and NewsCorp have stated that they plan to band together to form a new, ad-support online video venture called Hulu later this fall. Though CBS had been invited to join the upstart as a third partner, it declined the offer.

But in an unexpected move on Wednesday that has left more than a few industry watchers scratching their heads, NBC announced plans to also launch its own "NBC Direct" service through NBC.com. The on-demand service (also due this fall) will reportedly offer Heroes, The Office, Life, Bionic Woman, 30 Rock, Friday Night Lights, Late Night with Conan O’Brien, and The Tonight Show with Jay Leno at launch.

In an e-mail release, NBC said the first version of NBC Direct will enter beta testing in October under an ad-supported model, and will cater only to Windows PC users. However, subsequent plans call for a DRM-protected model that will also be compatible with Apple's Mac line.

What's more, NewsCorp. will reportedly follow NBC's lead, and launch its own digital download service in addition to its joint Hulu venture with NBC. The service will compete not only against iTunes, but also NBC Direct and Hulu.