It would appear that Apple Inc. is losing its grip on the digital download industry, after NBC Universal decided not to renew its contract to sell its programming via iTunes, Apple's media store. NBC made the decision because the companies were unable to agree on packaging and pricing terms. The media giant's contract with Apple expires at the end of December.
NBC, whose programming accounts for 40% of the video downloads sold on iTunes, is the second major media company to walk out on Apple because of the way it sells content through its media store. In July, Vivendi's Universal Music Group decided not to renew its contract with the iPod maker, saying it would instead sell music through iTunes on its own terms. The moves by NBC and UMG underscore a turning of the tables in the media distribution business. ITunes may be the No. 1 provider of legal downloads on the Web, but media companies have yet to profit from their respective arrangements. They say Apple under-prices content to sell more iPod, iPhone, and Apple TVs.
Meanwhile, competition is mounting: retailer Amazon.com on Friday (http://www.nypost.com/seven/08312007/business/lets_dance_baby.htm) announced the launch of a new digital music store in mid-September that features DRM-free MP3 files from UMG, EMI and several independent labels. NBC is also engaged with rival News Corporation in a free, ad-supported distribution venture called Hulu. In an attempt to expand its offerings, Apple on Friday (http://www.nypost.com/seven/08312007/business/apple__labels_pitch_tones.htm) announced that it would sell ringtones via its iPhones. Users can purchase the capability to create their own after buying music from iTunes, or they can purchase an upgrade that lets them use music from their existing library.