• by David Goetzl  @dgoetzl, December 4, 2007

NBC Universal chief Jeff Zucker said Monday that Apple was so rigid in negotiations to continue offering series such as "The Office" on iTunes that it wouldn't budge from its insistence on the $1.99 per-episode cost.

"All we asked was for an opportunity to be able to set a different variable price structure--even with one program, even to just test it one time," Zucker said. "And Apple didn't want to do that."

So, NBCU -- which was making $15 million in annual profits from its iTunes deal--pulled the plug and looked elsewhere for digital dollars. "We did not feel it was the game-changer for us ... certainly that it is for Apple," Zucker said at an investor conference.

Zucker characterized the $15 million from iTunes as modest. But its disclosure could still pique the interest of striking Hollywood writers fighting for a piece of the profits from digital downloads and other new-media distribution.

The executive said programs from NBCU's flagship network to its USA and Bravo cable outlets accounted for about 40% of the video business on iTunes.

"There's no place that I can think of where the retailer also gets to set the wholesale price," he said vis-à-vis the Apple tussle.

NBCU episodes are now accessible free via the ad-supported NBC.com (and other company Web sites) and the beta Hulu.com, a joint venture with News Corp. It's also available through a pay-per-download option on Amazon Unbox for $1.99. NBC also has its own free download service, NBC Direct, in beta.

"We are disappointed to see NBC leave iTunes because we would not agree to their dramatic price increase," said Eddy Cue, Apple's vice president of iTunes, in a statement. "We hope they will change their minds and offer their TV shows to the tens of millions of iTunes customers."

Zucker acknowledged that the combination--Hulu has about 60,000 users and seven charter advertisers in advance of an expected official launch next year--won't replace the $15 million in the near term due to Apple's comparatively larger scale.

He said he remains hopeful that NBCU and Apple will reach a rapprochement.

This summer, after the two sides were unable to agree to a deal, Apple said it "declined to pay more than double the wholesale price for each NBC TV episode, which would have resulted in the retail price to consumers increasing to $4.99 per episode from the current $1.99."