They are canceling their contract with Apple to sell their content on the iTunes Media Store. NBC, owned by General Electric, has had a history of attempting to squeeze every nickel, dime and penny out of its NBC-Universal owned content. Now, I genuinely believe they are killing the cash cow that is their product on the iTMS. Three of their largest sellers, “Heroes,” “Battlestar Galactica” and “The Office”, make a killing at the “store” and all rank in the top 10 in sales weekly, especially after they first air. Plus, Universal was the second, following Disney, to sign onto the iTMS two years ago.

However, NBC and Fox are attempting a “YouTube” killer by signing on with Hulu.com. Now, though, the timing of this is curious but further underscores NBC’s lack of understanding digital media. I’ll be the first to admit, I don’t know the specifics of any company’s deal with Apple, but, this is just crazy. Hulu will not be selling video, only showing it like YouTube does (down-streaming). Movielink, another iTunes-esque option, has been a colossal failure, with absolutely no one that I know using it, and I’m sure the sales have been infinitesimal comparatively to iTunes. And if this is just about piracy, that’s one thing - a stupid thing, but understandable. It is something else. Its about pricing and margins.

Sujal and I were talking about it earlier today. These companies do not understand digital media. They do not understand the benefits, but more importantly so rabidly protect margins that are impossible to sustain in today’s market. Bit Torrent, Handbrake and other products/services like them make the market unsustainable in the long run. Moreover, services like iTunes, et al., provide a greater secondary market for their shows than the syndicated market ever will in the long run. (Though, this is just my opinion, Sujal can put his own opinions in here, if he so chooses.)

This, along with Universal’s decision to pull its music off of iTMS, just shows that Universal - alone - doesn’t understand the realities of the digital world, and will never so long as they feel as if margins mean more than profits. Profits only come with understanding of the digital world. People who own DVRs don’t watch commercials. Moreover, they further lose those ad rate dollars. People won’t watch the program in syndication if it doesn’t exist, and won’t be able to “buy” it if it isn’t on a service they can watch when they are not connected to the internet - Hulu.com fails that way (if it works the way it is being purported). And with HDTV’s increasing, if you can’t buy a program that can be watched in HD or on a HD set, you’re not going to buy it on your computer - AppleTV solves that problem, not that I think its a good solution yet.

HBO gets it. Showtime gets it. They allow their creators to own their product, and only own it so long as it is on their channel. After that, they get no more control. Other companies are starting to get it (see Comedy Central and the South Park guys), and the secondary, syndication market is starting to fail because those channels are broadcasting original programming.

Fools. The mindsets might change in one decade….then again….maybe not.