Free From iTunes Addiction, NBC Universal Seizes Control Of Digital Destiny

Following the announcement of Hulu early this morning, reports came pouring in about NBC Universal President & CEO Jeff Zucker’s vocal disdain for Apple turning media revenues “from dollars into pennies”.

Disputes over revenue shares caused the pair to split back in August, letting their contract lapse after this December. But positive reviews of Hulu seem to have made Zucker more at home criticizing iTunes. He detailed how NBC U felt slighted by iTune’s continual refusal to test higher $2.99 (Apple claimed $4.99) price points or share iPod sales, especially since 30-40% of all iTunes video downloads were from NBC content (Zucker claimed 40%, Apple 30%). All together, he said, NBC made just $15 million in revenue during the last year of its deal with Apple’s iTunes.

But squabbles over prices don’t seem to be all that’s in play. NBC recently struck a deal with Amazon to distribute their downloads for the same $1.99 iTunes price or a $1.89 per episode subscription, although the revenue share can vary. What NBC wants more than money, now, is control of their own digital destiny.

Zucker highlighted NBC’s own success online, specifically pointing to the large numbers of viewers already tuning in to NBC’s TV shows online. Zucker describes as a “a small cable channel in our universe that is becoming very successful”, claiming 50 million TV show streams during October. That’s 8 million more than the 42 million streams served in the site’s first four months of operation to 6.9 million viewers. Although both numbers don’t state whether shorter and longer video clips are lumped together. For comparison, a hit TV show like “Heroes” can attract 16 million viewers in a week.

Yet, how profitable can NBC U’s venture into the ad-supported streaming model be? That all depends on costs and advertising revenue the service can command. On TV, an average hour-long primetime show can net $3.46 million in advertising revenue (41 cents per household). NBC has not disclosed it’s online earnings, earlier reports show online and offline aligning. A Hollywood Reporter article estimated $25 CPMs for a 15-second preroll Internet video spots, while general TV households in primetime might be an average $21. Video CPMs for the male 18-34 demographic, though, could reach as high as a $120 online and $198 on TV.

All things considered, going it alone may pay off for NBC.