Apple Inc. (AAPL) escalated a dispute with NBC Universal over the pricing of television shows by announcing Friday it would not sell any of NBC's programs for this fall season on iTunes.
Earlier, NBC had told Apple that it would no longer allow its programs to be sold via iTunes at the end of the year. NBC Universal-controlled television programming accounts for an estimated 40 percent of the video downloads on iTunes.
"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. "We hope they will change their minds and offer their TV shows to the tens of millions of iTunes customers."
Rather than cut off NBC programs in the middle of the season, Apple decided to stop before the new fall episodes premiere next month, he said.
That would be a blow to fourth-place NBC, which could use the buzz provided by Internet sales for its programming — not to mention the money.
But NBC insisted that Apple is contractually obligated to offer new episodes of returning programming, shows like "Heroes" and "The Office," through the end of December. Apple could only refuse to sell new series like "The Bionic Woman."
ABC, CBS, Fox and the CW, and 50 other cable networks, have deals in place to sell fall shows at iTunes' current price of $1.99 per episode, Apple said.
NBC wanted Apple to pay more than double its wholesale price for the material, which would have resulted in the retail price increasing to $4.99, Apple said.
NBC said it never asked to double the wholesale price of its programming. The network said it was most interested in the flexibility to package its programming in different ways at different prices.
"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 makes these devices worth buying," said NBC Universal spokesman Cory Shields.
NBC Universal has also partnered with News Corp. (NWS) to create a new video site, Hulu.com.
The company's contract to sell more than 1,500 hours of news, sports and entertainment programming on iTunes expires at the end of December. NBC fulfilled its requirement to inform Apple by Friday if the contract would not be renewed, said Amy Zelvin, spokeswoman for NBC Universal Digital.
The dispute illustrates unrest among content providers over Apple's pricing policies. Media companies want more say in pricing and, in NBC Universal's case, flexibility. Similarly, record companies would like to see an increase in iTunes' sales price of 99 cents per song.
Availability of Web-popular programs like USA's "Psych," NBC's "30 Rock" and Sci Fi's "Battlestar Galactica" are all affected.
Programming from NBC and cable properties like USA, CNN, Bravo and CNBC will be cut off from iTunes at the start of the season on Sept. 24, Apple said.
NBC Universal also wants iTunes to stiffen anti-piracy provisions so computer users would not have easy access to illegal downloads.