Ulanoff: NBC-Apple Spat Means Digital Holy War

NBC Universal has drawn a line in the sand.

On one side stands the media giant (and its parent, General Electric/Vivendi), with its thousands and thousands of hours of video and music content.

On the other side stands Apple, with its wildly popular iPod and the iTunes music service.

Two weeks ago, NBC yanked its content across the line away from Apple and into the supple arms of Amazon Unboxed.

The wisdom of that decision aside, this radical choice has made me realize that Apple is now entering the biggest and perhaps the most bitter battle of its business life.

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This is bigger than Apple versus IBM, more pitched than Apple versus Microsoft, and certainly more interesting than Apple versus Apple Corps (the Beatles' music company).

It's also likely that this war could leave the deepest scars.

At issue is content — who can sell it, where you can play it, and what it costs.

As with all things Apple, the company has exercised incredible control over pricing and digital-rights-management issues.

Music is one price. Video is one price. Content purchased and downloaded via iTunes can be played in iTunes and on iPods, and that's it.

Want subscription pricing? Go elsewhere. Want pricing options? Try another music service. Want to play protected content on a different player platform or device? Well, you know the drill.

Companies that have partnered with Apple know it, too, and now they're chafing against it.

Notice the slow but constant consolidation of music services. MTV's Urge is gone. Sony Connect is going.

Don't mistake this for anyone giving up, though — they're all changing strategy.

Microsoft, NBC, Yahoo!, Sony and others are trying, wherever possible, to partner up and combine their efforts in order to beat Apple at its own game.

Hulu, a new site that will eventually offer premium video-download content from owners NBC and FOX, as well as others, is one such attempt. Details are slim, and it won't launch in beta form until next month, so speculating on what it will do or how it will work is pointless.

What's more interesting is the way in which NBC walked away from Apple.

Instead of continuing to work with Apple while sowing its seeds elsewhere, it got into a huge public dustup with the seemingly stoic Apple.

NBC was angered by Apple's rigidity and felt that the company was abusing its position in order to drive iPod sales, thereby reaping huge profits and leaving its partners holding fairly light money bags.

NBC wasn't going to take it any more, so it grabbed all of its TV content (as Universal is set to do with music) and walked away.

Losing the 99 cents and $1.99 for music and video downloads, respectively, may not worry Apple much. It still has other partners, millions of tracks, a growing library of premium-video partners from less-touchy media companies, and a customer base with nearly 100 million iPods (and a growing number of iPhones).

So what's the worry?

Holy War

Apple may not realize it, but it's entering a holy war of media rights and sales and ownership disputes. Companies like NBC are clearly looking to hit Apple where it hurts by breaking its stranglehold on the portable-content business.

Disney, Fox, NBC and every other major media outlet know that the rights and control to portable digital media are way too important and potentially lucrative to leave to Apple. And if they don't do something now, Apple will control it all for years to come.

Still, this is a high-risk move by NBC. Apple owns the portable-media market and continues to push out products that people want and dream about. No competitor is even close.

Walking away from that gravy train could leave NBC and others without anyone to consume the portable music and video they're offering.

NBC took its fall lineup of downloadable video to Amazon Unboxed. Amazon is a great online brand, but, seriously, who is using Unboxed? TiVo owners?

Great, so instead of recording NBC shows on TiVo to watch at your leisure, you can download them from the Internet to the TiVo box to what? Your TV? It's not like you can easily get them off the DVR and onto your portable media player.

To put it lightly, NBC's strategy has flaws.

Even so, Apple needs to wake up, step across that line in the sand, start talking to every media outlet and get flexible — in a hurry. And media companies should also rethink their strategy of simply walking away.

I should think that the financial implications of not having Apple feeding their content to the hungry masses will not feel like a day at the beach.