In the corporate world, it's usually bad strategy for a CEO to pick fights with other large companies. It makes that CEO look petty and desperate. Worse, it makes any issues between the companies harder to resolve, leaving everyone a loser.
Which is why I'm still scratching my head over NBC Universal CEO Jeff Zucker's incendiary remarks about Apple and the iTunes Store he uttered on Monday.
First Zucker said that NBC wanted to "experiment" by charging $2.99 for a hit show rather than Apple's standard $1.99. "We made that offer for months and they [Apple] said no," Zucker told the New Yorker's Ken Auletta at a benefit for Syracuse University's Newhouse School.
OK, fine, we already knew NBC U resented Apple's ironclad rules on pricing. But then Zucker dropped his bomb: "Apple sold millions of dollars worth of hardware off the back of our content, and made a lot of money. They did not want to share in what they were making off the hardware or allow us to adjust pricing."
Zucker actually asked Apple for a cut of iPod sales, which explains Apple's unusually harsh public response when negotiations broke down in August. (Apple announced it would not sell new NBC shows the day after NBC U said it would not renew their contract in December.) NBC U apparently was inspired by last year's Zune deal: Microsoft shares $1 with Universal for each Zune sold.
Zucker had to know how much such a request would infuriate Steve Jobs. It's clear now that he wanted a public war with Apple. But what did Zucker hope to achieve?
He had to know that Apple would not bow to the pressure and suddenly cave to his demands. Judging from NBC U's maneuvers over the past six months or so, it appears Zucker's goal is to rally all the other content providers – both of music and video – to abandon the iTunes Store.
Universal has led the way in promoting alternatives to iTunes. Over the summer Universal announced that it would start selling DRM-free music at just about every other music retail download site except iTunes.
This week it launched the beta phase of Hulu.com, a Web site that will offer ad-embedded NBC shows for free. While Hulu will appeal to some users, the content will be tied to the user's PC. You won't be able to watch it on your TV or download it to your iPod. Anyone who prefers the iTunes way of paying for the download to watch it where they want it is out of luck.
You'd think NBC U would want as many types of distribution as possible. Cutting off iTunes to spite Apple will have the undesired side effect of angering a lot of fans of NBC U programs. It's bad business.
The situation reminds me a bit of the struggle between Pixar Animation Studios and Disney a few years ago, which was more a war of wills between then-Pixar CEO Steve Jobs and then-Disney CEO Michael Eisner. Pixar needed Disney's distribution system and Disney needed Pixar's box office successes. That conflict was only resolved because Eisner resigned, and was replaced by Robert Iger. Jobs got along so well with the new Disney chief that he elected to sell Pixar to Disney outright.
Apple won't be buying NBC Universal or vice versa, but the principal is similar: feuding with a partner with whom you have a mutually beneficial relationship is costly and stupid. The longer the battle goes on, the more both companies stand to lose, financially and in terms of public opinion. Customers care less about who's right than having a system that serves their needs.
Jeff Zucker thinks he's working in the interest of NBC U and for that matter, the entire entertainment industry by fighting Apple. Somehow he's forgotten that the iTunes Store was the pioneer in offering legal paid music downloads, providing a legal alternative to the rampant peer-to-peer file sharing that was undermining their business model. The contribution of the iTunes Store to the video world has not been as dramatic, but even NBC credited the support of fans using iTunes with saving "The Office" from early cancellation.
True, Steve Jobs isn't the easiest CEO to deal with, but others have shown it can be done. If Zucker wants to show us leadership worthy of a CEO, he'll try treating Apple as an ally rather than an enemy.