Friday, August 31, 2007

NBC Universal--Apple Relationship Shifts

Today's NY Times is reporting that NBC Universal has decided not to renew the contract with Apple for digital downloads.
The media conglomerate — which is the No. 1 supplier of digital video to Apple’s online store, accounting for about 40 percent of downloads — notified Apple of its decision late yesterday, according to a person familiar with the matter who asked for anonymity because negotiations between the companies are confidential.
This situation highlights some of the key requirements of winning in a network era.

1.Winning depends on managing a portfolio of relationships. Not all relationships are equally important. The real analytical challenge is to prioritize the relationships for today (current conditions) and for tomorrow (a range of plausible scenarios). Where's NBC Universal in the scheme of content providers today and where would it be in the future? .

2. The relationship interdependency is dynamic. Clearly, Apple-NBC intedependency has changed over the years. In the beginning, iTunes would have failed but for good quality content (from NBC and others). Now, can NBC Universal do without Apple? Will Apple customers desert iTunes in favor of an alternative if their favorite content is not made available on their iPod?

3. Will the shift in the relationship between two entities (Apple and NBC) impact a third entity (such as Microsoft or a different content provider like CBS or Disney) to gain an edge? [I had hinted about this possibility earlier.] Is the move by NBC because Apple is closer to Disney (by virtue of board-interlock with Steve Jobs on Disney Board)?

4. Winning strategies requires anticipating likely moves in the network. These involves not only realignment of relationships amongst existing players (example Apple and NBC) but also new players that may enter the market in the future.
Contract negotiations depend on an analysis of how nodes (companies) and linkages (relationships) are today and how they are likely to evolve in the future. Both Apple and NBC know that this contract renegotiations will alter not only their specific relationship but also the broader network of content creation and delivery. These moves--individually and collectively--will shape and reshape the media landscape.
Update: There's a Sept 1 posting at Business 2.0 blog that speculates on what iTunes looks like without NBC. It's worth reading.

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