NBC wanted cut of iPod sales

NBC Universal chief executive officer says talks with Apple over selling shows on iTunes broke down after the network asked for a cut of iPod sales

Talks between NBC Universal and Apple Inc. over selling the network's television programs on iTunes broke down in August after the network demanded a share of iPod sales, according to NBC chief executive officer Jeff Zucker.

"Apple sold millions of dollars worth of hardware off the back of our content, and made a lot of money," Zuckertold an audience at a benefit for Syracuse University's Newhouse School in New York. "They did not want to share in what they were making off the hardware or allow us to adjust pricing."

NBC said it asked for a slice of iPod sales only after Apple refused to budge on variable pricing of its television shows. Zucker said NBC had wanted to experiment by selling one show for $2.99 U.S. an episode, rather than the flat rate of $1.99 U.S. on all shows. Content providers have long asked Apple to charge more for newer shows and less for older ones, but the company has stood firm.

Apple immediately responded to NBC's request in August by threateningnot to sellnew episodes of NBC's fall shows. The company said NBC's requests would have resulted in a doubling of episode prices. In the end, NBC said it would not renew its contract with Apple when it expires this year.

U.S. shows, however, are still not available on the Canadian iTunes store.

Zucker said Apple's business model is turning dollars into pennies for the content producers. Despite making up about 40 per cent of Apple's video sales, NBC banked only $15 million U.S. in revenue during the past year.

NBC's request was an apparent turning of the tables on Apple, which has so far insisted on getting a cut of monthly service revenue from cellphone operators who offer its iPhone.

In retaliation, the network on Monday launched a test of its own video download service, called Hulu, to be run in conjunction with News Corp.

Separately, Apple on Tuesday reported it had sold two million copies of its latest computer operating system, Leopard, since it went on sale Friday. The sales far outpaced those of its previous system, Tiger, which was previously the company's best-selling operating software.