Apple’s Least-Favored Network: NBC

Ever since the Wall Street Journal reported earlier this month on Apple’s evolving plans to launch a multichannel subscription streaming video service, much has been made, largely by those already inclined to be suspicious of Comcast’s motives, of the reported absence of Comcast-owned NBC from the talks Apple is said to be holding with the other broadcast networks.

apple_tv“It appears from press reports that Comcast may be withholding its affiliated NBC Universal (“NBCU”) content in an effort to thwart the entry of potential new video competitors. Apple reportedly is planning a Fall 2015 launch for an over-the-top (“OTT”) bundle of TV channels,” the consortium Stop Mega Comcast wrote to the FCC last week. “If the reports are accurate about Apple, it would be consistent with Comcast’s prior conduct in attempting to leverage affiliated content to thwart rival services, even when faced with merger conditions.”

Comcast denies withholding anything, however.

“Not only has NBCUniversal not ‘withheld’ programming from Apple’s new venture, Apple has not even approached NBCUniversal with such a request,” Comcast attorney Francis Buono wrote to the FCC in response to the allegations.

While suspicion of Comcast may be well-earned, in this case I’m sure what Buono said is true. Assuming Apple really is in talks with the other major broadcasters there is no reason for it to be negotiating with NBC at this point and plenty of reasons not to.

All of the major broadcasters, as a matter of course, are going to want some sort of most-favored nation (MFN) treatment from Apple to make sure nobody else gets a better deal (anti-schmuck insurance). Under the terms of its consent decree with the Justice Department to acquire NBC Universal, however, NBC is required to make its content available to any online video distributors that secures content from NBC’s competitors on terms comparable to those negotiated by the competitor.

In effect, NBC is legally obligated to accept least-favored nation treatment, so from a simple tactical point of view there is no reason for Apple to include NBC in any discussions at this point that might allow it to influence the overall negotiations.

Apple also needs to be exceedingly careful about conferring most-favored nation status on anyone at this point. MFN clauses in ebook licensing contracts were at the heart of the conspiracy Apple was found guilty of orchestrating among publishers to force higher prices on Amazon. While Apple continues to pursue an appeal of that verdict the broadcasters likely have no appetite for inviting Justice Department scrutiny into their dealings with the company, so the less the appearance of coordination among similarly situated competitors, or even of confluence of interests, the better for all concerned. So again, there’s little for Apple to gain from including NBC in any discussions at this point and potentially a lot to lose.