NBC doesn't get it.

For anyone who hasn't heard, NBC recently pulled its contents from iTunes. Word on the e-street is that NBC wanted to raise the price of video downloads to $4.99 an episode, while iTunes wanted the price to be $0.99 or less. Recently, word has come down that NBC is going to offer their content on their own independent download service, which they are hoping to market as a viable competitor to iTunes. NBC will make their videos available for download a week after the show airs, for free. The downloaded shows will have commercials embedded in the file that the user will not be able to skip through, and the file will expire a week after download.

What does this mean? It means you should start shorting your NBC stock.

Could there be a program more destined for failure? This is just another example of corporate decision making that is out of touch with modern society and a business model that ignores the way things are. NBC is making the same mistake that record companies continue to make and that continues to feed illegal downloading. They are ignoring what consumers want and acting as if they can control their product.

Consumers do not want to watch commercials, and they hate DRM. For those of you who don't know what DRM means, it's the copyright protection that companies attach to your music or movie file to keep you from giving it to other people. In short, when you download a song from iTunes, or Walmart music, or anywhere else, you really aren't buying the song, you are buying the right to listen to the song on one machine, and to burn the song onto a cd a certain number of times. You are buying an inferior product. If you went out and bought the CD, you could rip the file to your computer, copy it an infinite number of times, and distribute it as you see fit.

DRM is the reason that there are 100 million music downloads from iTunes in the same space of time as 1 billion illegal downloads. Consumers have rejected DRM. Consumers have the obstinate view that if they pay for music, they should own it. Illegal downloading of music will not stop while you have to pay $1 for a song you will never truly own. You're better off downloading the song off Limewire. The risk of being sued is so low that consumers are willing to run the risk and go get the product they want. Steve Jobs, head of Apple, and by extension, iTunes, knows this, and has been fighting tooth and nail to get the record companies to dump DRM, but they won't budge.

What the music industry should be doing is abandoning DRM and lowering the price of music. Most consumers would gladly pay 25 cents for a song for the guarantee that they own the song and not having to risk a lawsuit. Record executives resist this idea because they think that if they remove DRM then there will be more pirating. That idea is stupid. Pirated music is not hard to find, and even with DRM's in place music piracy is RAMPANT. Music companies seem to take the view that "if we just sue enough people, we can turn this around and force people to do things our way." It's ludicrous. How could you ever hope to stop a billion downloads? How could you ever hope to even make a dent in that kind of movement? The answer is they can't. Downloads increase every year. Record companies are far better off conceding defeat and adjusting to meet the changing market. It's painfully obvious to everyone but the record companies that this is how it must be. The record companies no longer control the product and now they have to deliver the product to the public on its terms or the public will go elsewhere. This is the lesson that NBC seems to have also missed and its what insures NBC's new service will be a loser.

As it stands right now, you can download any episode of any NBC program for free, two hours after it airs on the east coast, in fairly decent quality, from the internet, with no commercials, and the file will be yours as long as you want it. The only limitation is the speed of your internet connection (it's nearly impossible without high speed) and the space on your hard drive. You can download the entire season of 24 and wait til the last episode has aired and then watch the whole season at once to avoid the maddening suspense that comes with trying to watch that show as it airs. You can send the files to your friends. The file is yours to do with as you please. You essentially own it. NBC wants you to download a show from their website a week after it airs and then impose limitations on your viewing. The public isn't going to go for it, not when there is a better product available, and its stupid to think they will. People who want the show with no restrictions are just going to take their chances and get the product they want somewhere else.

What NBC should have done was offered a competitive product. 50 cents for a TV show with no DRM restrictions. Or even better, free the day after it airs possibly a short add at the beginning. I realize that TV networks think that downloads hurt their DVD sales, but so far there is no real evidence to back that up. Besides, until the internet has the bandwidth to transmit shows in HD, online downloading is never really going to be a threat to DVD sales, especially Blu-Ray/HD-DVD sales.

The bottom line is, NBC needs to realize it has to compete with people who are offering a better product at a lower price, and no matter what they do, that product is always going to be available. NBC, it's time to quit living in denial and start competing in the present.