MOLI VIEW™

Any time media companies feud with iTunes, the Internet gurus cluck about how they just don't get the "new economy." It was no different a few weeks ago, when NBC parted ways with Apple's store over pricing issues in a he-said, she-said breakup. Since iTunes dominates the market for television, just as it dominates that for music, the argument went, how would NBC sell its shows?

Like much of what Silicon Valley executives believe, this attitude reflects considerable intelligence, solid logic, and stunning ignorance about the way the world really works. NBC is not in the business of selling shows — it's in the business of giving them away and selling advertising — which is why you can watch its programs for free. If some people buy episodes of its shows on iTunes, it's great incremental revenue. If too many people do so, it could make those shows less valuable for advertisers.

So NBC did the obvious thing: It made programs available for free online, with a service called NBC Direct. This strategy isn't without its own problems, most obviously that ratings will not reflect this audience. But NBC can insert ads into these downloads just as it places ads into programs.

Tomorrow: Why the future of TV looks a lot like the past.

Robert Levine is the MOLI View's contributing editor for Technology.

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