My take is that NBC wanted more per episode and was pressuring Apple to make up the difference by selling advertsing that would get bundled into the download, making up the price difference. No way could they be so stupid as to think that consumer would pay $5 per show. But since Apple keeps its content advertising free (except that iTunes site does have 'ad space' for the content that it sells), the $4.99 would be the new price in effect.
On Hulu, they will try to match iTunes prices but expect a load of advertising in your face - yuck.
On the other hand, I think that Apple will continue to face an ever mounting barrage of pressure from content providers of all types for more iTunes revenue and that some forms of advertising will be tried. It has been reported that they are studying different models. I'm glad that they are trying to resist!
Considering that I purchased 2 complete seasons last year (Scrubs and the Office), the loss of NBC from iTunes is a bummer.
But, had the price gone up that much I would not have continuing purchasing.
As far as I am concerned, NBC has just given a lot of loyal customers the finger. So, if NBC doesn't want my dime, then fine. I'll patronize vendors who actually want my business.
First, Apple was probably ticked by the what-seems-for-sure-now-NBC Universal-leak to the NYTimes. The slanted article implied that iTunes had some pricing and piracy shortcomings, and that the other networks were not signing up either. Then Paul LaMonica at CNN publishes an inane analysis saying that NBC doesn't need iTunes; altho he objects to even paying $1.99, he takes NBC's side. Whatever.
Second, it's clear Apple has been taking the consumer's side, at least when it comes to selling content 
since there's so little profit there for Apple. And with the example of YouTube for the iPhone and AppleTV, it's clear that Apple is open to other types of content delivery (i.e., video streaming) outside of iTunes, for its devices, though iTunes will remain the easiest to manage. I don't know why analysts, journalists, and businesses have such a hard time getting this.
In any case, I'm glad Apple issued the smackdown. In some ways, they had to since the leak made all sorts of implications, putting Apple in a bad light.
The battle for the distribution of content is an interesting one. NBC appears to want more control over the manner in which the shows are distributed and the price at which they are sold. However, they lack the technological foundation for distribution. Apple itself prefers to sell content rather than sell a device to record off the air shows (i.e. AppleTV) for free. AppleTV is a hopeful replacement for media discs (DVDs) to play movies (but not mature yet). NBC is the loser in this battle for now. I would not be surprised if NBC's high management is replaced in the next 6-8 months (like Disney last year).
I appreciate the fact that you got right to the point.
I winced when Vivendi Universal took a jab at Apple in such a disingenuous way.
But this time, NBC does the stupid thing, thinking Hulu will give them bargaining power perhaps. I can picture them flexing their content muscles in the mirror while saying to themselves "you look marvelous!".
But Apple had the game calculated in advance, and as you aptly put it, called their bluff and said "Oh, and just one more thing: no contract, no fall season."
Oops, it seems like NBC forgot they were actually in business to sell something.
That roar you hear is the bit torrents firing up.
An Open Email to NBC Universal
http://www.stonethembas.com
Hulu? More like Hurl.
Commenting by HaloScan
