… by allowing HBO to charge $2.99 an episode for those of its shows that just joined the iTunes Store lineup, the Hollywood Reporter says:

NBC took The Office, Heroes and all the rest of its shows out of the iTunes Store last year, mostly because Steve Jobs wouldn’t let the company charge more than $1.99 for an episode. Or so it seemed at the time. The HR story has a lot of new information on the dispute:

[…S]ources also suggest that it wasn’t Apple but NBC Uni that was being stubborn in their previous negotiation stalemate. Not only was NBC Uni pushing to test a $4.99 price point—suddenly, “Sopranos” doesn’t seem that expensive—but it also wanted to institute dynamic pricing, an experimental new technology that recalibrates price based on consumer demand. NBC Uni declined comment on dynamic pricing, which is being tested by Warner Music Group.

The story also details more of the complex dynamics behind the scenes as companies try to balance competing revenue streams—and the implacable Jobs:

Even if a program’s popularity was key to setting its price, “Sopranos” hasn’t proved particularly popular in its first few weeks on iTunes — perhaps because of the elevated price point. It is ranked 24th among season packages on iTunes; among individual episodes, “Sopranos” didn’t even crack the top 100.

No doubt Showtime might want to test the $2.99 waters not only because it shares HBO’s premium status but also because its series “Dexter” is currently the most popular full-season order on iTunes.

If sales ends up driving pricing, shows that aren’t necessarily big on-air hits but are iTunes darlings could command higher prices, including the CW’s “Gossip Girl.”

However, one conglomerate exec believes that Apple might have its own opinions on programming value. “When you get into that conversation, it’s a slippery slope,” the exec says. “Because we’ll differ with them on what content is worth what.”

If anything is indicative of a show’s iTunes price, look at the digits appearing on its DVD price tag. HBO in particular has a massive DVD business, and with that comes the need to maintain a higher price in order to afford some protection from cannibalizing DVD sales.

But variable pricing is only part of what content companies want from iTunes. What one might call variable packaging is high on the wish list as well, which means the ability to bundle multiple titles in creative ways—for instance, selling a film and its soundtrack together for one discounted price.

Another question altogether is whether Apple also will adjust revenue splits—known to be in the neighborhood of 70-30 with the content companies—once pricing changes. Not likely, most say, and beside the point for Apple. Content isn’t seen as much as a revenue driver in and of itself as it a catalyst for more significant dollars that come from sales of iPods and AppleTV devices.

The latest news from the NBC-Zune-Microsoft front is fascinating.

The story thus far is that NBC, which had a very popular slate of shows available at the iTunes Store, wanted to raise prices. Apple said no.

NBC, a media conglomerate that kicks it old style when it comes to feeling like it should be able to squeeze as much money as possible out of its customers, whined for a while and then finally picked up its Offices and Heroeses and went homeses.

Now it’s playing with the bully down the block. (Microsoft, if you follow my point.) Here’s where it gets interesting. In the old world, that would be the end of the story.

Twenty years ago, if an indie retailer had protested a jump in, say, CD prices, the big corporation would have pulled its product and gone over to Sam Goody’s or whatever, and the small retailer would be screwed.

That’s the media landscape Big Content knew and loved. The sitch today is different. Microsoft’s competition for the iPod is the Zune, which despite the company’s best efforts has a puny market share.

So—getting NBC, with its very hep and sophisticated lineup of shows, is a coup right? What does Microsoft care if the company wants to try to jack up the price on this or that?

Because apparently that wasn’t the whole deal. According to a story on the NYT’s Bits blog, Microsoft made a couple of arrangements with NBC:

Microsoft […] will accept NBC’s pricing scheme and will work with it to try to develop a copyright “cop” to be installed on its devices.

[…]

[…T]he copyright filtering system is still in development and its exact form has not been set.

Mr. Perrette said the plan is to create “filtering technology that allows for playback of legitimately purchased content versus non-legitimately purchased content.”

That’s corporatespeak for “Your Zune won’t be able to play pirated material. ” They are talking about a system that has become a Holy Grail for Big Content: Filters that would allow only legitimate—i.e., corporate approved—media to work on the players.

This is a sort of reverse DRM. A song with digital rights management attached will only play on certain players. This is a system where the player excludes everything but approved content.

It’s a fiendish plan, if it weren’t for the fact that no one in their right mind would buy a product like that.

(I’m a little surprised the companies only went half way. What they really need is a Zune that, when you try to play pirated material, automatically sends your personal information, complete with GPS coordinates, to the RIAA for automated legal action.)

After the item was posted, Microsoft began to spin the issue wildly. The writer never said the copyright cop had been incorporated into the Zune, just that that had been part of the deal with NBC, and quoted Microsoft thusly:

Adam Sohn, a spokesman for Microsoft, declined to discuss details of this effort other than to say that the software company is exploring anti-piracy measures with NBC. He said Microsoft, which suffers from its own piracy problems, is sympathetic to Hollywood’s concerns.

But after the piece was posted, the company complained, and the writer posted this update:

In the Zune Insider Blog, Cesar Menendez, a member of Microsoft’s Zune team, refers to this post, and the blog discussion it prompted. He writes:

We have no plans or commitments to implement any new type of content filtering in the Zune devices as part of our content distribution deal with NBC.

It’s worth noting that [NBC’s] Mr. Perrette told me that Microsoft committed to explore filtering; he didn’t say it committed to implementing those filters.

Here is what Mr. Sohn, the Microsoft spokesman, told me yesterday when I asked him about what Mr. Perrette said: “I don’t think they are wrong, but we are not going to characterize those discussions.” Later he added, “We have agreed to work with NBC across a range of topics, and protection of copyrighted material is certainly one of them.”

In other words, the original story was entirely correct.

It must be said that one explanation for all of this is that the unsophisticated folks from NBC came to the table with this proposal and Microsoft led them on (”Of course we can do that! Why, we’ve got a big ol’ team of people up in Redmond that are just wizards at this sort of thing!”), with no intention of actually doing it.

But it’s still a good example of how the transformative power of the digital convergence has made the old world of doing business more difficult; if nothing else, word of such comical dealings gets out. The irony is that NBC shows are going to be watched on computers and the internet no matter what the company does.

Moving from the iTunes Store to the Zune just means it will make less money. Sooner or later, presumably, one of the Six Sigma GE folks overseeing NBC Universal are going to notice the declining digital income figures and knock some heads together.

Microsoft, however, needs a lot more exclusives than The Office to compete with Apple, and the next company to come along dangling a deal won’t be as dumb as NBC.

Digital developments come so fast that it is, in the end, understandable why so many execs can be found saying senseless things. Even if you get one part of the equation, plain old ignorance (or corporate moneyminders above) keeps folks in a rut.

(I’ve seen this phenomenon a lot in places I’ve worked. Favorite example: The news exec who intoned to an assembled staff meeting, “We’re not getting Blackberries!” He then went on to announce that the company was going to hire some consultants—at who-knows-what cost—to analyze the news division’s reporting procedures in the digital age. Six months later, the consultants report came in. Task Item No. 1: “Reporting staff needs Blackberries.”)

Anyway, with the National Association of Broadcasters meeting next week, NBC Universal’s top digital officer, George Kliavkoff, is making news with just this sort of thing. On the one hand, there are noises coming from NBC Universal that the company would be looking into making Hulu available on cellphones. It’s pretty vague as yet, but the notion is out there.

Why? Well, here’s an AP story on the effects of debuting the premiere of a new episode for free online:

CBS Corp. executives took an unusual risk last fall before its series debut of “Big Bang Theory” — it offered the entire episode online despite the chance it would sap viewership for the TV premiere.

The show, about two geeky physicists and their beautiful female neighbor, got 90,000 views on CBS.com and other Web sites over a week, followed by a better-than-expected 9.5 million for the Sept. 24 on-air premiere.

(The story as a whole is a good overview of the state of the ad industry online for the networks.)

But there are still huge logical flaws. For example, Kliavkoff told Fortune that making video available online combats privacy:

Hulu offers users “all the value of aggregation, one-stop shopping for premium content,” Kliavkoff said. At the same time, he thinks it will reduce the illegal exchange of the content on peer-to-peer networks. “The best defense [against piracy] is providing a legitimate place for people to enjoy the content,” he said. For example, if NBC can post the latest episode of “Saturday Night Live” one minute after it’s finished airing, as happens with unauthorized posting on YouTube, viewers are more likely to watch the authorized stream.

Which is fine, except that NBC still isn’t making the video available for a move to one’s iPod. That’s where the piracy roars back in. In the digital age, if data can be moved, it will, whether NBC’s top digital officer wants it to or not. So kids will just torrent the show and stick it on their iPods.

… Which brings us back to the network’s war with the iTunes store, which it left in a huff last year because Steve Jobs wasn’t letting the company making its wares—what was the word?—more “attractive”—for its consumers. (Making prices “attractive” and “flexible” in NBC-speak is synonymous in normal English with “higher.”)

Now, over at Cnet, Kliavkoff is saying that the real issue with Apple is piracy. From an onstage interview at the Ad:Tech conference in SF, Cnet quoted Kliavkoff thusly:

“If you look at studies about MP3 players, especially leading MP3 players and what portion of that content is pirated, and think about how that content gets onto that device, it has to go through a gatekeeping piece of software, which would be a convenient place to put some antipiracy measures,” Kliavkoff said in an onstage interview at the Ad:Tech conference here.

In case you didn’t get the reference, he’s talking about Apple. Maybe I’m missing something, because the tech sites aren’t making a big deal about this, but Apple does have DRM restrictions on its video. With some tweaking you can move video files (along with anything else) around on an iPod, but even that way video from the iTunes Store doesn’t play on non-authorized computers. Kliavkoff seems to be upset that one download can be moved to more than one iPod (though each one needs to already be tied to the main computer), but in real life that’s too awkward for it to be a big piracy generator.

A few weeks ago, we saw how, in the dispute between NBC and Apple, the word “attractive,” when it came to the price of NBC shows on iTunes, was a convenient synonym for “higher.” Back then, “flexible” was in the mix as well:

“Our negotiations were centered on our request for flexibility in wholesale pricing, including the ability to package shows together in ways that could make our content even more attractive for consumers.”

Emphasis added. That was an NBC flack, nattering on about how Steve Jobs wouldn’t budge from his uniform pricing policy on iTunes. My point at the time was that the press wasn’t challenging or reinterpreting those euphemisms.

Today, Variety, which should know better, is now incorporating the euphemisms into the reporter’s copy. Here’s Scott Kirsner, covering a Jeff Zucker appearance at the Harvard biz school:

He seemed chagrined at NBC U’s dealings with Apple. Last year, the Peacock pulled its TV shows from iTunes after a dispute over pricing — the company wanted the flexibility to offer hot shows at slightly higher prices than Apple’s standard, and library content at a discount.

The company didn’t want flexibility; it wanted to charge what the market would bear. Jobs’ argument is that that approach was short-sighted. Variety’s version is too Universal-friendly by half.

p.s. to the ongoing Apple vs. NBC items, below:

How many times are journalists going to keep quoting with a straight face the PR guy from NBC talking about “attractive” pricing, anyway? Again, the quote is:

“Our negotiations were centered on our request for flexibility in wholesale pricing, including the ability to package shows together in ways that could make our content even more attractive for consumers.”

Is that guy attractive, er, high? And why don’t the reporters ask the direct follow-up question: Did NBC want to raise the prices on its shows on the iTunes Store, yes or no?

“Attractive” isn’t the only word that means “high” right now. “Flexible,” as one can see from the Shields quote, seems to mean that as well. Here’s another example from the Times the other day, about the producers of the new Mel Brooks musical, “Young Frankenstein,” readying the money trough:

Earlier this summer the production unveiled a tiered ticketing scale, with the tickets for the 250 or so best seats in the theater priced at $450 and $375 on weekends and matinees, a move that was criticized as much for its timing — i.e., before the show opened and achieved hit status — as for the prices themselves.

Mr. Sillerman, who said he was simply trying to make ticketing more flexible, pointed out that the show was also holding lotteries for $25 front-row seats at most performances, and reserving a large number of center-orchestra seats for sale only at the Hilton box office for the nonpremium $120 price.

There’s “flexible” again. Let’s do the math and see what flexible means here. Two hundred and fifty seats times four times the usual top ticket price equals a potential income equal to more than half again what the producers could generate in a sold-out house in the 1800-seat theater. So “flexible” in this context equals “almost 50 percent more money for the producers.”

But, that’s not all. Sillerman also says he is reserving “a large number” of seats for sale at $120, which sounds positively generous, until you remember that $120 is already at the high end of Broadway’s top normal ticket price. The writer of the Times story doesn’t describe it that way, opting instead to call that price a “nonpremium” one. I, inflexibly, call it a “greedily high” one.

So that’s the other definition of “flexible” on Broadway: “Some tickets we’ll sell at four times the normal rate, but we’ll also sell some at the high end of regular price. We don’t price every ticket insensibly high. We’re flexible!”