01 September, 2007

Markets Finish Higher on Bush and Bernanke Speeches while Apple's iTunes splits with NBC over Pricing

Optimism spread throughout the Financial Markets in North America Friday as Federal Reserve Chairman Ben Bernanke and US President George W. Bush presented speeches discussing the sub-prime mortgage crisis.

While not stating any certainties of an upcoming rate cut the Fed alluded to the fact that it will be ready to act if the economy becomes broadly hurt from the fallout of the credit-crunch. This was enough for investors to believe that a rate cut is more and more likely. The President conveyed a similar stance that it is not the job of the government to bail out over-extended investors, institutions and individuals. Bush did however outline a series of plans and proposals that will allow individuals to refinance some mortgages to avoid further potential loan defaults. Bush also presented proposals for slight changes to the tax code that would provide relief for people with heavy loan payments.

These were seen as positive steps by the markets as the major indices (Dow, Nasdaq, S&P, TSX) were all higher by about 1%.

In other market news Citigroup (C) is getting in on the bargain mortgage hunt as it is buying assets from ACC Captial Holdings (Parent of Ameriquest Mortgage Co.). This follows Bank of America's (BAC) recent $2Billion investment in Countrywide Financial (CFC).

In technology news Apple (AAPL) was in the news as hard-ball contract negotiations with NBC-Universal, a subsidiary of General-Electric (GE), fell apart. NBC noted that it will not renew its contract for shows in iTunes and let the current deal expire come December of this year. Apple took it one step further and stopped hosting new NBC TV Shows in iTunes before the television season starts later this September. The reasoning from Apple's press release was given as NBC demands for a 150% price increase per downloaded show. iTunes current rates are $1.99/show and NBC apparently wanted that to increase to $4.99/show, stricter piracy controls and the ability to change and bundle pricing. Apple stood its ground and talks faltered.

One of NBC's most popular shows Heroes had 23 episodes last season and at $5 a pop, a customer is expeced to shell out $115/season to be able to watch the shows on an iPod a day after it has aired on regular television. In the days of Tivo (TIVO) and the DVR the idea of drawing television audiences is about making it easier and cheaper, not more complicated and expensive. Season 1 of Heroes was just released on DVD for about $40. From a consumer perspective which party seems to have consumer interests more at heart?

There's been several editorials written about this issue including an open letter to NBC from iLounge.
Digg.com Comments (Link)
iLounge (Link)

Disclosure: Author is long AAPL, C, BAC

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