Wednesday, March 31, 2010

Future of Entertainment Commerce

There is an interesting post made the other day on Chutry about the future of entertainment commerce.

I've actually touched upon this briefly before, but this article raises some interesting questions.  The one I want to focus on is about television being 'freed' from cable providers... but in essence our choices would become more limited because individuals would be less likely to watch an episode of a new show if they had to pay for it. 

I don't see why this is where television is going.  I find this to be a rather simple solution still.  I think the problem lies in the fact that the cable providers, Comcast/Time Warner/etc..., can't get out of their own way.  They need to see the forest through the trees. 

Pretty soon every home will have broadband, and eventually that will be connected to our televisions.  It is already happening. I have a Roku box at my house that enables me to watch certain channels, Amazon On-Demand and Netflix whenever I want.

Here is my solution.  Cable providers currently charge subscribers a monthly fee.  This fee will vanish and become a straight broadband fee.  They need to accept that and shift their model.  Currently, in that fee, you are paying for all the channels that you receive.  The cable providers negotiate with each network on a licensing fee that it will pay out to them each month. 

You are actually paying a lot of money each month for channels you do not watch, nor will ever watch. It would make more sense for individual users, rather than pay for each show they download, to 'subscribe' to that network. This 'subscription' or 'licensing' fee would be set by the networks and, in a free market, would ideally wind up at the correct price point.

I don't see why this is such a hard concept to wrap their heads around.  They are hesitant to adjust the current system because companies with more than one channel (such as Disney with all of the Disney channels, ABC, all of the ESPNs, etc...) can use that leverage to eek out more for their underperformers.  If Comcast doesn't pay more for Disney Family, then they will hold out on ESPN. In this model, the big losers are the actual subscribers.

It'll force these studios to trim the fat, put out better product, have a more focused offering (which is the case with a lot of these new cable networks anyway) and price their networks at a reasonable rate - offering subscribers the ability to order the ESPN's without the Disney Family, and vice versa. Will it be hard for a new network to emerge? Yes. Very hard. But that is why capitalism is great - because they will find a way to get their name out there. Free subscriptions for a month. The ability to back-order months, if say, one of their shows is a hit and the appetite for it begins to pick up. Networks joining forces, if their products have the same audience, to promote each other - and possible bundle themselves together for a better deal. 

I think the one-off business model is the beginning of the end.  Unless the price point for each episode is so low that it makes sense. TV is a comfort item. It shouldn't be hard work. Every time you want to watch something you shouldn't have to work at it.  We don't sit at our computer and download songs on iTunes at random. The typical user is searching for something specific, downloading it and then moving on to another task as they listen.  TV is different... sometimes you just want to turn it on and tune out... and setting up 'subscriptions' for relatively low sums for your favorite networks seems like a pain free way to move forward.

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