A Strategy to Cut All Cords
The number of cord-cutters and “cord-nevers” has been increasing year-over-year, with current statistics penning one out of five households having no cable subscription service (fortune). One determining factor could be the price-value relationship offered by cable providers, as present packages offered start at around $35 a month, whilst the average user pays $75 (BCG). For this price, individuals get a wide array of channels they rarely watch, and the rigidness of not choosing other channels or dropping some they seldom know exist.
This, in turn, creates an inefficient market, as people that watch select channels are theoretically subsidizing the rest of the network’s offerings, fomenting mediocre stations that offer no real value to customers (VH1 Classic? Cloo?).
Current Alternatives
There have been recent movements on this front, with the likes of Netflix, Amazon Prime Video, Hulu, and Youtube emerging as new competitors, providing a glimpse of a more efficient market (but still unable to completely eliminate the need for cable).
Netflix and Amazon Prime have created a subscription service that houses movies and completed seasons of series while adding original content. This is a great example of creating an efficient market, evident with examples such as Amazon Prime’s pilot seasons, where viewers get to vote for shows that, if selected by enough individuals, will get produced.
Another interesting model is represented by YouTube. Here, show producers get rewarded with every view of their videos, so good “TV” gets replicated, while bad “TV” does not see the light of day; hence creating a more efficient market.
The Future
The future of TV may lie in a model somewhere in between all the current offerings. In the proposed model viewers would have two big benefits: First, they would be able to watch the content they desire, when they desire. Second, they would pay a price proportional to their consumption habits. To achieve this, the content aggregators, think Comcast and Google, can offer different subscription tiers. These tiers would be the equivalent of today’s cellphone data plans, where users would pay for a number of “TV hours” per month. As for TV Networks or show producers, they would be paid per view of each of the shows at an arranged rate with the content aggregator while still benefiting from ad revenue. This type of monetization strategy would ensure that the type of TV shows people “demand” are rewarded with higher revenues, while those with lower demand can look to reinvest their resources.
All in all, the current methodology of content aggregation, distribution and monetization employed by cable providers are stuck in the past, and have not kept up with the trends in technology, all at the expense of the consumer. For TV to truly jump to today’s standards, a new model needs to be adopted in order to kick start the revolution of TV.
