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Tag Archives: internet

TV is in trouble. DVRs like TiVo neuter the efficacy of advertisements on broadcast outlets and the internet is threatening the subscription model that supports cable. Marketplaces like iTunes and Apple TV are becoming increasingly attractive to consumers who question the value of paying for access to hundreds of channels that they don’t watch. And, despite experimenting with streaming services like Hulu, content providers are getting cold feet now that technology has migrated from the computer screen to the TV itself.

Cable stalwarts like Mark Cuban argue that internet-based al a cart services, like those provided by iTunes, Hulu and Boxee will not be able to compete with cable in terms of price. Cuban believes that the current prices that are charged to purchase commercial-free TV shows are artificially low because the business model is subsidized by revenue from cable subscriptions. Take away the cable TV business, he says, and suddenly the internet becomes a lot more expensive and less attractive to consumers.

The problem can be summed up like this: The internet doesn’t seem to be as profitable as traditional TV, but traditional TV is starting to wither. This is a lot like the problem newspapers face, it’s just earlier in the process. What to do?

In earlier posts, I’ve argued that the answer lies in getting creative. Thinking about this tonight, I was trying to imagine the ideal TV setup for me as a consumer. Trying to imagine how it would all work, not just for me, but for the advertisers as well. The following is just part of the system I imagined, and I’ve not heard this proposed before. So, in the spirit of creativity, I offer the following idea to the industry:

The Consumer Directed Content Pricing Model

Here’s how it works. I have a set-top box, let’s say an Apple TV. With this devise I can do all the stuff I can currently do with my Apple TV: purchase or rent TV episodes and movies, download podcasts etc. But, when watching a program, I have options about how to pay. As shown in the following mock-up, the interface provides me a slider that lets me set the price I’m going to pay to purchase the program.


I could choose to pay the full price of $12.99 to download and keep the program comercial free as a can on the current Apple TV. Or, I could opt to pay nothing, and get the program with a full complement of commercial breaks. The viewing experience would be much like watching the show on broadcast television in this case, except I can time shift it and watch it as many times as I want (as with a DVR). Unlike a DVR, I would be forced to let the commercials run in their entirety, much the way HULU requires on their website. Alternatively I could move the slider to some mid-point between the two extremes. This would allow me to pay a modest price in exhange for fewer commercials. 


The more I’m willing to pay, the fewer commercials I’ll get and the shorter the running time will be. 

Now, to make this practical, the ads should not be part of the video download. Just meta-data that marks the insert points for them in the timeline of the program. When a commercial break occurs, the ads are streamed in from the web. That way, advertisers can insert timely ads into a viewing, even if the consumer purchased the program some time ago.

As a consumer, I like this, because it gives me flexibility and control to watch what I want, whenever I want, and pay whatever I think is fair. As an advertiser, I like this because I get all the benefits of the traditional broadcast ad model, avoid the pitfalls of DVRs, and can target my ads to viewers based on the psychographic profile generated by my viewing habits. 

The only folks this model cuts out is the broadcast network. They’re screwed. I’m sure cable providers will hate it to, since they’re determined to be involved in my content decisions. But, hopefully, they will embrace the inevitability of their utility status, and focus on providing us consumers the most excellent dumb pipe screaming fast internet connectivity possible. 

Does this model solve the problem? I’m sure it’s not that simple, but this is the sort of creative thinking that I’m not seeing from most of the players in the industry. One notable exception is Boxee, a company which at the moment seems more interested in improving the Apple TV device than Apple does.

There are other things that I want from TV as a consumer, but I’ll save those ideas for future posts.

UPDATE: Since writing this, I found this post that describes a similar idea. Cool.



I spent a half hour this weekend standing in line at the Comcast office in Pinole California, waiting to return the HD DVR box that my cable TV provider had issued me a couple of years ago. I had stopped using it more than six months ago, but was only getting around to returning it now that Comcast had finally seen fit to bill be $400 for the missing hardware. I’m amused by the coincidence of this event which occurred the same weekend that a fascinating argument broke out online between Mark Cuban and the founder of Boxee, Avner Ronen. Turns out that billing isn’t the only thing the cable people are slow about. The position that Cuban takes about the role that the internet will play in the future consumption of TV content demonstrates a surprising lack of foresight for someone who has a so much history invested in internet content distribution.

I really recommend reading through the exchange that is now reprinted on the Boxee blog, as well as the associated comments. I’ll not reiterate all the points or give deep background on the players here, but suffice it to say: Boxee is a software/service that provides consumers access to streaming video content in different formats, including making it possible to watch that content on your living room TV. Cuban owns a cable TV network and takes the position that Cable providers are better suited to provide consumer access to content than the internet for a myriad of business and technical reasons. 

This would probably have been written off as just a high-level academic discussion about technology and business trends, except for the events surrounding Boxee just a month ago when Hulu was forced by content providers to remove access from the Boxee interface. That incident demonstrates that the TV industry is facing a crisis not unlike that which has overtaken newspapers recently. As with newspapers’ inability to transfer their ad-based business models to the online world, TV is getting a glimpse at a world where consumers, in their desire for more control over their programming, have less need for ‘channels’ to act as a middleman. 

The Hulu/Boxee incident indicates that content providers like NBC and FOX, despite getting their toe wet in the internet waters, have no intention of allowing their traditional distribution model (affiliates, broadcast and cable) to be replaced by an internet-based one that cuts out the middleman and lets consumers pick their own programs. Presumably they don’t think they can make as much money online as they do on the air. Cuban latches on to this very point in his weekend rant when he claims that current internet TV programming is subsidized by broadcast and cable revenue, and that consumers will never pay the actual price it would cost for this programming if the cable money-stream evaporated. 

This argument makes no sense to me whatsoever, and Hulu is a perfect example of it. They show commercials on Hulu programming. Why is my attention less valuable to an advertiser if I’m watching their ad on my TV screen via an internet stream versus a cable line? In many respects it should be more valuable to them since software like Hulu and Boxee make it cumbersome to skip past the commercials which is one of the main services provided by TiVo and other DVRs that companies like Comcast now sell directly. In a grotesque twist of logic, Cuban even leans on the proliferation of DVRs as supporting evidence of the superiority of cable-based distribution.

One of the frustrating stances that Cuban takes, is that consumers don’t want to be exposed to a raw stream of content, and need to rely on the wisdom of cable and network providers to weed the wheat from the chaff. 

“The concept of “users always want choice” really really sounds nice. It makes for a great panel argument. But the reality is that its not true. Ultimate choice requires work. Consumers like to think they have choice, but their consumption habits say they prefer easy.”

I don’t doubt that it’s true that users want ease of use, but he’s using behavior within the current distribution model as a justification for that model. I think the newspaper debacle indicates that users want more control over the content they consume. The fact that he cannot imagine a way that this could be made ‘easy’ just demonstrates a lack of creativity. The internet has shown a unique talent for crafting all kinds of weeding mechaisms for the firehose of content that is out there (hello Digg, Twitter). Furthermore, I seem to remember that the music industry made this same argument ten years ago. How’d that work out for them? I don’t know about you, but I’m consuming a wider range of better music now than when I was dependant on FM radio for exposure.

One of the main gripes that many have about the current system is that Cable service sucks because I have to pay to subsidize 400 channels of crap I don’t watch, just to get the 5 I do. This is the very reason I dumped Cable TV six months ago in favor of an over the air HD antenna and Apple TV. In response to this position, Cuban offers perhaps his least compelling argument. It goes something like this: As consumers, we would never stand for al a cart internet service, so we would likewise never stand for al a cart TV service. 

“I only go to maybe 10 sites regularly. I get RSS feeds for another 50. Why should I have to pay for the resources required to provide access to the other 10zillion sites that consume resources ? Why shouldn’t I only pay for the 10 I go to ?”

“If al a Carte is the way of the future, then it should apply to the internet as well, right ?No one wants to pay the cost of the websites they don’t use, or the bandwidth they dont consume, right ?”

The reason this makes no sense also exposes the bias of his thinking. He is comparing ‘internet service’ with ‘tv service’. I have no doubt that cable guys think the product they are selling is ‘tv service’. But the fact is, consumers are not buying ‘tv service’. They are buying ‘tv shows’. And it makes no sense to compare the sale of finite products to a service. Consumers never talk about ‘movie services’ or ‘news services’. They buy ‘movies’ and buy ‘news’. This shows that Cuban is concerned about what is good for his business, not consumers. 

In his follow-up post on the matter, Cuban sort of makes this point himself and in doing I find I must regretfully agree. I think what he is saying is that internet people tend to be blinded by the idealized future that their technology promises and forget that there are many additional factors that will shape how things ultimately play out. I posted this response on his blog:

“We should never underestimate the ability of business to suppress technological advancement or deny consumers what they want in the name of protecting their own entrenched revenue models.”

Today, I see that others are weighing in. Notably this guy comes to Cuban’s defense by basically saying that ads can’t work in an al a cart system because advertisers rely on random spill over attention from lazy  channel surfers. If that is the backbone of the industry, then they are just as doomed as the newspapers are. Advertisers have to get much smarter about what they do because if the internet excels at anything it’s punishing inefficiency.

I think this quote from one of Ronen’s responses sums it up well:

“i would love for my Cable/Telco providers to focus on being great network providers rather than try to decide what content i should or should not have access to, what application i should or should not run, invent new standards for Interactive TV, Enhanced TV, whatever TV. all with the goal of trying to maintain control, so they don’t lose a grip of their lucrative business model.”

I’ll go one further. I think the newspapers are suffering from a lack of foresight and creativity very similar to what we are starting to see from the cable industry. I wish some entrepreneur would start a new telco called ‘Dumb Pipe, Inc’ focus on great service, and get out of the content business all together. That’s the kind of business I might wait in line for.