My cable bill is very confusing. Comcast charges all sorts of fees and then gives a bunch of discounts and credits and it ends up at a number which I pay without trying too hard to comprehend it. Right now my roommates and I are paying about $125 a month for digital cable with HD channels and high speed internet. This, to me, feels very, very high.
The first thing I’d like to do to that number is knock out the internet — that we need. However, doing so is difficult. While it costs $43 a month, with a “multi product discount” we get $15 off of that amount. $28 does seem reasonable to me for high speed internet, although I think for that price we should be getting something even *higher* speed. So let us say it should cost $30 a month for reliable high speed internet. Now the cable bill is down to $95. The HD recorder itself plus the remote control accounts for $5 of that, so let us pull that out as well, and we’re down to $90.
Ninety dollars is the figure we will use. Before we continue, let me explain my alternate proposal for a la carte programming. It is really quite simple: we have “podcasting” which is an easy way of checking web site feeds to see if new audio files are available and, if they are, downloading them automatically. There are even some “video podcasts” which is the same thing, only with video files. It is straightforward, it is easy to use, and it is built into iTunes. ITunes also now allows you to purchase some television shows at a low quality suitable for iPod viewing at $1.99 per episode.
I want to podcast television shows. I would like to sign up for, say, _Lost_, and every week iTunes would download the show for me and debit me $1.99. Then I could watch the show at my convenience, without commercials. However, I want my shows to be equivalent quality to what I can see on my fancy new television, which means beautiful high definition. Each night my computer will check for new shows on my list and download them in HD, each time charging me $1.99. Each morning I’ll have fresh content to watch on my iPod, my computer, or my television when it is convenient to me. This, I believe, is the future of television. Broadcast as a concept will gradually cease to exist.
There are additional benefits to such a system. If a television show is cancelled or can’t be made in the first place, but half a million people sign up for the podcast version, the producers can have a fairly good idea of how much their weekly budget can be — about $1 million. With a “guaranteed” audience, dead show can live again without having to worry about ratings and advertising and programming time slots. Even niche shows can continue, albeit perhaps on a reduced budget. As an example, _Veronica Mars_ costs about $1.7 million per episode to produce. It has a viewing audience of between 2 and 3 million people. If 1 million of those people subscribed to the podcast version, _VM_ could continue to exist without fear of cancellation for the foreseeable future. And if the show started to go downhill, consumers could vote with their dollars and go watch something else.
But why apply this only to first-run shows? There is no technical reason not to let users create their own podcast feeds. Lets say that I want to watch _The X-Files_, a show that has been off the air for a few years. What if I setup a podcast that downloaded two episodes a week, in order, starting at the beginning? Of course since these are back-catalog shows, I should expect to pay less for them, perhaps $0.99 each. I could watch the show at my own pace, pay a reasonable fee for the privilege, and now I have, in effect, a customized TV “channel” of the programming I am actually interested in. And since I am getting the podcast anyway, shows could throw in “extras” to gain audience or keep me interested, such as commentaries on the shows that appear the same week that the show comes out, or background information, or deleted scenes, or cast interviews, or the episode’s script. In fact, shows don’t necessarily even have to worry about coming in to time anymore — if the episode is a few minutes long, don’t go through the painful process of choosing a scene to cut, just keep it all in on the podcast version!
Remember those numbers we were looking at earlier, for cable service? I pay $90 per month for the privilege of having a set of channels and schedules shoved down my throat by Comcast. With a digital video recorder (DVR) like TiVo I can, to some extent, take control, but I still have to deal with the whims of network executives and fast-forwarding through the annoying commercials.
Let us look more closely at the economics of podcasting television shows. As we’ve already seen, a guaranteed audience well below many shows’ actual existing audiences would be enough to put the show on a firm financial footing. People who don’t subscribe to the podcast can of course purchase individual episodes of the show at any time, but the podcast will be the best judge of continuing success. Of course the networks don’t even factor into my equations. Sorry about that, guys. What does factor in, of course, is the consumer.
Personally, I watch about nine shows in an average week. Two are of the short fake news variety (_The Daily Show_ and the _Colbert Report_). I also watch _Scrubs_, _Gray’s Anatomy_, _House_, _Veronica Mars_, _The Simpsons_, _Family Guy_, and _Battlestar Galactica_. Let us assume I’m willing to pay $1.99 for each show, even though I actually believe the half-hour animated and newsy shows should be cheaper. That adds up to $30 per week (the news shows broadcast 4 days a week). Multiply by four weeks and you get $120 per month for my programming. I’m coming out way behind cable here. I’m free of the shackles of programming schedules and cancellations, but in exchange I lose a lot of flexibility to watch things on a whim and for people who watch more television than I (or have more people in the house) the numbers don’t look good.
But wait! One hundred twenty dollars per month assumes new shows each week. In practice, this is not the case. Most shows do seasons of 22 episodes. And I’m still hung up on the idea of paying the same amount for a show as cheap to produce as _The Daily Show_ as I am for a major drama like _House_. So let us recalculate, this time taking into account more reasonable prices:
table{border: 1px solid #ccc; padding:3px}.
|_. Show |_. Price |_. Total |
|Battlestar Galactica|$1.99|$1.99|
|Gray’s Anatomy|$1.99|$3.98|
|House|$1.99|$5.97|
|Veronica Mars|$1.99|$7.96|
|Simpsons|$0.99|$8.95|
|Family Guy|$0.99|$9.94|
|Colbert Report (x4)|$3.96|$13.90|
|Daily Show (x4)|$3.96|$17.86|
|Scrubs|$1.99|$19.85|
So my grand total is about $20 per week. Let us be generous and assume there are 26 weeks of new programming per year instead of the average 22. Amortized over 52 weeks, then, the cost is $10 per week. In a typical month I’d pay around $43 for my shows, which is far better than the $90 for cable. Quite a cost savings.
One important loss here is the ability to channel surf and check out new shows. I personally do not do this frequently, and I don’t consider $1.99 too much to check out one episode of a show I’ve heard is good, but others might be dissatisfied with this arrangement. I can see several ways to alleviate these concerns. First, shows want a stable audience, and will do a lot in this new system to hook viewers. I’d envision most shows giving away their pilot episode, if not at first, certainly later, after they have started to build a following and become self-sustaining. Then when people who are new to a series want to tune in, instead of looking at the most recent episode they would have the option to watch the first episode of the series for free, and if they enjoyed it could subscribe to an episode a week, skip straight to the current episodes, or buy several episodes at a time to catch up to the current episodes more quickly.
Since we will be using an online store anyway, it would make sense to make movies available as well, so that I could, for example, pay $3.99 to add the latest _X-Men_ movie to my weekly movie queue. Of course I’m buying, not renting, so if I don’t watch it today I could always watch it later. There are additional tie-in opportunities here, such as letting one download a free movie of some sort as a reward for signing up for a season podcast of a television show, or bundling multiple movies together as a discount, or bundling a free television episode with a movie.
This is what I see as the future of television. It is cheaper, because it cuts out the middle men, better, because it lets viewers see what they want, better for shows, because they get a guaranteed audience and shows that would otherwise be cancelled can live on, and great for companies like Apple that will facilitate the transactions. Comcast won’t come out ahead unless they work to give users what they want. Neither will the broadcast networks. But there will still be a place for production companies and studios and high-quality shows. Just because you get something over the internet doesn’t mean it needs to be inferior. What I think it should be, especially if I’m paying by the show, is ad free. I could see how other people might want a show at a lower cost if it is subsidized with advertising, but I believe that creators of television would rather, given the choice, offer their content ad-free, so that it can be experienced as it was intended. And with all the money we’re saving over cable already, we don’t have much to complain about.
With iPods being sold that can, through a “universal dock” plug right into a TV, it is becoming increasingly easy for the average consumer to get high quality digital video onto normal television screens. It is only a matter of time — and not too much time, I don’t think — before any issues with bridging data content to the TV screen will be resolved. Then we will truly have television over internet, what some people are calling “IPTV,” and it will be nothing like existing TV. It will be more customized, higher resolution, more responsive to the marketplace, free of ads, and in almost every other way, far, far better.
One important loss here is the ability to channel surf and check out new shows. I personally do not do this frequently, and I don’t consider $1.99 too much to check out one episode of a show I’ve heard is good, but others might be dissatisfied with this arrangement.
*raises hand*
First let me say that *personally*, I think it would be cool, but playing Devil’s advocate is fun.
I don’t think most peoples’ mindsets work this way. Look at how people balk when they need to pay for content on the net (all you need to do is look at Slashdot whenever someone links to a registration-req’d page).
Even if some people would like it, I still don’t think giving out a few free episodes can get you the same kind of viewership that airing things for free does. Oftentimes, shows take a while to ramp up to high quality – what this scheme would do is essentially kill any show that doesn’t have a whiz-bang pilot or first few episodes. Studios will spend more time and money on pilots rather then other episodes. There’s less incentive to create a new show now, because the chances it’ll flop are higher, since nobody will accidentally tune in mid-season and see a great episode.
As for the contention that at 1.99, people will still be willing to browse: First off, how long do you think it’d stay at 1.99? More importantly, though, I think there’s something about the way people work that puts up a huge red flag about spending money – even 1.99 – on something they’re not sure is going to work out for them. Look at the early proposals for email “stamps” to prevent spam, by having the sender pay 1c for every email – it works on a similar principal.
I agree with you that judging a show solely based on its pilot is not necessarily a good move, many of my favorite shows took a long time to build up to a level where I thougt they were truly great. I enjoyed _Deep Space Nine_ quite a bit, but its entire first three *seasons* were disappointing.
However, your suggestion that studios would start spending more money on pilots than other episodes is somewhat irrelevant — they already do that. There is a very high sunken cost to create a new show. I would suspect shows generally spend 2x their normal episode budget to produce a pilot. This includes doing all of the ground work to create a production crew, find the actors, lay out a storyline, build sets, etc. The difference, I think, is not that a pilot would be the major focus — it already is — but that it would be harder for shows to prove themselves. As much as we might like to rail against the networks, _Veronica Mars_ is a good example of a show that did not immediately pick up a huge following, but UPN to their credit stuck with it.
I think the major difference here is that with this new systems, shows would need far smaller audiences to succeed, and would be able to adjust their budgets according to the size of their audiences. It is a trade-off, I know, but assuming that 1/3 of the current _VM_ viewers would be willing to pay to watch (a big assumption, I know), and you’re already making more than enough to pay for production. Assume 1/2, and you’re set for quite a while, and can even spend more per episode if you so choose. I still think there is a place for studios. Someone needs to put up the upfront capital to develop a new show, and smoeone needs to make the difficult decisions about whether a show is viable. In this respect it is just like any other major investment decision.
I think the comparison to “stamps” for spam email is a highly flawed one. True, there you are talking about attaching a price to something that is currently free, but the entire proposal is predicated on the belief that a) people are willing to pay to get rid of spam; b) that proposal would be effective. It is also unclear where the money would be going, among other things.
In this case, we have a proven track record of people paying for music and DVD sets. We have people paying large sums for cable or satellite television. With the iTunes movie store we are seeing people very quickly switch to the concept of paying $1.99 per episode for shows that they can already get for free. They are paying for the convenience of downloading and watching on their own terms and for the format that lets them watch on their computer and their iPod. This proposal is, in many ways, a logical extension of that. I believe the ability to bundle “extras” will dramatically increase the value proposition, at least for hard-core viewers such as myself. We’ve seen this phenomenon in action with _Battlestar Galactica_, where they are releasing commentary tracks and making-of videos on the same day that episodes are aired, and, in fact, releasing the pilot for free online in order to attempt to pick up more viewers. Even if someone doesn’t want to buy an episode, they might just download a script, or a making-of, or one of those ever-present summary/clip shows, all of which could be, at the producers option, released for free.
As to the price point, I believe $1.99 is a price that the market can bear. Producers that charge more do so at their own peril.
As I’m about to leave, I’ll only respond to one of the last points – that people have been paying for DVD sets for a while.
I’m willing to bet that in 90% of DVD purchases, the person getting the DVD set has already seen almost every episode on those disks. In your model, most likely, they’d not have seen them before.
On ITMS, I’m really not sure – do people DL the eps the day after it’s aired, not having seen the show yet? Or have the bulk of the downloads been of things that people already know and love?
As for the email metaphor, yeah… I wrote that as I tumbled out of bed and checked my blogroll…
This is such a well thought out proposal, but there are some problems. I think the largest problem, and this is a temporary one, is that HD programming takes up a lot of space. According to http://www.widemovies.com/dfwbitrate.html, DirecTV seems to be broadcasting AVERAGE content at around 14Mbps. At that rate, an hour show would consume over 6GB of space and take quite a long time to download (3.5 hours over a 4Mbps connection). So from a technological standpoint, I don’t think we can do it yet. But FiOS is coming/here which means 15Mbps speeds for $50/month which would allow one of these shows to be downloaded in near real time.
Then there are shows with natural commercial breaks. Specifically, I’m thinking of things like (many) sports. Football and Baseball have nice places where you can easily put commercials without disrupting the viewing experience.
Frankly, from an economic standpoint, we need to move away from our current entertainment structure. Right now, in many ways, we have an oligopoly in entertainment. One has to go through the few big names to get in and they charge oligopolistic prices. That’s the thing I love most about your proposal. TV shows would sell directly to consumers and that would create a market with many many suppliers and many many customers which would get us much closer to a fair market price. Of course, when music did this (iTMS) they made sure that the record labels would still be the go-between. It would be amazing if artists could start selling their albums through the iTMS (or a similar store) without record labels and such – without an oligopoly keeping prices as high as they are today, we could see lower prices and increased consumption of music. While you’re quoting the $1.99 iTMS price for videos today as a starting point, there is a lot of evidence suggesting that, if we moved to a competitive market structure, prices could be even lower.
I still think that it’ll be a little while longer before we have the technology to make this happen for video, but I think that someone who realizes that they can alter the market structure though an online store of this type and tries to monitize this model (bypassing the networks) will become very rich. While it would be hard to get shows at first (since they would be shows that weren’t the ones people were used to on TV) and hard to get producers to produce shows strictly for online sale, once those hurdles were past, we could see a new emergence of entertainment.
Sean, your numbers jive with mine, based on what I’ve pulled down from my Comcast high defintion cable box over FireWire. I’m expecting that capacity to the home will continue to increase as we move to the everything-over-IP future. There is really no point in wasting 95% of that cable bandwidth on sending out 200 channels when I’m only going to watch 1 (or 2, or 3) at a time. In a pure-IP network, there will be bandwidth to burn. And, of course, storage keeps getting cheaper. And you could always delete things, or archive them to the next generation of higher-capacity DVDs.
Aaron, your argument is far more troubling, and one I need to give more thought to. The content industry (for purposes of simplicity I’ll just group everyone together at this point) has found, in DVDs, a new and previously non-existant revenue stream. _Family Guy_ wouldn’t have come back on the air had it not been for strong DVD sales, and it is most likely that the majority, perhaps the vast majority of buyers of the DVDs are people who had previously seen the shows. If you are paying the first time around and already have the digital files, why go out and buy them again?
The question, then, is can this new distribution medium earn the content industry enough money to make up for the loss of advertising, syndication, and DVD sales. Those are a lot of revenue streams we’re talking about. If the answer is “no,” that presents a major obstacle. The first obvious “solution” to this problem is to not let people keep the shows they’ve paid for, but instead have the downloaded content “expire” after a certain amount of time or number of watches. I am strongly against this idea, and I could argue that the majority of consumers are as well, but we probably need more research to have a better understanding of how the marketplace feels on this point.
Didn’t read the whole thing, but how would news channels work?
Read the whole thing, then I’ll answer you!