Ah, figuring out how to charge for TV shows online

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A couple of days ago, I shared (via Reader) this article by Duncan Riley over at TechCrunch. His basic premise was that Big TV (networks in the US) just weren't getting it. His basic arguments were that the increasing use of Bittorrent (and other alternatives) meant that the networks couldn't really justify products which
  • didn't offer broad choice (i.e. all the programs that they could make available)
  • restricted based on geography (i.e. certain shows are only available in the US)
  • had an expiry date (i.e. only TV shows broadcast in the last x weeks are available)
  • had bad content (because more options now exist on long-tail stuff)
I ended up thinking about the third of these practices the other day, and decided it wasn't really as bad Duncan made it out to be and may not be just about future DVD sales as he suggests. In fact, if you wanted to be charitable, its a creative attempt to figure out a business model in a changing environment.

Price-discriminating with respect to time is an established practice especially when it comes to media-related products.
Most common example: movies. The same "product": the movie is packaged in different ways (i.e. in theatres, on DVD, online and TV via syndication) and its made available gradually over time, for reducing average prices. The idea being: people who want to see it most will get to it.

I think what the media companies are trying to achieve with TV shows is similar...but in reverse. Here's what I think/understand they're trying to get to work:
  • they know a market exists for downloading (and "owning") TV shows (iTunes limited success with TV shoes seems to have proved that)
  • this audience has shown a willingness to pay for content they care about, but they want more than just being able to view it online.
  • On the other hand, the volume of Bittorrent traffic for illegal TV shows seems to suggest a much, much larger market exists for viewing popular network shows, with the highest demand being for shows that have been recently broadcast. People aren't as willing to pay to own/download this, but if its available, they seem to want to watch it despite it being more effort to acquire this content.
Given that you know this consumer behavior, and your background in media and mindset of charging different prices for variations of the product with time, wouldn't it make sense to try this in reverse?

  • Start with it being free (maximizing the number of people who will watch it) and try to monetize from advertising
  • Then with time (on the order of a few weeks), remove access to these files. If you believe that people who want to watch this content then want it more, they might be willing to pay for it! If you allow them to download it (and offer higher-quality) that might seal the deal.
  • Finally, make the DVDs available with extra benefits like outtakes/commentary/interviews etc.
I don't believe that this system will work as is. Let me take that back...it may or may not work, but doesn't seem optimal to me. The additional benefits need to be tweaked (or the current prices would need to be drop) to make me more of a believer in this system.

Its going to be interesting to see how this shakes out though...

Comments

shmoo said…
Sometimes your blog is so b-school! ;)
11:22 AM
salgar said…
Yeah, I know...we are what we know I guess.:)
3:37 PM
Isaac said…
I need the link to your Reader shared items!
9:33 PM
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