My awesome friend Todd wrote a nice, long piece on the Game of Thrones piracy issue. Similar points to what I was mentioning: people not getting how HBO’s revenue model is dependent on cable/satellite providers.
Have been thinking a bit more about that, however, and I really do think the solution is for those providers to start offering online-only subscription packages. Some already offer online content (see: Comcast’s Xfinity online version) but they only do so for existing TV-package subscribers. What I’m suggesting is that they develop a subscription package that doesn’t require a cable box attached to a big piece of living room furniture, because I think that’s the big barrier right now.
Obviously, there’s a subset of people who think they shouldn’t have to pay for entertainment, period (and really: screw them) but I think there are far more folks who download primarily for equipment reasons. This is partly a generational thing–young folks are more computer-savvy to begin with–but also partly a lifestyle thing. Older folks with kids are more used to the idea of everyone gathering in the living room to watch the same thing on the big box. Heck, the entirety of the primetime live-airing model is based on this. But single folks, from older teens up through mid-30s or beyond, aren’t bound to the group-watching experience, and thus can–and do–get their entertainment via more personal devices. And how are they doing this (legally)? Netflix. Amazon. iTunes. Hulu. Or some combination thereof. Some do a pay-per-view dealio, some gladly pay for subscriptions.
Given how well these companies are doing with subscription models, there’s no reason Comcast or DirecTV or any other provider wouldn’t make a decent amount of money on a similar model. The biggest reason their online offerings aren’t getting as many views is because their current subscription model caters to the TV set (see what I did there?) If they did direct outreach to online viewers, by giving them an opportunity to see that same batch of programming without the hassle of installation, equipment upkeep, blah blah, I think they’d see their overall subscriber base go way up.
I do get that there are some other protectionist issues involved, here. The cable/local market thing is a big one, for instance. You may have noticed that a significant number of the ads you see on commercial cable channels are for local businesses. That’s because the cable provider sells a portion of their commercial-break space (usually that which is otherwise taken up by channel promos) to local biz. An online-only subscription model would have to find a way to account for that.
However, that’s actually pretty easy to do. Just require your online subscribers to register their zip code, and when they’re logged in, watching your shows, they’ll get region-targeted ads, either on a web page, or inserted into the streaming video. And actually? There’s an even bigger advantage to this: If you do it based on zip code, you can have hyper-targeted ads. Imagine that, instead of seeing an ad for a car dealer halfway across town, you saw one for a dealer that’s five minutes from your house. Cool, yeah?
The other stuff that advertisers like can be worked around this way, too. Basic subscriber data from the signup forms should include marketing gold like age, gender, income, blah blah, thus giving your advertisers an even easier way to target the exact right demographics for their ads. Neilsen, shmeilsen. When the local sporting-goods store knows it can sell an ad that will be seen by males 18-36 who like watching a lot of ESPN and happen to live nearby, you’re hitting paydirt.
Of course, local advertisers aren’t the only barrier to creating online-only subscriptions. There are all sorts of other stakeholders (did I really just use that word?) that would balk if cable started moving out of their territory. Everything from the people who make the cable boxes to local install/maintenance workers might be a little worried if they think fewer people are going to want that equipment. But, as I mentioned in the previous piece about master control operators, those jobs are going the way of the pterodons anyway. Best adjust to that change now.
In a way, this is something like what Microsoft* has been facing for the past several years. Until recently, most people were using desktop computers with locally installed software to get the vast majority of their computing tasks done. Now, everyone’s gone mobile, and they need to switch gears with their OS and package software to accomodate this new hardware. Which, going by today’s preview launch of Windows 8, they’re finally doing. It would be nice if Comcast, et. al, recognized the hardware shift in their own industry, and reacted accordingly.
*Ob. disclosure: I have family who work for Microsoft. I don’t speak for them.