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by MatthewPhillips
5450 days ago
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Commercials are an essential part of the television experience and the main reason why the transition to online is taking so long. Getting advertisers on board is difficult for a variety of reasons (namely that's it's a completely different model). An episode of a TV show can cost several million dollars to make. Reality shows cost much less, obviously. ER, for example, cost 13 million per episode [1]. Do you think they can recoup that at $0.99 per episode? I don't. Can they recoup that at $9.99 per month for some subscription? No way. The only way they can pay for that is by drilling into your brain brand recognition. http://wiki.answers.com/Q/How_much_does_a_cable_television_s... |
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Firstly, making the service I am describing available to customers like me doesn't mean that everyone is going to abandon the traditional delivery methods. Such a service would likely require some level of technical sophistication (i.e. plugging in an ethernet cable) where most TV users just want to turn on the TV. Traditional delivery methods, and revenue streams, would not be immediately damaged by such a solution.
Secondly, using your example of ER, there is marginal revenue per viewer. For every viewer that the new service draws from the old service, it becomes necessary to make a certain amount of money per viewer. ER's lowest rating was about 9 million viewers. At 13 million an episode, the marginal revenue per viewer (again, on the low end) would need to be around $3/viewer/episode to earn $14 million in net income per episode (that's 9M viewers x $3.00 = $27mm - $13mm cost per ep = $14mm). At 22 episodes a season, that's $66/yr for each viewer. Compare that to a digital cable service that can cost you well over $1200 dollars a year. You could buy 18 shows on the magnitude of ER for that price, and who could possibly have the emotional fortitude for that? Let alone the free time.
http://en.wikipedia.org/wiki/ER_%28TV_series%29#Ratings http://money.cnn.com/2010/01/06/news/companies/cable_bill_co...
The cable television business model is a value suck. Albeit, a value suck that's not going anywhere, but I sure as heck am not going to pay for it. I'll stick to free TV, Netflix, and my BD player.
The numbers work for the sort of service I want, and I would bet that Reed Hastings would love to give it to me for $30.00/mo if he could get around the content providers who are clinging to their 20th century business model.