Monday, November 14, 2005

TV You'll Want To Pay For?

Taking network television revenues to the next level.

It was only a short time ago Apple announced it would sell some of ABC-Disney television programs via iTunes and by the end of October, the company’s customers had already purchased over 1 million videos. If we can get television content online, on demand, whenever we want it, how will networks convince us to tune in on their schedules? For that matter, how can they be certain we'll tune in at all?

This new online distribution model presents the networks with an enormous opportunity to change the traditional network business model. Allowing viewers to purchase individual episodes would free the industry from the current strangle hold of advertising revenue. Imagine a new era in broadcasting where fans have the power to keep their favorite series in production and producers have the opportunity to create more elaborate, controversial, and innovative programs.

Network television has followed a predictable pattern with programming, no ratings, no airtime. Many of the most innovative shows of the last two decades, shows that generated critical acclaim and cult followings, have been early casualties of the ratings wars. When these programs are canceled, there are generally two explanations: Either the network didn't know how to market or schedule the show, or the series grew too complex and unwelcoming for casual viewers and latecomers. The problem is that there's still an assumption that if a show is good enough, a sizable audience will be sitting in front of the television when it airs. In an age of TV series being widely available via DVDs, the Internet and DVR, such a belief is fatally flawed.

As iTunes and its future competitors offer more video content, producers will no longer need to depend on the networks “prime time” viewers as their only audience. The compromises that they currently make to meet broadcast requirements will also disappear. Episode lengths can vary as needed, content can be darker, more topical, or more explicit. If the network execs are clever, these changes can supplement broadcast programming rather than replace it. Viewers already have been programmed to expect director's cuts and deleted scenes from DVDs. It's certainly conceivable that in the future networks might one day air a "broadcast cut" of an episode, then encourage viewers to download the longer, racier director's cut the next afternoon.

The industry was quick to introduce “end of season” DVDs of hit series and consumers have purchase and rented them by the millions giving viewers the chance to catch up between seasons. In a online, on-demand world, anyone can catch up at any time, quickly and legally. Producers will no longer have to choose between alienating new viewers with a complex storyline or alienating the established audience by rehashing details from previous episodes. Forward thinking networks will realize this is not only feasible but also extremely profitable. Rather than recapping relevant details from previous episodes, we could soon be encouraged to buy our way up to speed.

On-demand television will allow audiences to take an active role in programming the networks. We've seen several examples of fans banding together to save their favorite programs in the past few years. On-demand and direct downloads give fans of endangered shows the chance to vote with their wallets while a show is still on the air. And if a program is cancelled, revenue direct from the viewers might provide enough revenue to keep it in production as an online-only venture. Assuming that the average half hour show costs $1 million per episode and downloads will cost around $2 per viewer, shows would only need a few million viewers to turn a decent profit. Would a few million viewers pay $2 a week to download their favorite show? The concept is certainly possible.

Henry Jenkins has written extensively on potential business models for online, on-demand television. Jenkins outlines a subscription model where viewers pay in advance for an entire season of downloadable episodes, providing the startup capital needed to fund production. Episodes would also be available at a higher cost on a per-episode basis, providing a steady stream of additional revenue. The Apple iTunes business model proves that audiences are willing to purchase their media when it is simple, affordable, and convenient. With Google, Yahoo!, and Microsoft set to join Apple in the television distribution wars, it's a safe bet that you'll see more major-network content for sale in the near future.

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