Tuesday, November 08, 2005

Big News If You Don't Have a DVR or VCR, But Do Have Cable (Preferably Digital)!

According to the Los Angeles Times, Comcast has entered into a deal with CBS and Disk Network has brokered a deal with NBC that will allow pay television customers to access "on demand" versions of highly rated broadcast television shows.

The Times does mention that such an "innovation" may not seem like much to "viewers who own personal video recorders such as TiVos or VCRs [who] can record their favorite shows now, the two deals are unique in that they make TV-on-demand available to a broader audience. They also let customers pay for shows on an a-la-carte basis." It is the second statement that bodes wierd for the television entertainment industry. By this I mean that traditionally television has been a "programming" oriented business where producers sell shows to networks who "schedule" shows they believe will attract audience. Even niche cable networks work on this same programming model. Television viewers have traditionally had some choice as to what hey can watch (there are 120+ channels) and when to watch it if they have a recording device, but the "on demand" market may add another variable to the equation.

While I admit that offering on demand for shows you can already record (though the on demand versions are commercial free) is not very revolutionary, or even enticing. What is enticing is the potential for networks to have greater ability to tailor to their audiences desires. The television market may move into a direction similar to the motion picture industry where all viewing is technically "on demand" and demand is prompted by advertising.

I can actually see, after the technology has become normalized, the major networks offering on demand show for free (with commercials) to all comers. In doing so the networks would also purchase more shows than they currently do. That's right, I said more. The reason for this is that the major networks could purchase shows currently offered primarily by niche cable channels or who have a limited fan base. The "per show" cost will be fairly low for shows that would draw a small market share, but such shows might have longer runs as well. Every television viewer has a show he or she wish continued on the air, the recent movie Serenity shows the power of small but loyal audience can have in the marketplace. Imagine if all Firefly fans could have spoken with their dollars in a direct fashion early in the process. It could have meant the show would still be on today. I can also see changes in the revenue model where the front end payments for shows are lower, but that residuals and revenue for screenings are higher. Naturally, the self programming model would rely heavily on advertising to "get out the word," but that could be a boon for both the growing internet ad market and the shrinking newspaper ad market. It is a good thing TV guide has changed to a larger format, they might need it for ad space and articles in the future.

In this potential future model of television one could imagine the networks gaining greater marketshare than they currently have, but it would be because they have become more like show "brokers" or superstores than "programmers" of entertainment.

NBC executive David Zaslav made an interesting comment in the article. He said, "If you don't play, you'll get left behind." He made the statement in response to how NBC/Universal was reacting to ABC's deal with Apple Computer Inc. which allows for the purchase of ABC programming for iPod. He meant that if you didn't offer similar products to your competitor you would get left behind. What is interesting is that he summed up what will become the market model if the individual programmer market takes over. If shows don't play, in other words if they aren't requested (and, for now, purchased) by viewers the shows will be dropped. This is very different from the current model where shows are played and are only dropped if no one watches them afterword.

On an ironic side note, the NBC deal with Dish Network does require that the customer already own a DVR. Begging the case that in the early stages of the new television model what benefits Dish really offers.
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