What Are You Paying for When You Buy TV?
Photograph by Gareth Cattermole/Getty Images
When pay-TV options came out in the 1980s, consumers were buying choice: more channels and more options for their prime time or daytime or anytime entertainment. But when the choices are infinite and spread among Facebook, So You Think You Can Dance, and Angry Birds, consumers aren’t demanding choice. In today’s world, what am I actually buying when I buy TV packages, be they from a pay-TV provider, Hulu, Amazon on Demand, or Netflix?
After thinking about TV in this way, I realize that traditional cable is no longer about choice. It’s about access: We have an abundance of choice but not necessarily what we crave. As an access provider for content, cable has the widest depth of content right now, but it also costs the most. When I thought about what I was actually buying, it shed light on cable’s problems but also led to insights about Netflix, content companies, and broadcasters, and it also helped me as a consumer to think about TV in a new way that could help me spend my money better. For example, I don’t have cable, and this reaffirmed that call.
When I buy Netflix, I’m buying the ability to sleep in on weekends. Quite simply, it’s worth it to me to pay $8 per month for a service that contains a bonanza of children’s programming in formats that enable my five-year-old to wake up, borrow my iPad, and settle in for an extra hour or two of selecting her shows—all without waking me up.
I’m also paying for the shows to be ad-free, although I would say to Netflix that creating some easy way for me to create a kid-safe selection of TV in this case is important and becomes more so as my daughter grows up.
On the other hand, I subscribe to Hulu Plus because that’s my only way to get broadcast TV. I occasionally want to watch broadcast TV but not enough to want to pay $25 for an entire season of a show on Amazon. I can’t receive digital signals inside my home, which frustrates me since those airwaves are considered a public good. Thankfully Hulu and new services such as Aereo are coming to my rescue with my broadcast content.
I even watch ads on Hulu, which is the only place I actually even ever see ads anymore when viewing TV content. Apparently for some programs, Web advertising is outstripping its TV counterparts, which may bode well for Hulu and other broadcasters’ Web efforts. March Madness ad spending on Web TV last spring outstripped the advertising spending on live television. Apparently people know where to reach the March Madness demographic, and it’s not on TV. So what does that mean?
Maybe instead of authenticating users for Hulu Plus to make sure they are cable subscribers, the broadcasters should go all-in and embrace the benefits of offering a platform that gives people broadcast TV (and ads) even if they don’t want to buy cable and can’t get broadcast signals. People are willing to pay for it, if Hulu Plus and Aereo are any indication. As for the argument that advertisers currently spend more on “real broadcast TV,” that will change—and fairly quickly is my hunch.
What about sports? I don’t watch ‘em, but my husband does. It’s the thing he misses most about losing access to cable, but so far he still doesn’t think it’s worth it to switch back to paying $85 per month for the service. Instead, he shelled out $120 for an MLB Premium pass, and he uses a website to track games that are blacked out. For other sporting events, he wanders over to a local sports bar and buys a beer. So now, instead of buying sports, he’s buying an evening out with friends and a game. Unsurprisingly, even though he doesn’t catch every game, he likes the bar better.
So what do the content and cable guys do? The cable guys are in a tough position. People are lazy and do like choice, but they are also cheap. And the focus today isn’t about choice; it’s about finding the right content on the right device when you want it. That’s a mindset that screams for services such as true on-demand networks powered by IPTV where a cable provider can queue up any content for a watcher on demand and on any device.
But technologically, cable companies and some other pay-TV providers aren’t there yet, and they are hazy about when they will get there. One reason for this is it’s tough to do on the back end, but it also has the potential to destroy the geographical monopolies established by physical access lines into the customer’s home.
While they wait, they are pushing hard to create TV Everywhere services that will let customers watch whatever they want within certain restrictions and on particular devices. And they are also trying to keep their content providers from decamping to Netflix or other over-the-top services.
Some of the content guys are undoubtedly realizing that many consumers will still pay for their content even if it doesn’t come from a pay-TV provider. The question is, how much? And when will it make sense for a content company to jump ship and risk alienating a huge source of revenue?
That’s why the Internet is so eager to see HBO Go’s actions, because many believe HBO Go has the largest and best chance to go over the top, thanks to its distribution deals and its quality content. But that argument continues to be debunked, and HBO isn’t interested. Honestly, the entire future of TV is more compelling than some of last season’s dramas.
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