The Future of TV Stations

5 06 2009

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When was the last time I watched cable TV?
Many many years ago… when I flipped my cable TV on recently out of EXTREME boredom, I didn’t realize which channels were which anymore. The station had revised the channel numbers TWICE and I missed both iterations!

How do I use my TV now?
Hook up my laptop to my HD TV using a HDMI cable, stream/play video on my laptop, watch away on the nice, big clear screen.

Will I get Cable TV when I have my own home? Will my friends get Cable TV?
MOST PROBABLY NOT.

But why??!!
Isn’t it obvious?! We’re arrogant. We don’t arrange our schedules around television programs anymore.. waaay too troublesome. We’ve tried that in the past and have always ended up going “When did this guy die?? o_O??”.

A couple of weeks back my colleague Calvin and I were talking about how long it has been since we last watched TV.. I realized that all I remembered was that it was EONS ago… leaving my Cable TV to collect dust (and continue feeding the TV station subscription fees). The interesting thing is, we know it is happening to majority of youths now, we’re sure the TV stations know it too but we still see the usual “$XYZ per month for 100+ channels” packages being promoted all over. However, instead of laughing at the death of these stations, we embarked instead on a discussion of how TV stations would change their models in the near future.
 

Model 1: Pay Per Channel Collection model

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Saying Pay Per Channel may be very misleading as there are Cable TV stations that allow you to pay according to the number of channels you subscribe to. Instead of saying channel to avoid confusion, I’m going to say Collection. Every TV Station now have their own line of series like AXN with CSI and House, Star World with American Idol, MTV with Punk’d, Sweet Sixteen and the list goes on. I love watching all these programs and I’m subscribed to all these channels! but I watch them online now.. all because they do not fit into my schedule.

Instead of making viewers pay for PROGRAMMED Television, why not give them UNPROGRAMMED Television? How it works is simple. I subscribe to the channel and I instantly get on-demand access to any show shown on that channel, whenever I want. The next question that came was, whether there should be ads for these shows.. Currently, we are paying for channels and am kind enough to tolerate the ads shown on them. This is a convention that has been in place for years and people have gotten used to it.. When it comes to paying for on-demand access however, we have gotten used to a no ad policy and will probably be really unhappy if we saw ads popping up here and there. It doesn’t help either that a large portion of a station’s revenue comes from ads, hence a subscription-based on-demand model might not work.
 

Model 2: iTunes, meet TV

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How about we apply the iTunes system to TV programs instead? Pay per episode of a series you want to watch. I admit that I am unsure of how much cost actually goes into the creation of each series but my guess is each episode would not exceed $1 million? So assuming that the cost of producing an episode of a TV series like Prison Break is $1 million and we charge users, say, $3 per episode taking into consideration users are already willing to pay $1 for a 4-minute song, $3 for a 1-hour video should be well-received. Multiply $3 with the average number of viewers during its worst season, we have:

$3 x 5.3 million viewers = $15.9 million

This is a profit of $14.9 million per episode not taking in the in-movie advertising and endorsements by companies. Even if the cost of the episode was $10 million the profit would be $4.9 million for each episode..

Prison Break was a huge success, so lets take a lesser known TV series instead. Lets try Harpers Island. Their latest episode only managed to garner 3.62 million viewers. Assuming that as this is not a popular series, we have only 20% of these 3.62 million viewers willing to pay for the episode.

20% x 3.62 million viewers = 724,000 viewers
$3 x 724,000 viewers = $2.1 mil

This still covers the cost of $1 mil per episode.
 

Consequences of model
The model actually feeds into a trait of consumers becoming more and more selective. If we feed into that trait, that would mean we are giving consumers a free hand to pick whatever they wanna see.. which also equates to lesser known TV series and movies dying. Is this a bad thing? No because even today, bad TV series are being pulled out by stations very quickly except that with this model, it may be pulled out faster as there are no ads to reduce losses. The result will be an ever more competitive market leading to an increase in the quality of media produced.

But what about series which are actually good but fail to succeed due to bad marketing? What if consumers only stick to the few series they are only aware of and never give the other series a chance? To tell you the truth, I, as a consumer actually do pay attention to the little icons and animations that pop up at the corner of the screen every now and then advertising an upcoming new series. I look forward to those as they give me a guide of what to check out in the gazillion series to choose from out there. In other words, I don’t mind paying for episodes that have some little animations and bars appearing to promote an upcoming series that is currently being practiced by TV stations. I believe most consumers wouldn’t mind those unobtrusive elements either.
 

Conclusion
If TV stations want to continue operating, they have to move towards new models that feed into the traits of UNPROGRAMMED, on-demand televising. If they don’t change their models soon, they will start to see their finances dwindle until it is too late and we will all be left with nothing but old video archives on the internet to watch. Coming up with a “Support TV stations! Don’t let them die” campaign won’t work because the benefits of on-demand streaming online is just too good. Better change before it is too late for all of us! (and we’ll just stick with computer games and box office movies). 😉
 

Note: This post was written from a consumer’s point of view. I am unfamiliar with the inner workings of the TV industry and as I couldn’t find much information of what elements of costing goes into the production of a TV series, my values were made based on estimations from costs of blockbuster movies

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7 responses

10 06 2009
10 06 2009
jiinjoo

actually, not that you cannot find the cost for making non-blockbusters etc. you’re looking at the cost of making tv series only. you forgot the cost of delivery and the entire ecosystem of delivery, as well as the ecosystem of advertisements. in other words, what you said was right, as for the numbers, you just need to call up mediacorp and ask them how much it cost to bring you prison break, call up starhub to ask them how much it cost for them to carry the programme over the cable, and see which of those $$ they are paying will have to be paid even if iTunes brought it to you.

10 06 2009
bitbot

Hey Jiinjoo!

Thanks for the info. You’re right, I totally forgot about the entire delivery ecosystem involved.. this brings another thought to mind: If say the original producers of the series themselves decide to adopt the iTunes model and let anyone on the Internet buy them, would that kill the cable and TV stations in Singapore?

Then again there is jurisdiction law that can sometimes apply even for businesses on the Internet..

10 06 2009
jiinjoo

hehe – you interested to “kill the cable and TV stations” in Singapore? how would the poor man with no mac book pro watch little nyonya?

10 06 2009
bitbot

Actually I don’t think it’d kill the cable and TV stations in Singapore entirely.. there would be more competition and now they’d have to produce higher quality media which the public would be willing to pay for online. Kind of reminds me of this academic paper I read about how the Korean media industry went through a huge increase in quality and boom after the 1997 crisis due to intense competition during the Korean stations’ struggles to survive.

13 06 2009
James

I don’t watch TV anymore, my mom still does once in a while. I guess my next home will have no TV and hence no subscription fee to pay either.

17 01 2011
rutubes.net

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