Cable TV has been a big part of most of our childhood shows. But with the advent of the internet era, it is slowly losing to Subscription video on demand (SVoD) providers. Streaming giant Netflix has taken over the market and is currently eclipsing television viewership. Let us take a closer look at a statistics from Nielsen’s survey. 40% of all US households with Cable TV or broadband connection use a SVoD service like Netflix, Hulu Plus or Amazon Prime, out of which Netflix dominates as expected with a 36% share.
Such is the phenomenon that households are increasingly subscribing to only the internet to access SVoD and not subscribing to cable television. This is especially prevelant among young families and students.
The number of households who have broadband connection but do not subscribe to television grew by 16% from to 10.5 million in 2014 as compared to 2012. TV ratings are also on the decline while those of SVoD services like Netflix are shooting up. All this leads us to question whether Cable TV has joined the list of vulnerable markets which are disrupted by the advent of Information and the Internet. We answer this question using the vulnerable market hypothesis by Nelson F. Granados, Robert J. Kauffman, and Bradley King.
- Easy to Enter: The availability of internet has allowed streaming service providers to use it as a low cost distribution channel, something which the incumbents had never tried out before. The internet gives them access to a global audience and hence they are able to gain volumes which they would not have been able to otherwise.
- Attractive to Attack: There exists a customer profitability gradient in the entertainment industry which the new entrants are exploiting. The cable TV providers have for long followed a one size fits all approach. They have floated expensive channel bundles and most viewers had to choose from a fixed set of alternatives. But the streaming service allows viewers to compile their own list of channels which view on a regular basis. For less than $10 a month, one can sign up for Netflix and browse what they have to offer. Since there are no termination fees involved, viewers have the flexibility to cancel the subscription as well. Thus streaming service providers have managed to opportunistically pick off the most passionate viewers who have a higher willingness to pay provided they get exactly the content they want to view. This has left Cable service with the leisure and occasional viewers. No wonder the TV ratings are tumbling.
- Difficult to Defend: Premium networks CBS and HBO announced their won streaming services for next year. In fact CBS shows, past and present can be viewed by subscribing to its streaming network for only $6 a month. This is a major blow to cable service providers since these are marquee brands available only on Pay TV. With such brands announcing their plans to circumvent the existing delivery system, cable TV has just been hit with another bullet. Cable TV providers need to understand the needs of the customer better and provide more customized bundles if they have any chance of a fightback against the SVoD dominance. They have to get rid of the rigid pricing structures and must try to be flexible as per consumer preferences.
Cable service providers have thus got a massive challenge on their hands. As I near the completion of this report, I am myself looking for a streaming service to show me the weekend’s soccer matches. Can Cable TV do something ? Please let me know your views.
- Granados, N., Kauffman, R.J., and King, B. 2008. “How Has Electronic Travel Distribution Been Transformed? A Test of the Theory of Newly-Vulnerable Markets”. Journal of Management Information Systems 25(2) 73-96
- Nielsen, Total Audience Report Q4 2014. Available at: http://www.nielsen.com/content/dam/corporate/us/en/reports-downloads/2015-reports/total-audience-report-q4-2014.pdf
- The Los Angeles Times, “Moves by HBO, CBS could be tipping point for a la carte pricing” Available at: http://www.latimes.com/business/la-fi-lazarus-20141017-column.html
In the wake of the digital revolution, it has been the print media publishers who have suffered the most in keeping up with other forms of media content providers, in terms of retaining a large user base. This week, we bring you two such digital services, Flipboard and Blendle, who have been doing their bit to ensure that publishers find an attractive platform to reach their target segment. Flipboard, one of the most successful apple apps ever (I-Pad app of the year, 2010) allows the users to create their own customized magazine based on their interests. Its feature of running full page ads has made it highly popular with advertisers and publishers alike. On the other hand, Blendle is an upcoming Dutch start-up which works on a pay-per-view model. It is similar to how I-tunes operates and is an attractive proposition for price sensitive users.
Flipboard relies on positive network externalities to boost its profits. It subsidizes its customized service offering to end users and thus ensures that price is not a barrier when trying to attract new customers. This has gained it its 100 miliion user base worldwide and made it a favourite channel for advertisers to reach a diverse user base. Advertisers also favour the fact that they get to run full page ads which are usually more eye catching and not considered a distraction like the banner ads. Hence, Flipboard has currently an elite list of advertisement partners who pay a premium which more than offsets the costs of collecting and distributing information for free, thus making it an economically profitable model. But in the quest to win the clickbait race, Flipboard must guard against compromising on content quality.
Blendle’s model of pay only what you read is bound to find a lot of takers in the occasional readers category. Usually the subscription charges by reputed journals is above the reservation price of a one-time user. But through its novel technique, Blendle ensures that readers get more value of the nominal amount they pay upfront. Currently the pricing power is given to the publisher and the €0.2 price per article ensures that that the cost per article is recovered by the publisher by selling an efficient number “N” of articles. The only challenge with this that publishers should be wary of losing bargaining power as had happened with the music owners in the case of i-tunes. Also, many users differ in their valuations for information as per their need, so a per-use pricing might prove economically inefficient during low-value periods.
Overall, we believe that both these technologies have reduced transaction costs for readers and publishers. The key challenge is to fight declining ad revenues in the wake of stiff competition. Compromising on quality of articles should be a strict no. To tackle this, we propose a gradual shift towards video ads which not only ensure a premium price but are also more popular with users. This will ensure long term sustainability of these innovative business models.
Being an exchange student, I have done a fair bit of travelling round this fascinating continent in the past month and many a time when I see something amazing, I feel the urge to instantly show it to my friends and family back home. To address this, I was rummaging through play store when I came across this wonderful app called Periscope. Now for the uninitiated ones, Periscope is a live broadcasting app owned by Twitter, which you can use to record and create videos on your phones which can be watched in real time by others. For those of you who are couch potatoes. this app is equally attractive since it allows you to select and watch from a range of videos which are being broadcast live and are available for public viewing.
The differentiating factor for Periscope is that everything is instantaneous here. For example if you are watching a live feed and want a different angle or view, you can immediately message the broadcaster and request the same. You can also ask any questions or ask them to repeat a certain portion you missed out on or applaud their effort. Similar to Facebook where you press the like button, here you generate “hearts” each time you tap the screen. The number of hearts accumulated acts like a feedback for the broadcaster and tells him about the current popularity of his live stream.
Using the app is also super easy. You just need to log in through your twitter account ( create one if you don’t have) and you can view which of your friends or any popular broadcaster is currently broadcasting live. To start your own recording, locate a red camera icon in the bottom right corner of the screen which is the record button. Select a title for the broadcast, pin point your location, choose your viewers ( public/private) and you are ready to go live!!
Having described the app, I will now tell you why I feel this is such a good tool to possess and its pros and cons.
Real time nature of the app
The most amazing feature is that everything on this app is instantaneous. You broadcast a video of what you would like your select audience to see, receive comments, requests, suggestions and applause from them, all on the fly. This creates a really interactive environment for both the broadcaster and the viewer and enhances the experience for both. This is the BIG differentiating factor this has over Youtube is that this is real time and hence is a lot more fun too.
A travelling companion
Now one can share one’s experiences with friends and family across the globe using this app. Be it sailing under the magnificent Erasmus bridge or skydiving from a plane or a mesmerizing show at the opera, you can share everything with them and enable them to see the world through your eyes. Their reactions and comments will just make travelling with a Periscope that much more amazing.
Live news reporting tool
Imagine yourself as a news reporter who has gone to cover a world cup final. You want your news channel to be the most updated and the fastest to broadcast the next goal or the next red card. This allows you to do exactly that using this tool. Using Periscope can give a news agency a big boost during major political or sports events as the live feed will soon draw a lot of traffic to your news channel’s twitter account. The faster you manage to get the video on TV, the faster your channel’s TRP ratings will shoot up.
Sometimes you may be alone without a video cameraman and other aids. If you come across an incident which you feel needs attention or must be broadcast instantly, then Periscope is a great aid in such circumstances: For example, you re driving down the highway and come across a growing bush fire.
It can also replace official media press conferences since an announcement can be made through a live broadcast and all the reporters and media personnel can interact using the app. This greatly simplifies proceedings where in an urgent press conference needs to be called. Who knows very soon presidential addresses might be given through the Periscope!!
It can also prove to be a worthy competitor to Skype and other video calling platforms.
Piracy: a big concern
Like most good things, the Periscope app too has a downside because live broadcast features are an invitation for video piracy of authorized content. This issue was highlighted when several users of the service used it to illegally broadcast the fifth season premiere of HBO’s Game of Thrones live. Similar concerns were raised during the highly watched boxing match on May 2, 2015, between Floyd Mayweather, Jr. and Manny Pacquiao, which was widely pirated live on Periscope as compared to its being televised via a pay per view that cost approximately US$90. Such issues need to be addressed at the earliest in order to protect the interests of the affected parties as well as show Twitter’s strict stand against piracy or any other illegal activity.
All in all, I feel optimistic about the future scope of the app. It is a serious challenger to other broadcasting channels like Youtube primarily due to its real time and interactive nature.With the popularity of social media, Periscope broadcasts will really enable faster information sharing and transfer across the globe.It being part of a social media mogul like Twitter will ensure its visibility and acceptability as there are no switching costs involved for users. Certain security features like providing restricted access to using Periscope only to authorized personnel during sports events or pay per views can curb down its usage as a piracy tool. But its here to stay and am confident its soon going to be an integral part of most of our lives.
Please let me know through your comments if you have used Periscope before and if you have shared any interesting experiences using it. I would also like to know of your views about the app overall and if you can think of any other use to which it can be put to.