Commentary

TV's New -- Or Old? -- Financial Model: Making Consumers Pay

by Wayne Friedman , Staff Writer, March 3, 2009

The rise of advertising-supported media may be getting a new wrinkle. Actually, though, it's kind of like an old crease.

Time Warner CEO Jeff Bewkes' new "TV Everywhere" initiative looks to add a seemingly quaint way of doing business: having consumer pay for TV/video content.

Specifically, consumers buy a subscription that allows them -- via a cable, satellite or telecom provider -- to view cable TV network content online.

But this isn't for Time Warner's existing base of cable or satellite customers that already get Turner's networks -- TNT, TBS, HBO, or CNN. It's for a small minority -- 10% or less -- who don't have access.

In a small way, Time Warner seems to want what it has with spun-off cable operator, Time Warner Cable: a new digital-style MSO model for those consumers who can't access, or currently don't pay a monthly fee for access, to cable or satellite programming.

Recently, Cablevision System Corp. the new owner of Long Island, NY. daily newspaper, Newsday, said it would take an unusual, seemingly against-the-grain, business decision: charging consumers to access its content online.

Head scratch, here: All this happens during one of the crushing recessions in recent memory?

Perhaps new business school graduates should do some research into unusual supply and demand equations buried into some remote commerce case study.

In reality, consumers seem to be moving in another direction, one where traditional cable and satellite subscribers may abandon their $80 to $100 a month subscriber fees for hundreds of networks they don't really watch. (Most studies show the average customer focuses on five networks, or maybe as many as a dozen.)

Surely, Cablevision and Time Warner won't position these new initiatives as long-term financial saviors. Instead, they seem a test of sorts, to see where the voraciousness of consumers' media consumption will end.

Why? Because at some point -- maybe a year from now -- the economy will get moving again. But at that point, media companies may want to move more cautiously, looking to eliminate some of the wild swings that come with revenues from TV and other media advertisers.

Not ad-supported media; consumer-pocketbook-supported media.

2 comments about "TV's New -- Or Old? -- Financial Model: Making Consumers Pay".

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William Hughes from Arnold Aerospace, March 3, 2009 at 12:34 p.m.
I abandoned my (Then $65.00/Month ) Subscriber Fee two years ago! I remember when Cable TV was introduced to my Hometown (Redford, Michigan) in 1980. I was like a ten-year-old on Christmas Morning, having been promised two major things would happen with my Subscription.
First, of course was the promise of VARIETY. We were told there would be channels that catered to our interests. Whatever you liked, there would be a Channel for it.
Second, was the promise of LESS COMMERCIALS. Since we were PAYING tho have the "Priveledge" of watching these new Channels, we would not have to contend with as many commercials. Fast-Forward to today and what do we have?
1. Dozens of Channels that basically show the same kinds of programming over and over again.
2. More Commercials than ever! Up to 26 minutes of each hour is now crammed with advertisments for products I have absolutly NO Interest in purchasing, and even if I did, it would be a cold day in Hades before I'd purchase it from the Company that's advertising it because they think the best way to sell their product is to present themselves in an obnoxious or even offensive manner! Naturally, in order to make room for these ads, older programs have to be BUTCHERED, if they are even shown at all.
In the Fall of 2006 I began questioning why should I have to pay to watch a bunch of channels that no longer interest me, and in January of 2007 I cancelled my Subscription to Cable TV. I now use that money to purchase DVDs of Programs that are either no longer shown on TV, or are heavily edited to make room for Commercials. Yes, in a way I still PAY to watch TV, but in the way I'm doing it I have complete control over what is watched. I get only what I want to watch, and nobody butts in to attempt to sell something I don't wish to buy. Best of all, when I get done with a show, I GET TO KEEP IT!
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L.a. Peters from Audience Research Analysis, March 3, 2009 at 5:17 p.m.

By limiting their viewing to an average half-dozen cable networks consumers have already signaled the capacity of their media appetites. This "new" pay-for-play model is yet another fine example of management types testing a question until they get an answer they like better.