The battle continues over how much TV content will be free

30 Mar 2009|Leigh Marinner

Currently most broadcast TV shows are free online and most cable shows are not. Many content creators have been taking a wait and see approach while people were only watching on their PCs. But now that more and more people are viewing online content on the TV set using devices like AppleTV or Roku, or by connecting their PCs directly to the TV, content creators are becoming worried. Boxee, a software startup that lets people move online content to the TV set, had to remove the Hulu website TV content under pressure from Fox and NBC. Hulu had seen a 42% jump in viewers in January.

The New York Times reports that television executives are developing a different model in which only subscribers to traditional cable and satellite services would be able to access the full breadth of shows online, out of fear people will turn off their cable services and get their content for free online.

Somehow content creators will have to monetize their content, or the quality will decline.

That happened to kids edutainment software in the 1990’s, when prices declined to $10 or $20 and the result was the only products released were junk and the industry died.

It makes a lot of sense for the cable companies to try to keep their subscription revenue for online content. But given the ubiquity of free network TV shows, the cable companies may have to lower their pricing for their online content. The cable companies may still make just as much if they attract more subscribers or let people buy individual episodes for small payments (e.g. $ 0.50 or $1) that aren’t painful but add up. Content companies underestimate the revenue potential of small payments. Online sites like Second Life, QQ, Club Penguin, and Cyworld produce a lot of revenue from microtransactions.

“Free” has been a watchword in online content, and this makes it hard to go back and start charging. It’s better to test paid options first. Witness the problems newspapers are having trying to create an online subscription model after free content has become the norm. Or online photo storage sites like Kodak EasyShare that just implemented a charge for previously “free” storage and is taking hits for the change.

Let’s hope the cable companies that own content will experiment widely with different revenue options – free teaser 5 minutes of a show and then a charge if the viewer wants to continue; or adding ads to online shows with the option to pay to stop the ads at any time; or the ability to subscribe to individual shows rather than a whole cable channel. Let’s hope they learn from the music industry and don’t just dig in and try to maintain their current revenue stream in essentially the same form.

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