Thursday, January 12, 2006

DVRs Undermine Free TV Model

Ampersand of Alas notes that he is personally killing off free TV, by using his DVR to skip commercials. I do the same thing, and he's right: he and I (and the millions like us) are putting the nail in the coffin of the free television model. I watch more TV now than I ever have, other than in a couple of periods of depression, and the only commercials I ever watch are ads for movies that happen to catch my wife's eye ("go back, go back, I want to see that one!").

There is some speculation in Amp's comment thread about what's coming next. My view is that some low-value TV will remain free, supported by banner ads at the bottom of the screen - stuff like news, weather, talk shows, Springer, etc. Everything else - everything that costs significant money to produce - will come streamed over the Internet. The cost model works. My calculations, based on existing charges for bandwidth, indicate that an Internet-based TV "station" is perfectly feasible.

DreamHost will sell you 120 GB of bandwidth over the course of a month for $8. The market price for bandwidth is accordingly estimated at 6.67 cents per GB.

300 megabytes is a half-hour of adequate video. Nothing great, but watchable.

To send a 1/2 hour news program out on the Internet, to one viewer, therefore, costs just ever so slightly more than 2 cents. 2.001 cents, to be precise.

Two cents, for half an hour of video.

And viewers can download it, too. 300 megabytes isn't a trivial download, but on my cable modem, I can do a 300 meg file in (running speed test) at 4 megs a second, so 75 seconds. A bit more than a minute. Even for people with connections 20 times slower, 22+ minutes for a download means that we can stream the video - they can start watching immediately. Instant-on. Broadband TV.

At this point it becomes a question of finding good content from a production company willing to adopt a different revenue model - probably a profit-sharing arrangement, rather than a "we'll buy X episodes of your show at Y dollars per episode."

Personally, I can't wait. Such a model makes it possible to make a lot more shows - all you need to do is demonstrate an audience exists that will generate enough revenue to cover the show costs. We'd have "Firefly" on three nights a week.


Jake Squid said...

One comment on the "Firefly 3 times a week" line - wouldn't it just be available at time X and you could download it at any time thereafter?

A couple of questions:

What is the revenue stream? Are you considering it as PPV?

What is the expense/time/complexity involved in getting it from your computer to your incredibly expensive home entertainment system? (I'm assuming that folks will want to watch on something other than their monitor and in a space set up for more than one to watch at a time).

Robert said...

There would still be production schedules, and it would still make economic sense to space out releases so as to build anticipation and interest in the fan base.

I would imagine PPV to be the simplest model, but I don't know. Subscriptions to bundles might be more attractive to consumers. I would expect to see a lot of different experiments.

Digital playback is trivial, with a number of easy and effective solutions.