Whenever new things come along, they nearly always attack the low-end
of the market first. Why? It's the least defended market segment and
the one that well entrenched companies will sacrifice while they focus
their attention on their most profitable customers. That is good
business.
The problem comes in when aggressive new companies learn to
expand their now successful appeal to their initial low-end market,
expanding that market by manageable and systematic bite-sized chunks
that chew off just a bit more of the market with each new foray up the market strata. The day eventually
comes when these new companies supplant their predecessors, who were once the giants -- giants who
fatefully hid behind the "higher end wall" of their own profitability until the wall that was their comfort, one day became their prison.
A
good example of this is seen in television itself. When cable first came
along it was tiny, mostly unwelcome and the vast majority of customers
saw no reason to pay for something that had been free for decades. It
took many years, but one day the broadcasters themselves were being
bought by the very companies who had only decades before, been mere distributors of their programming.
Broadcasters and film studios and others,
have watched cable companies become some of the richest companies in the
world, as they distributed and marketed the very programming created by
the studios and broadcasters. As is often the case, the middleman made
most of the money.
I am sure that had to be the burr under their
saddle, especially when the day came that Comcast announced it was buying
NBC/Universal. That had to be a wake-up call to the industry. They
couldn't do much about it because the studios and broadcasters had lost the direct contact with their customer. Few were using antennas and most customers were now fed by cable.
That has changed and now the internet and very sophisticated
compression/decompression algorithms (codecs) give studios and
broadcasters a chance to learn from the cable companies and reach out directly again to their customers.
Today, some studios and broadcasters are taking the fight direct to customer and are
willing to give their content free to the customer, settling for the
direct commercial revenues earned by advertisers wanting to watch their
programming.
You see this on two fronts:
First, major film
studios like Sony Pictures and Paramount Pictures are leading the charge
from the major studios. Paramount has partnered with an investment
group to put 20,000 titles from the Paramount library into free on-demand viewing under
the name of
Tubi TV. Sony Pictures is putting many of its productions
into free on-demand viewing under the banner of
Crackle.
Why hide? The answer is
simple: they do not want to devalue their trademarks by mentally
associating their brand names with free content, but they do want to
take steps to build their own direct customer base -- one in which not
only do they earn ad revenues but also over time build an outreach to
market to the very customers who enjoy their content. It's a win-win for
both the studios and the customer.
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| Some free channels you'll find on Roku, Fire TV, Apple TV 4, etc. |
The hiding and free content
isn't just limited to film studios. First in for major broadcasters is
Disney/ABC who hides behind the name
Free Form, where Disney/ABC gives
away many of their shows to an on-demand audience. They are joined by another early adopter,
Warner Bros. Television, whose programs are now
trickling out for free under the
CW Seed moniker.
Joining these early adopter networks are "aggregators" like
Pluto TV, a service whose efforts catalog many web-based video services and serve them within a single interface. One of Hollywood's film distributors is behind
OVguide, a service that includes free movies, episodic television, documentaries and other programming.
As these
bite-sized chunks are bitten off and more and more of the audience
watches free movies and television shows on-demand on their phones,
tablets, computers, and on systems like Roku, Fire TV, Apple TV and
others -- they chew off more and more of the market, until one day like
the cable companies themselves, they will transform the very market
itself.
Cable cutting is helping drive this phenomenon but to be
truthful, it is a minor player compared to the Gen Xers and Millennials
who prefer all their content to be on-demand and at their beck and call.
Today, I noticed that
YouTubeRed was advertising the first-run
new release of a major film that will be premiered on YouTube, not on
the big screen nor on any of the major networks. But seeing that YouTube
already has more viewers than any network I can name, the move is less a
surprise than it is an "about time" recognition of what is already far
too obvious in the market.
It's a brave new world for studios and
broadcasters and in it, content is king. The traditional means of
distribution will give way to a more direct-contact model. Paramount,
Sony, Disney/ABC, and Warner Bros seem to already be recognizing that
change. Many more will follow, they will have to or they will find the
biting chewing away their part of a onetime major part of the market.
This is a fundamental and far reaching change. It puts the customer in a
market in which middlemen will find it harder and harder to justify
their high cost of entry to get the same programming that the customer
can get for free with a bit of effort.
How much will convenience prove to be worth is the question that customers will have to learn to ask themselves.
#cablecutting
