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
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