Monday, November 21, 2005

Subscription TV

The following was a response written to a comment on Mark Cuban's log: blog maverick

As we saw at CompuServe, technical capability/capacity and the uses of those capabilities/capacities ratcheted steadily upward over the years. When everyone was timesharing via line oriented text user interfaces on monochrome monitors (and teletypes!!), 300bps modems were sufficient. When higher speed modems appeared (especially 9600bps), some said "wow, we'll be able to print out those long reports to the local printer a lot faster now." But others said, you know, I think we can transmit color graphics and whole files with that much bandwidth.
The same kind of thing happened when broadband came into the home. At first, it just seemed like a faster way to do old things the old way. But there was always something waiting in the wings that just needed the greater capacity. Music sharing became the killer app.

On demand HDTV over the internet is one of those applications we all see coming down the road, but only because we've seen primitive video over the internet already, and now want a more variety and more quality. Consumers see the internet as a vehicle to get whatever they want whenever they want, and are impatient for the world's video archive to be put online (sounds a little like Audionet, huh?)

Meanwhile, I think television could turn into a subscription medium. You don't just watch "Desperate Housewives," you subscribe to it. With that subscription, you purchase the right and ability to download and record the current episode when it is broadcast. It doesn't matter when you watch it, although the really hot shows will be broadcast during "prime time" so that its audience gets a chance to see it at the same time as all their friends (don't want to be the last one to see a really juicy episode).

For many other kinds of shows (think "American Chopper"), the broadcast time might be in the middle of the night. But no one cares because you're recording it to view later anyway.

The key is that the show is distributed via a one-to-many broadcast technology, either directly from satellite or from a local terrestrial station. I don't know enough about the comparative economics of the two, but suspect that satellite distribution is much cheaper, although the customer-end equipment is more expensive.

My satellite TV service, DISH, broadcasts something like 150 channels all the time. That means that in one day, they could broadcast 3,600 unique one hour programs. In a week, it would be 25,200 unique one hour programs. Right now, a lot of those slots are filled up with informercials and junk. Why not instead fill them with subscription feeds?

It could be very democratic. Create a website with a library of all the possible programs. At any given time, viewers could submit bids for the programs they want to see broadcast. Since each hour represents 150 hours of broadcast capacity (using the DISH network as an example), at say 30 mins prior to the top of the hour, the top 150 vote getters would be retrieved and queued up, and at the top of the hour, they would get broadcast. Any show not making the top 150 that hour would be in the running for the auction in the following hour. There might be a show that takes a month to collect enough bids to make it to the top 150. That's okay too.

Maybe you pay for every bid, or maybe you get 100 bids/month for your monthly subscription. Maybe you can only record a show you bid on, or maybe you can record any show that gets broadcast as long as you pay your monthly subscription.

What's the money trail? Boy, lots of possibilities here. One is that the broadcaster (satellite company), pulls off a slice of every subscription for their trouble, and then the show producers get paid directly based on the proportion of total downloads their show gets every month. The producers are free to bury ad spots and product placement in their feed if they want to try to make a little extra money. Viewers can decide whether the show is good enough to put up with this stuff.

Let's preserve the wires for time-critical and narrowly focused telecommunications, at least until the wire-based technology gains a couple of orders of magnitude of price/performance. We can push 'television' to satellites if we're willing to experiment with radically different revenue models.

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