The Effects of Forced Limits on Unlimited Content

by | Aug 2, 2012 | Insights | 0 comments

Consider the following analogy: Imagine that instead of being able to purchase almost any book from the extensive catalog available on Amazon.com, you must buy from a collection of websites, where your choices are limited to the books carried by local, partnering bookstores. Amazon.com, a limitless, central website, has been replaced by a number of smaller, niche-oriented websites that place a severe restriction on consumer options on account of preexisting distribution deals with their publishing partners.

From a consumer standpoint, an Amazon-like solution for digital content is easy and comprehensive. But in the online video space, content owners/distributors have created a convoluted web for streaming video providers‚ each with their own time constraints, protocols for distributing their online content, and viewing experiences.

Networks currently release different content to different websites: some for streaming only on computer, some for streaming with monthly subscriptions, and some for individual purchase. Online viewing is a tangled mess, even as more and more people move to watching video online.

Earlier this year, Nielsen reported in The Cross Platform Report that homes with broadband Internet and only broadcast television rose 22.8% (from 2010 Q3 to 2011 Q3). Nielsen does not give an explanation for this figure: Whether they’re cord-cutters or former broadcast-only homes that upgraded to Internet service, these homes represent a very small but growing group of U.S. consumers (p.3).

A similar comparison of the numbers for homes with broadcast but without broadband (6.2% decrease), with cable and broadband (5.2% increase); and with cable but no broadband (17.1% decrease); gives us a fuller picture. The percentages are easily misleading since these four categories deal with completely different numbers. Broadcast/No Broadband homes currently number 5,869K; Cable/Broadband homes, 80,824K; Cable/No Broadband, 22,329K; and Broadcast/Broadband, 5,104K.The bigger trend is that more people are getting broadband, which is not surprising. But paired with a decrease in cable-only viewers, a more important development is apparent: people value broadband Internet over cable.

Telecom companies recognize this shift, but they’re still getting part of it wrong. For instance, Comcast signed a deal with Disney that will allow Comcast to stream live programming on computers, smartphones, and tablets (ComcastDisneyPact). The Nielsen report shows that people are not drifting away from cable because they’re throwing out television sets. In fact, in Broadcast/Broadband houses, roughly the same percentage of consumers… watches traditional TV. The difference is in the amount of time spent watching (Nielsen, 3). In these households, TV viewing time decreased by more than half, from 256.5 daily minutes in all cross-platforms to 122.6 daily minutes in broadcast/broadband houses.

The issue isn’t one of availability, but of something more fundamental. A growing number of people have little interest in the viewing habits that guide the rest of television owners. They want to be able to dictate the content they want to watch, as opposed to watching for hours hoping to find something that appeals to them. Similarly, even cable subscribers are changing their viewing habits. DVR usage has grown substantially in the past three years. From 2008 to 2011, the number of DVR users has climbed by 65.9%, and the time using DVRs has climbed 66.1% (Nielsen, 4).

Let’s return to the initial analogy. Television viewers are treating DVR as the next best thing to having access to all content. That model, however, still has massive shortcomings. With DVR, viewers cannot catch up on months of old content and, likewise, networks cannot guarantee that advertising will be watched. But DVR gives viewers the modest freedom of being able to watch content when they actual have the time to do so—a liberty not afforded by streaming live television programming.

If the above figures contend to these trends, then networks will be better off giving all content at all times to anyone who pays for it (e.g. consumers who pay the monthly cable fee, or the advertisers that pay for network television).

Admittedly, this is a disruption of the current model of contracts between networks and online exhibitors (i.e. websites, telecom companies, etc.)—but it’s a disruption that is already here, in the sub-standard form of DVR. Content providers need to use all avenues to deliver content to those who will pay.

Because the next step in television is personalized programming—or perhaps even the oft-mentioned a la carte channel subscription model—which would allow the customer to pay for exactly what he or she wants to watch, with minimal time delays or restrictions.

By Zac Stockton, Product Manager

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