Free vs. Paid content: Hulu becomes the next small thing

Not one to usually value unsubstantiated rumors, I will occassionally pass along rumors that seem substantiated. In this case, it's the rumor that the video sharing site Hulu intends to start charging for access to it's content sometime in 2010.

I say substantiated rumor because Hulu owner Newscorp's very own Chase Carey says it thusly:

“It’s time to start getting paid for broadcast content online,”

Full quote via TVWeek here

Of course Hulu isn't the only new-legacy media outlet online attempting to find a way to get paid for what's previously been free. Newspapers, like the NYTimes, have gone free online, tried a paywall, then torn it down, only to reconsider it again.

The long, slow decline of ad revenue at Big Media has driven the best and brightest they have to offer the usual and customary response: raise prices.

So what?

The obvious challenges in charging for broadcast content (or news, or opinion, or entertainment) online include:

1. How does customer behavior that has been groomed around free access online suddenly change to a paid model?
   
2. What value must be provided beyond what is currently available via the free model?


3. How do you define broadcast content competition online that includes the myriad other channel options people have for spending their time and interacting?


4. Broadcast content offline is subsidized by advertising...does charging customers for access online presumes that advertising is not required?

Beyond these questions, the reality behind the online subscription model rumblings is this: traditional broadcast models are based on a cost structure that is under duress...because the models are based on big. Big audiences, big production, big ad revenues.

Paper pays for infrastructure (printing presses, distribution, etc.) that is not able to be cost recovered. Broadcast content producers and their network distributors pay more than their audiences are willing to pay to watch (and, increasingly, more than the advertisers are willing to subsidize).

Applying technology to most human endeavours does two things: it decreases the costs associated with doing the same thing the old way and it enables things to be done in a new or different way.

Until broadcast models do something new and different, their only option will be to reduce costs and prices to reflect the long-tail reality of their customer's interests...the challenge is that cost cutting ends at zero. Ultimately, I think this means Big Media will have to think smaller...smaller audiences, smaller segmentation, smaller budgets...in aggregate, they may become something bigger...but they have to start by thinking smaller.

Ultimately, Hulu will probably deploy a mix of paid and free access...all-you-can-eat and on-demand packages. As with any endeavour that has near commodity status, the challenge will be in setting a price that marks to a market of one--not to what Hulu wishes a market of millions would bear.

With any luck, small thinking might--finally--become the next big thing for Big Media.

Stupid networks: Delivering the goods

As with most aspects of the future, someone somewhere probably thought about it long before it became obvious to the rest of us. Take the network.

Way back in 1997, a network engineer for AT+T (the prior version, before it disappeared and then was reincarnated by SBC) named David Isenberg wrote a paper called "Rise of the Stupid Network". You can view it online here.

The premise of the paper was to challenge the status quo thinking of the telecoms...no mean feat for someone employed by a company that had created one of the world's most powerful telecom companies based on certain assumptions about their value proposition.

Isenberg identified these assumptions that in turn held the companies hostage to thinking differently about their role in a changing world. These assumptions included:

1. expensive, scarce infrastructure can be shared to offer premium priced services,
2. that talk - the human voice - generates most of the traffic,
3. that circuit-switched calls are the "communications technologies" that matter, and
4. that the telephone company is in control of its network.

Of course, history is showing that Isenberg had it right. Cheap infrastructure, data in all its forms (including voice), Packet switched + IP-based technologies...and most importantly control of the network...all undercut the old telecom value proposition.

Now take Isenberg's view and apply it to any network...television, radio, online advertising.

The parallells are readily observable: if intelligent devices are located at the end of the network (computer screens for watching TV programs; gaming; and connecting the weekend call to your mom) then the network's sole value is to carry content.

And if your sole job is to carry content, then you want all the content the people connected to your network can get. If you create content, you want it to be available on any network you can get it on that will support your goals...want to talk to your sister through a mobile device or your computer? Which network is deisgned to support your needs.

Want to watch reruns of The Office while your in the office? Which network supports your device?

In the ever emerging future of the stupid network, walled gardens and network content exclusives will certainly exist. But the transition will make those practices harder to support financially. The flexibility demanded at the ends of the network will exceed the capacity of any one network to meet the diverse needs of users by doing anything but delivering the data.

For broadcasters, certain realtime events like sports or news might capture large audiences. Ultimately, though, the traditional networks will have to make a decision between being a provider of conduit or content. One or the other is where the smart money will be.

Trying to be everything to everyone is a recipe for extinction.

Prime time: Just another brick in the wall

In part 2 of what is shaping up as Accenture Week (see part 1 here), I'm catching up on Accenture's Consumer Broadcast Study. The document has lots of lovely findings from their global look at consumer interest in the medium formerly known as television.

To quote the challenge being made to the traditional definition of the network television model:

"Consumers are seeking out the content brands they want regardless of channels, rather than sticking with a channel they know. The message is clear: the days of the line-up are numbered − and the value of “must-see TV” in prime time is falling."

Another way to say this is that technology separates the value of the network from the content that rides it. Network television has always tried to own both.

Now, though, if you are a content owner, you want your content on every network that will distribute it. If you are a network owner, you want all the content you can get. YouTube for instance. Or Flikr. Millions of content owners seeking their own audiences. So there's that.

And in addition to the usual youth-is-the-trend-to-watch findings (they want what they want and they want it when they want it on any device they choose...who'd have thought it!), there is a set of charts in the report that caught my eye(s) on the relationship between advertising and economics:

Looking at both charts, regardless of age: more people would choose to pay to download a TV show they want to watch than would choose to watch advertisements in lieu of paying.

Of course I'd like to see how the question was asked and to explore the nuance of the responses (e.g., how much would you be willing to pay, for instance), but it certainly seems that, in a broad sense, advertising's perceived 'underwriting value' to consumers isn't something to bank on.

Then again, online you don't have to implement mass-media approaches. Let those who would pay, pay. And for those who would trade their time on the planet for ad-supported content? Well, let them eat advertising.

Diversionary link on the value of being a brick in the wall: