What Are You Paying for When You Pay for TV?

The discussion of TV futurism often revolves around technology delivery methods that allows consumers to watch shows on their own schedule.

However, one of the other aspects to this trend, and I’d argue more important one, is the reason people are cutting the cable cord and primarily watching TV on Hulu or Netflix has to do with the realization that paying for cable TV access isn’t worth the cost.

Is $60-$75 a fair price to pay when consumers only watch broadcast channels (they can get for free) and a few popular cable channels, like ESPN or USA? Hardly.

Technology is making the shift to cutting the cord possible, but economic factors are largely driving that change. Stacey Higginbotham explores the technology vs. economics of TV futurism for Giga Om:

That’s a mindset that screams for services like true on-demand networks powered by IPTV where a cable provider can queue up any content for a watcher on demand and on any device.

But technologically cable companies and some other pay-TV providers aren’t there yet, and they are hazy about when they will get there. One reason for this is because it’s tough to do on the backend, but it also has the potential to destroy the geographical monopolies established by physical access lines into the customer’s home.

While they wait, they are pushing hard to create TV Everywhere services that will let customers watch whatever they want within certain restrictions and on particular devices. And they are also trying to keep their content providers from decamping to Netflix or other over-the-top services.

Some of the content guys are undoubtedly realizing that many consumers will still pay for their content even if it doesn’t come from a pay-TV provider. The question is, How much? And when will it make sense for a content company to jump ship and risk alienating a huge source of revenue?

This is why the television industry won’t be changing as rapidly as many of us will like. It feels very much like the early days of Napster and the music industry when astute observers could see the change on the horizon, but it wasn’t quite a reality.

One of my friends, Chris Page, even made the analogy that the television industry is using people that bit torrent shows and have cut the cable cord to figure out what their technology and economic model is going to become in five years. I think that’s a fairly apt observation.

Oddly enough, it was this article on Intel’s television plans that prompted this post.

Apparently, they are working to deliver an IPTV service, but more importantly, the company’s plans also include replacing the Nielson ratings monopoly — one of the more detrimental problems facing the television industry today. There’s nothing like using a 50-year-old analytics and big data tool to measure the audience of a show in 2012.

My guess is Intel won’t have a television service of its own, but if they could create a better system to determine a show’s actual audience based on factors like DVR, streaming, live audience and, gasp, pirated copies, that would probably be a boon.

The reason I include pirated copies among those factors is because HBO’s Game of Thrones is watched by 3.9 million people every week and pirated by roughly the same number, which means the show’s weekly audience is around 8 million.

Somewhat related: Netflix is launching its own Content Delivery Network to reduce bandwidth use.

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