THE CABLE PIPELINE

Why do Internet users continually resist paid content on a systematic basis? Keep in mind that many current Internet business models were built on the premise, (create the content and they will come). We have all seen the sterling examples of this model with Google, Facebook, MySpace, Hulu, YouTube, along with a host of others, including news organizations betting on ad supported revenues to make a profit. While this model worked for some businesses, it has not for others. Relying solely on ad supported revenues is a weak model, as the Broadcast TV Industry found out the hard way.

Historically, news organizations relied heavily on paper subscription models supplemented with ad revenues to make their profits. Linear TV models like CNN and Fox News relied heavily on the Cable Industry’s monthly subscription models while being supplemented with ad revenues. These amounted to dual and re-occurring revenue stream models, realizing the best of revenue worlds, subscription and advertising.

I’m sure the current ad revenue based models were launched based on garnering a gigantic number of users which could be attracted to these sites based on whatever product/service was being offered. Not to mention that these models worked and trained users that Internet Content was free. But what new start-ups today are going to get the numbers needed to break-even, much less make a profit? They are few and far between and Internet junk-yards are full of great ideas based on an ad supported revenue model. One only has to remember the Dot.com era where company valuations were based, not on real revenues, but (pie-in-the-sky) business models.

The time has come with the continued proliferation of broadband Internet users, clamoring for content to distance them from a Linear TV Model, for companies to understand that Internet based subscription models will work, if the business model gives the right combination of a paid and free content model.  The Cable Industry is using this model to perfection with its TV Everywhere initiative, giving away free Internet content, if you keep their subscription based models, see (Nielsen study shows there’s a long road ahead to get people to pay for online content). In the interim, these companies will surely test online dual revenue Internet models of ad and subscription, if not in somewhat of gradual scenario, since Linear TV continues to produce great profits.

The bottom line to subscription based content  over the Internet is that consumers want a quality experience at a reasonable price, based on competitive market forces, and one where that do not feel trapped in a spiral of upward rate adjustments. This is where the Linear TV model got into trouble, see (Cable Is Saved?). While it produced great content and hundreds of programming choices, it became too expensive and forced consumers to subscribe to channels they didn’t want or need. But here lies a new frontier where innovation and competition can solve consumer demand at a relative price model. So what do existing and new companies wait for; a realistic business model where investors are willing to put up capital but receive acceptable returns, where consumers will both accept and follow an Internet based subscription model? It’s time is coming, so turn up the bytes and let the good times roll!

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