Eenie Meenie Miney More

Capsule: What's the better model for digital TV distribution--a la carte or the bundle? Does it matter? The question itself may be an illusion. With Google's YouTube opening a new version of Blockbuster for video "rentals" and Apple's Tablet promising to revolutionize traditional media as a profitable sale in a newly portable digital world, what will TV look like five years out? Will cable packages persist ? For fans of a la carte, the 2011 New York Times' metered model--where you get a finite amount of content for little or nothing extra and pay a la carte for what you choose above the norm--could demonstrate a new efficiency for TV distribution. With all these new TV aggregators entering the ring, will traditional network and pay syndication models get knocked out or knocked up?

The New Yorker



The publishing industry blames the hit-driven efficiency of the mega-book store for the loss of its long tail.  It's hard to see today's struggling Borders and Barnes & Noble as powerhouse retailers changing the course of literature; but these brands were running the tables for publishing until recently when portable digital e-readers began to turn the tide.  The content commissioned and licensed by the Random Houses of old was seriously changed by big bricks-and-mortar from a broad signature list of classics, educational texts and popular works to a narrow list of popular sale-able titles that people were willing to pay for in volume.


What are people willing to pay for now?  It's likely too early to tell given our still unfolding transition to digital publishing with its impulse gratification and everyday low prices.  Amazon announced a new deal this week that will share 70% of a book's royalties with the publisher and writer, provided the digital book is brought to market for no more than $10.  This is a model that only a consumer can love, provided we all have access to the content we want via portable digital download.  


Amazon's new distribution model is aimed at driving book prices down and reading volume up, creating new opportunities for the most popular books on the digital shelf.  But will it also make the cost of publishing the more obscure difficult works that we all know we should read from time to time as part of a life well-lived--the digital vegetables--more expensive and harder to get?  Is Amazon cutting more meat off the publishing long tail or has it chopped off the tail entirely?


Bricks-and-mortar booksellers and digital retailers are all pushing the bundle--as distinct from classic bookstores like the legendary Strand in NYC that used to house hundreds of choices from the best-seller to the scholarly limited edition. In modern retail, bundles of books make up the retail brand, bringing customers in the door and creating loyal relationships for the storefront (as opposed to the author or publisher) while selling a little extra of the special of the day.


Cable, satellite and telco TV models perform like mega booksellers. They sell their brand in the form of TV bundles at price points from $50 a month to three times that amount, even though viewers still watch TV one show at a time. The cable bundling model helped networks reproduce through bundled carriage fees, charging the most for the best and freshest of a multiplexed network group and practically throwing the narrower cable channel off-shoots in for free. It also helped grow advertising revenue for new channels that got in front of audiences purely because of their required place in a network bundle.


Cable, satellite and telco-tv's $50, $100 and $150 TV bundles encourage TV viewing as an all-you-can-watch buffet. Audiences who find a value in having access to hundreds or thousands of program choices rationalize their cable bills with a per-program math that keeps demonstrating value. Cable distributors reinforce the value of all-you-can-watch when rate increase time arrives each year and the number of available viewing options is promoted (and occasionally increased.)


But TV's tail isn't getting any longer when another dozen networks or several hundred VOD viewing choices are added to the bundle. Most likely, new networks are vaguely similar to the content already purchased; and, where a new original channel is added, it comes at its own relatively high a la carte cost.  In this way, TV distribution is able to control the cost of TV content and to finance the development of a few original series that improve brand quality--be the brand in question HBO, Showtime or AMC or Comcast, Time Warner, Verizon or DirecTV.  Savvy distributors know that quantity additions--like so many books on the shelves--can't be the real ratings-drivers.  By design, quantity in TV land means a few star performers amidst a sea of facsimiles creating a sense of brand abundance.


When Apple and Google's YouTube enter the fray, will they adopt a similar bundled stance? On a practical level, Apple and Google's cable-like TV bundles are guaranteed. Apple and Google will have to replicate the best economics of modern TV distribution in order to place those economics on steroids to drive efficiency. Like Amazon, Apple and Google are efficiency models--larger than their bookseller and cable distributor forebears and capable of beating cable at its own game only if they can do more of the same on a significantly larger scale.


What does all of this mean for the future of content and distribution and their accessibility to the consumer? One view is that efficiency--and only efficiency--wins. The newest distribution models that will prevail and ultimately overtake the guys that "brang 'em" will price in the aggregate--in the sense of the bundled value of a distribution brand--just like today's distributors. But they will look different in that they may enter the market with more a la carte content than the competition only to bring that content back into a bundled model once they've established distribution dominance.  


Anyone who has teenagers running up iTunes credit card bills in the low-to-mid three figures each month knows that the Apple pricing model is ripe for a bundle. Once those teenagers are emancipated and have to pay their own freight for music as well as food, fuel and shelter, new realities will claim the day. The true choice quotient inside digital media will be only slightly better than the range of content and distribution choices at present.  But everything will look bigger and newer, which may make digital media seem better to a new generation; until that new generation looks around for the long tail it lost.