Monday, September 25, 2017

Open Letter to Robert Iger on "Designing" the ESPN Fan's Experience

Robert Iger of Disney recently made a very interesting statement about where ESPN will be going:
You'll be able to pick and choose over time what it is you want, it won't necessarily be a one-size fits all. … the goal eventually is to create something that a sports fan can essentially use to design what their sport media experience can be. will be able sport, a sporting event, a season, a league, maybe a conference.
This represents a big step forward -- but it is just a beginning. I assume this means not just old-fashioned a la carte (at single-item prices), but some kind of pricing for personalized bundles -- with bundle discounts that make the monthly cost reasonable.
  • That would be a step toward more customer-value-first thinking about selling digital content. 
  • It recognizes that the future of media is in building relationships with each customer that recognize that each customer is different, and needs a different package of value
  • ...and that each personalized package should be priced in the context of the relationship, not just as one-off transactions.
That is certainly a big step from where Disney and most media companies are now, but I am hopeful that Disney is thinking still farther ahead, to the next step -- also a big one.

Not "to design" -- the way to design is to be

That next step forward will be to recognize that the sports fan does not want “to design what their sport media experience can be” – they just want it to be what they want it to be. Designing it is a hassle -- and has risk. How can a fan know what they want their package to be until the time comes? Good post-pricing can let them just experience it as their desires take them, then pay a reasonable price (after the fact). That removes the hassle and risk of “designing” the experience in advance.

According to The Way of Life, the founding wisdom of Taoism, "the way to do is to be." If we try to design how we will be, that is distracting, and makes it hard to "be here now." Of course it is desirable that ESPN move toward letting fans "design what their sport media experience can be." But they don't really want to have to think about designing it, and they can't really know in advance how they will want to design it.

Reducing the pricing risk

So what fans really want is to just let their experience be what they want it to be -- as that varies through time and circumstance -- as long as they have some confidence they will not regret how much it costs.

The challenge is in enabling that confidence. We do a poor job of that now, but we can do much better, by applying more flexible and adaptive strategies for setting prices.

Now:  Current subscription bundles for TV (and other kinds of content) require customers to pre-select a bundle of services they will pay for -- excluding other services they don't think they want to pay for (during that pre-selection). For cable TV bundles, that defines which channels I can and cannot watch. For the new ESPN service, it may be which sports, leagues, or teams I can and cannot watch. Of course I may have a good idea of what I expect, but things change over the course of a season. Some things get less interesting and some more interesting, in ways that are unpredictable.

Soon?: A relatively simple "post-pricing" strategy that I have proposed -- "post-bundling" -- sets a framework for finalizing prices after each month of viewing, but still applying volume discounts and price caps comparable to those for a conventional, pre-set bundle. That would enable ESPN to retain full control of how it prices these bundles, but give the customer free range, run-of-the-house access to compose the bundle on the fly. The experience could just be, with a level of confidence the price will be reasonable. (Perhaps I am just reading what I want into that quote, but I hope that is what Iger plans to offer.)

And beyond?:  A further step toward letting the experience be, with assurance the price will be fair, is something like the FairPay strategy. That recognizes that the value of the experience is co-created with the customer, and that only the customer knows how much value they actually obtained. That depends on how they watch (engagement, replays, etc.), who they are, what they value, and their ability to pay. The business can infer some of that (from usage stats and other data), but some of it is known only to the customer. To achieve a level of value discrimination that fully takes that into account -- to set prices that neither leave money on the table nor exclude customers who could be profitable -- the customer must participate at some level in how the price is set. FairPay offers an architecture for variable levels of customer participation -- at the discretion of the business. The business can maintain more or less strict control (for customers it lacks confidence in), or can give up various degrees of control (for customers who prove they use their power fairly). This blog and my book explain how that can be done in a relationship that works as a repeated game -- a game that motivates cooperation over a relationship, based on trust and reputation.

I do not know what Disney plans to do, but the ideas I suggest here have been out there -- in Harvard Business Review, on my blog, and in my book, and in other publications. Many of the underlying concepts of customer-value-based and participative pricing are becoming widely accepted as best practice. I have had discussions (at least elevator pitches) with top executives at many of the largest media companies, and many consultancies. Many are already tuned in to these general directions and excited by the prospects, at least to some degree. Most find the new ideas in FairPay thought-provoking. They recognize that it will take time, testing, and adaptation, but see the potential to change the game (at least in some business sectors and market segments).

I take this as a sign that Disney sees the importance of this vision at the highest levels, at least in part -- it sounds like they are moving in the right direction. I hope they will fully commit to the customer-value-first path that enables each fan's experience to be what they want it to be -- with the freedom and flexibility they want, and with high assurance that the price will be reasonable. That means working with each unique customer, individually -- not just offering one or a few "one-size fits all"cop-outs. Disney has shown at least some research interest in pricing innovation along these lines -- including seminal work with leading scholars.

Many businesses are beginning to think along these lines. The path will take work, and experimentation, but the rewards are compelling: happier and more loyal customers, and more of them -- yielding more customer lifetime value -- on average, and in aggregate.  Those who move early and well stand to gain the high ground of a loyal customer base.


For a full introduction to FairPay see the Overview and the sidebar on How FairPay Works (just to the right, if reading this at There is also a guide to More Details (including links to a video).

Even better, read my highly praised new book: FairPay: Adaptively Win-Win Customer Relationships.