Saturday, November 9, 2019

The Streaming War to End All-You-Can-Eat Streaming Wars

(Image: Wall Street Journal)
Do you hear the giant sucking sound of tens of billions of dollars of content production cost and corporate debt going down the drain? ...of tens of millions of consumers missing out on content they want to watch?

Much like World War I, great powers are massing armies and entrenching content libraries for a Great War that may have no real winners. And once again those great powers (and other contenders) are relying on inflexible strategies that will drain resources, and get mired in a long and costly war of attrition. This time the inflexible trenches that will suck up armies of content dollars are not in the ground, but in the deadweight loss of all-you-can-eat (AYCE) subscription models.

News of this streaming war is everywhere. The Wall Street Journal provided a good summary of the order of battle, and of the collateral damage that consumers will face. Axios notes the huge debt being incurred to create these arsenals of content.

The nimbleness of the German Blitzkrieg ("lightning warfare") demonstrated how WWI strategies of trench warfare could be overcome quickly, and with far less carnage. The players in this streaming war should be looking for a similar Blitzkrieg business model. But I predict it will be the smaller players, less able to throw money at this, who will be driven to experiment with less familiar, but more agile, strategies.

We wanted a "Celestial Jukebox" -- instead we got "subscription hell" and "subscription fatigue." This is the era of "peak content," but only a fraction of it is within any one person's reach -- its costs and its price are unsustainable. Can't we find an ecosystem business model that can sustain a celestial jukebox for the video industry?

Earlier this year I suggested how more agile strategies might operate, in "Risk-Free" Subscriptions to The Celestial Jukebox. The essence of the risk-free subscription is to be flexible, in order to be value-based -- cheap or free at low or zero usage, and rising at a reasonable rate as usage and other aspects of value received increase in that month, up to a set monthly cap. Think of it as a pay-ramp instead of a pay-wall. This kind of flexibly affordable model that is based on the value that each individual viewer actually receives (and that ramps up less prohibitively than pay-per-view) will get more viewers to buy more subscriptions. That will generate more profit from more viewers for every provider who has content that viewers want.

Such a pricing model also offers sensible economics across a mix of providers and aggregators. Disney could leave most of its content on Netflix for those who are only occasional viewers, while attracting its more regular fans to direct relationships on Disney+ with added features (such as its newest and hottest shows, and extra perks).

Instead of the all-or-nothing battle for AYCE subscriptions, providers can build relationships with all or most of their potential viewers. Think of this as agile pricing for a good customer value experience (CVX) -- and for a fair revenue share to platforms, content providers, and creators.

Disney is apparently ignoring such options, presumably thinking its Magic Kingdom will enthrall enough users to take the risk that they will not view (and enjoy) $7 worth every month. All of the great powers may similarly be too entrenched in their thinking to want to experiment.

But less dominant providers -- and entrepreneurial upstart aggregators of many providers -- may come to embrace agility and Blitzkrieg asymmetry, seeing that the biggest risk for them is not to take the risk that a risk-free model will empower them to fight a win-win battle -- one based on desirability of their content, not just overwhelming scale.

More on this theme:
------------------------
More about FairPay

A brief introduction is in Techonomy"Information Wants to be Free; Consumers May Want to Pay"
(FairPay is an open architecture, in the public domain. My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)

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