Charging for Video Content Not Ready for Prime Time

Should Hulu and YouTube charge for content? Not yet. Few would buy, and views would drop and threaten already light ad revenue.

I challenged Tom Green on his subscription model at the Digitas Newfront event. Although I don’t see much of a market for $5-$10 monthly fees for a specific destination, I liked his answer. He doesn’t want a huge audience. He wants a tight 100K loyal audience of subscribers. Of course it will take a long time to get 10K much less 100K people subscribing. Even Howard Stern lost the majority of his audience when he moved to Sirius.

Now here’s an article that suggests at least one Hulu content provider would like to charge. There are three reasons I don’t see this as attractive as ad-supported (or better yet, sponsored branded entertainment) in the next couple years. Think back years ago when newspapers moved online. How many, save the WSJ, would have had popular websites had they charged from the beginning? Few.

I’ve always said the only content I’d pay for might be The Onion, but I’m not sure. I don’t subscribe to the newspaper. But I love the videos.

Why do I not believe pay-per-view and online video are ready to meet in the next 12-24 months?

  1. First, there’s not an easy way to buy. Unlike iTunes, which provides me with an easy way to buy TV shows from my bed, Hulu views are mostly on the computer and in low resolution. And unless Hulu persuaded viewers to pay, and became the “Visa” or “PayPal” of online-video subscriptions or purchases, it’s unreasonable to expect many people to pay in the near-term unless it’s high resolution and available for TV and remote viewing.
  2. Second, this represents a “shot over the bow” of cable providers. The cable companies are not going to be happy about individual networks circumventing them and allowing people to purchase ala cart. It’s a big threat to cable’s bloated monthly costs.
  3. Third, the market is too small and new. I’d advise Killar and other destination CEOs to continue looking for creative ways to charge advertising premiums, and maybe pilot selective micro payments for incredibly popular content (assuming they could make it higher resolution, exclusively pay, and available for TV viewing without cable conflicts.

I’ve bought more television shows on iTunes in the past 6 months than I’ve ever paid for DVDs or premium cable services. But again- that’s easy, high quality, and I’ve only got to have a credit card on file with one company. More importantly, I don’t pay a subscription fee, so I buy pilots of shows to see if I want to watch more. I’d advise iTunes to offer free/discount pilots to get new audiences hooked on shows. I bought almost the entire history of Lost during the time I was on back surgery, and felt it was a fair price.

Author: Nalts

Hi. I'm Nalts.

7 thoughts on “Charging for Video Content Not Ready for Prime Time”

  1. I dunno, man… I agree with you — I don’t think we’re “there” yet, either.

    My philosophy as the Guy Holding the Remote, especially in “These Challenging Times,” has always been: If you wait long enough, any piece of entertainment you’d ordinarily have to go get and have to pay for, will eventually come to you for free over time.

    Movies that are released in the theater eventually show up on TV… TV shows get re-ran, and with a little diligence, you can find any of it online for zero cost.

    Like I said, I dunno about this whole “charging for content” scheme. All I know is, I ain’t payin’. “Entertainment” is NOT at the top of my monthly expenditures for which I’ve budgeted. I think most people will forgo any subscription fees for this stuff, even if it means forgoing some good entertainment. Fact is, there’s a lot of excellent entertainment out there you don’t have to shell out beaucoup bucks for.

    Just because ABC produced it, and it’s (arguably) “quality entertainment” doesn’t mean you should have to pay to watch it. Makes it sound like they’re doing US the favor by airing it for free on broadcast TV in the first place.

  2. TV shows episodes purchased on ITunes in last 12 months = 4
    Free pod casts downloaded from ITunes in last 12 Months = 50
    Free Content watched on Hulu, ABC and Fox = large number and still counting.

    Online subscriptions of payed content “ever” = 0

    There’s been a drumbeat as long as the internet has been around to market “Information” on a pay per use basis. Newspapers tried this model in the early days (90’s) and we know where they are now. The only model that has consistantly returned anything is the ad driven model. Yes people hate it but a couple minutes of your time is a lot easier to swing than a couple bucks out of your pocket.

    I once knew a man who ran a television repair business. His philosophy was “there are so may TV’s out there I can run everyone through here once and not care about ever seeing the that customer again”. The man did not take into consideration that the market might change and he might have to struggle to get the first job.

    Tom Greens theory sounds a lot like this.

  3. If Ol’ Tom gets his 100k, that’s $50k a month in his pocket. He completely gets that he is niche entertainment and is calling his site “narrowcasting.”

    I completely get and respect what he’s getting at. But the thing is that he established his niche before Internetainment happened. I even chalk him up as one of the larger catalysts of the whole movement, but that is a different discussion.

    I don’t see a lot of people using his model in the future, though. People aren’t disciplined enough to be niche. People don’t WANT to be niche, which I believe to be one of the larger failings of Big Media’s transition to New Media – why it isn’t adding up like they figured it would. When they were concentrating on filling 24 hours of programming, they tried to fill every hole.

    New media has broken the concept of timed programming. People get what they when they want. In order to beat that, they have to tailor their programming but STILL don’t seem to want to.

    I think Tom Green will see success. I think people will be baffled and continue to ignore niche programming (and THE IDEA OF OPERATING WITH SMALL BUDGETS) and wonder how he and people like him keep this up.

  4. BTW, you referenced Howard Stern, and I think it’s the same thing. A lot of people subbed Sirius specifically for him. That is how Tom Green’s model is going to work out. It’s based entirely on his name and rep with his fans.

    But it’s a matter of how able he is to continually satisfy his fanbase. If he can grow his fanbase, even better. But it’s a matter of him continually making stuff they would be willing to pay for. Hopefully it is going to work.

    I’d like to see him succeed both as a fan of his and someone hoping to make this stuff very profitable.

  5. Hulu, however, I don’t see ANY pay models working out on. They have already branded themselves as free and people will leave in droves.

    Their success as a free site is going to cripple any “exclusive pay site” type efforts.

  6. I won’t pay. I’ll watch something for free, even if it’s illegal. I don’t have cable and I won’t pay for video content on the Internet either. That’s how I roll.

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