TV Without Advertising

Based on Dish Network adding a commercial auto-skip feature (and the subsequent complaints) and my previous speculations, I thought it’d be interesting to discuss what TV might look like if (when) advertisers stop advertising for everything but live events like sports and news.

Here’s what’s true:

  • There’s more TV shows than ever
  • There’s more good TV shows than ever (and still plenty of bad ones)
  • Because of the segmented market (a.k.a. more and more cable networks), a show can have a lower rating and still stay on the air
  • A TV show can get (more) popular five years after it goes off the air due to DVD sales and the internet (The Wire,  Arrested Development, etc.)
  • If it’s easy and reliable, consumers will pay some amount of money per month ($10 for Netflix/Hulu Plus to $100+ for a cable/satellite provider ) to watch TV shows on their TV and or other devices
  • People don’t want to watch TV commercials (or at least wouldn’t complain if they disappeared)
  • The TV Network financial model is all about selling commercials
  • For live broadcasts, TV quality is still significantly better and more reliable than the internet

Imagine all advertising stops for non-live shows (everything but the news and sports). How else might TV shows make money?

Here’s my idea: Have each user pay $X a month for unlimited video, then pay each show a percentage, based on how much of it the user watches.

A cable box-like device would measure how many M minutes you watch of each show and add up how much TV you watch each month.

That show’s income could = M (minutes of show watched) / T (Total Minutes of TV this month) * $X (the monthly service fee)

In other words, each show gets the % of your monthly viewing fee which you spent watching that show.

Example: The service costs $40 per month, I watch 5 episodes of The Office with each episode being 20 minutes long, and I watch 800 total minutes of TV in the month. The creators of The Office would receive (20 * 5) / 800 * 40 (1/8 of 40) which is $5. With 9 million viewers, these numbers add up quickly. Of course, the company (most likely cable, satelite or dot com) that creates and adminsters such a system would charge an administrative fee (I’d imagine it around 10% – 20%).

Some Consequences / Impacts:

  • The more popular your show, the more money it makes.
  • It’d be more profitable to get users who barely watch TV to watch your show.
  • Built in residual income — if your show gets popular five years after it comes off the air, you still get paid the same amount and can turn a profit. This is basically The Long Tail effect.
  • Contracts structure might be changed so that more actors / directors / writers are paid a percentage of the total income, instead of a one time fee. This better aligns everyone’s incentives for a successful, long running, well written series.
  • Instead of pitching an idea to a TV Network or production company, you could pitch it directly to a venture capitalist (Sillicon Valley Style) or Satellite/Cable/Amazon/Netflix type company. This may lead to more buyers and consequently more shows.
  • This same cable-like box could also incorporate an Amazon / NetFlix like recommendation system for TV. Users can rate and review shows, and receive recommendations on what shows they may like based on how they’ve rated shows to date.
  • This could turn into a Pandora type stream, where everyone has their own customized channel(s) with the shows they like to watch. Would networks still be necessary?
  • Everything but news and sports can become on demand, and there’s no waiting week to week for the next episode of the season.

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