The digital revolution has managed to seriously disrupt traditional business models for media firms in newspaper and magazine publishing. But the TV business model has remained strong. Analysts Martin and Medina at Needham Insights. say there are multiple reasons for this strength and that challengers will have to employ specific strategies to impact the businesses and advertising revenues that are part of the TV ecosystem.
The specific strengths of TV include:
- Good value proposition: Consumers pay an average of $75 a month to access 135 channels. Based on viewing hours, the average consumer pays $.30 for every hour they spend in front of TV.
- The TV industry has kept current with technology by offering DVRs, 3D-TV, and expanded services like home security.
- The TV industry pays upfront for enormous content costs instead of allowing consumers to pay for hits only. Analysts believe the reason the music industry was destroyed during digitization was because consumers purchased only specific songs that they wanted. As a result, the industry is now starved of capital.
Enterprises in the TV industry are already experimenting with online business models. This is being done to hold off Internet-based entertainment start-ups that are trying to make inroads into the TV ecosystem. Analysts say there are 3 shortcomings to the current offerings from operators outside the TV ecosystem:
- While the online content is infinite, discovering the quality programming is difficult.
- The short videos currently available do not keep consumers engaged for long periods of time which might be a problem for marketers.
- Picture quality online is not as good as it is on TV.
Until new-age companies find a way to reach significant audience bases with quality content, the business model offered by existing TV industry players is likely to endure. As a result, marketers will continue to allocate a significant portion of their ad budgets to the TV format.[Source: Martin, Laura and Medina, Dan. The Future of TV. Needham Insights. CapKnowledge.com. 22 Jun. 2012. Web. 2 Jul. 2012]