Pay to Play TV: Already the Case

Todd Chanko | May 07, 2006, 02:16 PM

There is considerable agitation about the DVR lately, regarding the device and its impact on business models. The very phrase "business model" implies an almost Platonic ideal, the achievement of which can never occur. The New York Times' recent article on DVRs focuses on a patent recently accorded Philips, which enables the development of a DVR that could monetize the base human desire for commercial skipping. In response to the NYT's question "Someone Has to Pay for TV. But Who? And How?," I answer that 89 percent of US TV households already pay for some form of TV service via a monthly invoice from their friendly Pay TV provider. The issue is who reaps the benefits of these monthly annuities. Cable and satellite operators, a few scattered telcos and a wide range of misnomered "cable" networks have claims on these monthly remittances. Only the broadcast networks, by and large, are left out of this TV largesse. Yes, Les Moonves did negotiate with Verizon for carriage of CBS' programming, but mostly broadcast networks are the beneficiaries of must-carry. These aforementioned “cable” networks have dual revenue streams, from subscriber fees and advertising, providing some cushion against the vagaries of media planners’ budgets and consumer behavior.

Broadcast networks are too reliant on one sector – advertising. True, diversification of their revenue streams would reduce one kind of risk while elevating another: the risk of losing carriage should demands for retransmission payments ultimately result in a wholesale reconsideration of must-carry. To their credit, the networks have been experimenting with post-primetime sell through, streaming online, stocking DVRs and VOD. But if the industry is serious about the threat of commercial skipping, deploying DVRs that would require consumers to make yet another choice of how much they’re willing to invest in TV is not the best option.