The truth is that the content developers still have no idea in how to leverage a new digital model without cannibalizing revenues on advertising, subscription and international rights sales. The problem is while these extremely well paid guys cant decide on a way to go, they rather keep the same myopic vision that the music industry had 10 years ago at the rise of Napster. The game has changed and they have to deal with it, especially with so many opportunities that can come from it. As opposed to producing music, developing a quality television content, be it a series or a live sports event is still quite expensive. On one side this means that the producers must find ways to monetize and pay for these expenses, but on the other side it also means that these content providers enjoy high entry barriers to any serious contender. Even though youtube became very popular with homemade videos, there is no comparison with the quality of a real tv series and audiences of these have not been affected by this new element.
Some experiments have been done in the past years in this area, mostly in the United States. Some have been very successful such as MLB.tv, which was developed as a way to sell the “out-of-the-market” games to fans. While deemed unfair by American costumers, the blackout system (some games are not shown in certain regions in order not to rival with TV or ballpark attendance) seems to have been effective in avoiding cannibalization. In fact, MLB.tv became one of the most successful online subscription services in the US, along as the Wall Street Journal, and the most profitable video-streaming service on the web. This service has been so successful that last April, Sony signed with MLB the rights to offer MLB.TV in its Playstation network. MLB.tv has not shown any effects on the MLB television rights negotiations, as these are still very well demanded by networks and prices have still increased in latest contracts.
Hulu however, despite being the 33rd top accessed site in the United States has only managed to make $226 million in revenue. Not much considering the major networks that are behind the project and the $2.6 billion made by rival Netflix in the same period. Hulu has been very successful in reaching the audience, but owners worry if popularity of online video will cut into their traditional business. In order to attempt a change in this game, Hulu managers are considering moving the business to a subscription model and turn it on the first online “cable” television network. While there is a great potential in increasing revenues with this move, especially if they charge low monthly rates like the ones on Netflix, there is one important factor that Hulu is forgetting about but that MLB did not: International markets!
While Mlb fans around the world are allowed to sign up to mlb.tv and watch they're favorite games from anywhere, Hulu is only accessible in the United States. On my discussions with TV executives, they would argue that they can’t offer this kind of services abroad due to the rights contracts negotiated in each region. While I agree that offering online subscriptions would probably piss off the international networks that buy these rights, as premium content providers, NBC, Newscorp, and Walt Disney are strong enough to enforce on their contracts the availability of online streaming rights, maybe even negotiate them with the local networks.
What happens now with these content providing companies is that they are allowing several pirate websites to offer their content for free and selling local advertising, not making anything out of it. I will take myself as an example. On my first year in Spain, it was clear that Spanish television was not really my thing. At first I had not much of an option, but soon enough I started to download lost to watch it on my computer. For the last three years or so I have been able to watch all of my favorite series on streaming without having to do any downloads. Though the quality of the image is obviously not as good as a regular TV (Despite recent improvements), this on-demand service is much better in several aspects, not only in convenience but also because I can watch the shows on the same day it is released in the US and in English. There are several other people in the same situation as me, who do not want to wait one year to watch a dubbed TV show, this is the niche market that someone in the likes of Hulu could tackle. On the other hand, this service would not cannibalize the business of the Spanish tv stations who bought the rights to the given show, since the people who are interested in watching in English online, already do it anyways!
An ever better example of this myopia comes from my other “online tv” passion. As a Brazilian living abroad, it was very hard not to watch my Brazilian Football matches every Sunday. In fact, I was (and still am) willing to pay for a pay-per-view service that would allow me to watch the games of my team. Gladly, since Sopcast, Justin.tv and other Asian websites came up, I didn’t have this problem anymore. Now I can watch all my favorite games live! If Globo (the rights owner for Brazilian Football) offered some kind of international online service, they would be able to cater to the millions of Brazilians living abroad, making money in foreign currency and selling localized advertising. Actually, on this case, they don’t even have the excuse of the international buyers since no one seems to care much about the Brazilian national league around here. After spending millions in the new rights contracts for the next 3 seasons, I sure hope they look abroad in order to increment they're revenues. This is also a great opportunities for other niche content from any other country.
If you are liked this article and now want to watch tv online the following links might be of your interest:
www.free-tv-video-online.me - great source for series and movies on streaming
vertvonline.org – for the lovers of Brazilian football
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