Tuesday, June 2, 2009

John Malone Sees a Revenue Model in Broadband Content

In an interview with Walt Mossburg, the chairman of Liberty Media, John Malone, believes the very survival of online content depends on a subscriber revenue fee. He recalls a time when TV was free and the question was how to get people to pay for additional TV type content (cable). As Malone saw it, "The way it was successful was blending together the transport service with the charge for the content. When you were a cable subscriber, you weren’t sure whether you were paying for connectivity or whether you were paying for the content that was embodied in the connectivity."

The problem in comparing the launch of cable to the launch of broadband video is that the consumer already subscribes to the internet and is already receiving free video content. In the cable example, its content was not made available unless you bought it.

The issue is to get the consumer to pay more for what they are already receiving. The answer may still lie in connectivity and multi-platform viewing. Providing the consumer with the means to synchronize all their viewing platforms into one easy to use program has a value and appeal. To that end, the telcos may have a leg up on their cable rivals because they have a four screen advantage to work with: wire and wireless, cable and broadband. If I could receive my sports network on my cell phone because I am away from my home, receive my TV networks on my laptop, these extra features of connectivity have an incremental value.

Malone sees a future more pay per view. "People will pay on a per-view or on some kind of subscription basis for content on the Internet if the quality is there and there’s convenience. The question you have to ask yourself is, is there going to be an aggregator doing that? This is the role that HBO traditionally did in movies. They aggregated movies and they sold you in bulk. You got 30 movies a month for seven bucks when they started." As Mossberg correctly notes, that is what Netflix and Apple and others are doing. But then again, so is cable through VOD!

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