Monday, October 26, 2009

Will Consumers Pay for Online Content

Hulu wants to charge for online content. Will consumers pay? They pay for Netflix, they pay for Blockbuster, but will they pay a site that has been previously offering its content for free? I expect that consumers will simply get more annoyed at thesecompanies and will utlimately find a way around them. The challenge for Hulu is not how to build a subscription model, but how to build an authentication model that feeds off of its cable license fees. Authentication is really all about convergence for the consumer, "what you want, where you want, when you want, how you want" - one price for access across all devices.

The added wrinkle is that the relationship between the cable company and its customer base is a poor one - built on poor service, bad communication, mistrust, and bad feelings. As technological advances hit the masses, from Apple to X Box, cable technology, and the box that enables TVs to function, look and act like old fashion, rotary dial, phones. There is nothing 21st century, with cool looks and interfaces, and ergonomic design to make the consumer feel that they are getting the best product from cable. Rather, they feel overcharged, and under appreciated. Hence as competition enters the fray, the customer makes a quick exit to the door.

So online content may try to find a subscription model. Just don't expect the consumer to roll over and take it. We have been mistreated for too long and will find other alternatives to satisfy our video cravings.

Fios To Exceed Cablevision Subscribers by 2010

In just a few short years, Verizon's rise in cable subscription has been fast and furious. While growth has slowed in the last quarter, Fios is the 6th largest cable operator, set to overtake Cablevision and the number 5 spot in 2010. And with partnerships with Direct TV in markets that don't have Fios, Verizon is still able to offer a triple play option to compete with cable. What makes Verizon most dangerous to cable in this competitive environment is that they can offer a fourth play, wireless communication, and build a compelling, competitive offer.

Sure Verizon has had to deal with the loss of customers from wireline, but that is mainly due to technological changes; consumers are switching off wires for cellular. To me that means that this third leg for cable is not the real hook that consumers need. Rather, cable must find a wireless product and build out a wireless broadband model. Consumers no longer want to be tethered to their home or to their devices. Devices must follow them.

As Fios' growth exceeds Cablevision, what does that mean for them? Does it push Cablevision to finally sell itself to Time Warner in order for it to better compete in the region? Verizon is reaching scale and no longer needs to sit at the kid's table; they are a major player in the cable distribution industry and will continue to demonstrate a strong voice in the months to come.

My hint to Fios. Buy some independent cable networks and create a stronger programming arm.