Saturday, September 19, 2015

Grim Future for Much Content, Apps, if Ads are Blocked, Bundles Disaggregated

In a world where the linear TV bundle is diminished, many expect there will simply be “fewer channels” in existence. In a world where app or Web advertising is largely blocked, will there likewise be less ad-supported free content? One is forced to consider that it will be so.

In such a world, without as much ad-supported content, more content will be supported by other revenue models, commerce or subscription, for example.

End users might find there are significantly less “free” content or applications available, with more value obtainable only by paying a transaction or subscription fee.

As with a future “over the top” video entertainment market, popular content and applications will still find an audience. Less-popular fare will not be produced at all, or will have somehow shifted to alternate revenue models for smaller audiences.

Advertising long has been part of the fundamental fabric of media business models, subsidizing lower cost or free consumer access to content products, ranging from over the air radio and TV to newspapers and magazines.

It isn’t the only possible model. Concession and ticket sales support movie theaters, while subscriptions support linear video services or SiriusXM (both of which use a hybrid model including subscription fees and advertising).

But most web content has been provided at no incremental charge for consumers, as advertising supplies the revenue. That could change if “ad blocking” largely becomes the rule.

Less content produced, and much less available “for free” is an inevitable result, in that case, as it will be for unbundled linear video channels.

Most predict there simply will be fewer channels, were unbundling to happen, since current business models are predicated on aggregating packages of popular and niche channels in ways that allow smaller channels to exist. And diminished advertising potential plays a role there as well.

In an unbundled world, smaller channels simply would not be able to generate enough revenue from advertising to survive totally on subscription fees. A simple look at potential alternative revenue models based solely on subscription fees illustrates the problem.

What is the expected retail price for content from any single channel, assuming one believes that will continue to be a relevant form of bundling? Part of the answer hinges on volume, a function of popularity, when people must buy individual channels directly.

Most agree that ESPN and sports would have relatively large audiences willing to pay. But many smaller channels simply could not charge prices consumers would pay.

An analysis by analyst Jason Bazinet at Citi Research suggests that “in a pure OTT world most firms would see their equity value fall,” Business Insider reports.

Where ESPN might be able to earn a return selling subscriptions at close to $20 a month, most of the larger channels (top 40 by audience) could not expect to charge more than $5 a month, and the vast majority would be limited to $1 to $2.

Many niche channels could not hope to reach even the $1 level, most would therefore conclude.

So one might conclude that ad blocking in the app and web domains is going to have impact similar to what is expected if linear video bundles are disaggregated. There will be fewer suppliers of content and apps able to survive.

Screen Shot 2015 09 18 at 12.00.51 PM

No comments:

How To Install HBO Max on a Fire Stick, Right Now

source: The Android Soul Many people who use Amazon Fire sticks on their TVs might also have--or want to have--a subscription to HBO Max. Un...