How to make money in the video distribution business
- Step 1: Make crazy low-ball price offers to lure in many bargain hunters. Persist this pricing for a while to get new users accustomed to your service.
- Step 2: Ease pricing up to see how many will stick (and just pay up) rather than bail.
- Step 3: Repeat step 2 in search of the optimal balance of retention & profitability-per-subscriber. If some price increase proves particularly painful, offer "introductory pricing" for short periods of time to simulate Step 1 only for new subscribers.
We've seen this before. Did anyone believe that cable TV rebranded as "the future" streaming (bundles) TV would be any different?
What happens next? The other competitors ease their pricing up too. Eventually, we're paying just as much as we used to pay for "500 channels" while getting only 50 or so. And we generally pay more for broadband because we unbundled to "beat the man" (even if that "the man" is likely still the very same cable company that used to offer a bundle of broadband + cable for about the same total price). And thus our total out-of-pocket works it's way right back to where it was (or higher) for less channels, lower quality, no surround sound, feature-limited DVR, etc.
And "the man" eases broadband-only pricing up to replace the fading cableTV revenues (ultimately making at least as much as they make now providing both
services), knowing that broadband is essential to ANY of these streaming options... and thus, where else are we going to go for broadband (when there is generally only a single provider in any given area)?
Then what happens? The streaming TV providers consolidate down to just a few players while pricing continues to rise- all blamed on the cost of programming of course. Lower-priced competitors are bought out by more dominating players until there is little competition. The names of the old cable companies change (unless the old cable companies are the ones who buy out the streaming companies) but the game remains the same.
Eventually, the group whine will be for the "good old days" when the same money for streaming got far more channels, at generally better quality, the vast majority with 5.1 surround sound instead of mono or stereo, a real & full-featured DVR, a unifying guide that would bring all programming together in one place, tools to hide any channels you didn't want to show in that guide, no video counted against ever-tightening broadband caps/tiers, etc.
We've seen this movie before... and we already know how it ends.