How to Disrupt the Traditional Video Content Business

Includes: CBS, DIS, MSO, NWS
by: Ashkan Karbasfrooshan

Martha Stewart (NYSE:MSO) “plans to start charging for online video downloads of the domestic diva’s TV show episodes and segments”, according to Paid Content.

It might work, it might not.

Rule #1: Individual Users Don’t Like to Pay for Content

I don’t think end users (individuals, basically) like to pay for content: not monthly subscriptions, not micropayments, nothing, nada, zilch.

Rule #2: Business Will Consider Paying for Content, If and Only If…

I do think that media companies can be convinced to pay licensing fees for wholesale videos, if the

a) quantity,
b) quality,
c) frequency and
d) consistency

meet a certain threshold.

Reason # 1 Why Traditional Media Companies Are Getting Disrupted

The problem for traditional media companies is that their content libraries are generally

  • of great quality (it’s what I call “super premium”),
  • of enormous quantity, as it encompasses years of archives,
  • consistent, with professionals involved in a “stable and reliable” manner in pre-production, production and post-production.

The problem is that the frequency of future publishing cycles is erratic at best and non-existent at worst.


  • CBS (NYSE:CBS) only basically goes all out on its NCAA College Hoops tournament.
  • Disney (NYSE:DIS) /NBC (NYSE:GE) and News Corp. (NASDAQ:NWS) largely publish old stuff on Hulu (either years old with sitcoms or days old on things like Saturday Night Live).
  • Discovery outright avoids it by keeping their good stuff offline.

Reason # 2 Why Traditional Media Companies Are Getting Disrupted

But there’s one more major obstacle for traditional media, and this is where we exploit things quite admirably. Traditional media needs licensing fees in the 5-6 digits monthly and/or 6-7 digits annually to make it worth their while, and guess what? They can never/rarely get those.

Want to know how has managed to disrupt things in the online video content business?

We can license categories of “premium” content (travel or health, for example) or our entire treasure trove of content (nearly 5,000 videos and hundreds of hours) for bargains relative to what traditional media companies would demand.

So over time, we have actually developed a “software licensing” model, but positioned for upside when partnerships grow.

What Not to Do (I Think)

We could also, of course, simply give away the content, but that is quite foolish because the concept of hyper-distribution is one of those fads that doesn’t really make sense in practice and actually dilutes your leverage and wipes out any pricing power you have.

I am not saying it works for everyone or that every content producer can pull it off. It’s very funny to see established media companies belatedly run after free, ad-supported content during the boom and now scrambling to protect their derrieres.

By the time they get their houses in order, the market will turn once again and they’ll be preaching free is the way to go.

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