There has been a revolution when it comes what traditional cable companies are offering their regular viewers. Many television channels are now offering an on-demand subscription service where customers have to pay to gain access to TV episodes online.
While some of these channels are offering only catch-up, where recent episodes are available, others are offering exclusive content for their audiences. One such example of this is Nickelodeon. The children’s channel recently announced their Noggin app. This will be a monthly subscription service allowing children to watch old shows that are no longer shown on the main cable channel and feature new content.
It isn’t just children channels that are going that way. HBO Now is a new service with similar ideals. On this channel, programs become available to subscribers as soon as the episode starts to air on the standard channel.
In addition to this, the UK has seen a move by traditional companies to move towards a subscription service. ITV, one of the main UK television companies that offer 4 free channels, has just launched two new channels: ITV Be and ITV Encore. Both of these are subscription channels.
The Advantages Of This Model
The main force behind the move is purely financial. While TV shows are popular, watching television live is in decline. This is mainly due to the improvements in technology that have led to online catch-up and other online media.
This has created a problem for broadcasters as revenue from advertising has declined. Instead, there is more money to be made by advertising on digital media. At the same time, television companies can collect significant revenue from subscribers.
The biggest challenge for those channels that aren’t using adverts is will they generate enough income. A television show is very expensive. Games of Thrones costs $6 million per episode to produce. While this is significantly higher than other successful shows, Breaking Bad cost $3 million per episode and The Big Bang Theory cost just $2 million when it started out, it demonstrates how much, a subscription channel must generate.
It isn’t just about one of these episodes per week. It is a combination of several new episodes over a month. With HBO Now, it would take over 400,000 subscribers to pay for just one episode of Game of Thrones. While it is not subscribers alone who will be the main revenue stream for these companies, they will be part of the plans for these companies.
Yet, Nickelodeon has a good plan. By using old content that has long been paid off and made a profit, it can reduce the costs for the service over the week and therefore it will take fewer subscribers to make a profit.
Will These Channels Be A Success?
While it cannot be guaranteed that these channels will be a commercial success, there are signs that it is likely. Netflix and Amazon have demonstrated to the world how an online streaming subscription service can be an effective business model. Netflix earned $4.37 billion in 2013 and made $228 million operating profit. That is nearly enough to fund the first four seasons of Game of Thrones!
In fact, Netflix has shown that an online streaming service can produce original works with their highly acclaimed: Orange is the New Black.
But the greatest challenge will be whether these new digital channels will be able to demonstrate to viewers why they need to pay for one channel, when they could gain access to more content via the big streaming companies. If they can’t, they will need to rethink their strategy. If they can: we will probably see numerous more channels like this.