CBS just announced its going to launch a new monthly subscription service that will give viewers the opportunity to browse through an extensive catalog of procedural crime shows and multi-camera sitcoms. The news of this new business venture comes hot on the heels of HBO announcing that they are launching their own subscription service thus cutting ties with the cable companies that hold modern consumers hostage and waging a direct offensive against Netflix (and subsequently decimating Amazon Prime their current streaming partners). It’s clear that both these moves are the third wave of a dynamic shift in the way future generations will be consuming television. However, in CBS’ case it may also indicate a move that bites off more than it can chew.
WAIT… WHY ITS THE THIRD WAVE?
CBS and HBO’s strategic decisions to break into the streaming network model has many calling this the new wave of television watching. That is of course misleading. The new wave of watching television began in early 2000s right after TIVO became a “thing” and cable companies rushed to find their own “TIVO” solutions. Thus the creation of the DVR, which like TIVO, allowed cable customers the ability to record shows and watch them at their own leisure without needed to find a blank VHS tape and figuring out the a complex series of timer mechanisms. The DVR was and is the first wave of modern television consumption. No longer was one forced to make a Sophie’s Choice between two of their favorite shows, they could have it all (a luxury I wish I wish I had twice in my adolescence, the first during the great Saved by the Bell: The College Years vs. Full House wars of 1993 and the second during the Teen Drama Inquisition when upstart Dawson’s Creek faced off against stalwart and side-burned Beverly Hills 90210). The DVR revolution has changed how network television is consumed so dramatically over the past decade that television executives are still trying to find a way to adhere to this new model and perhaps is part of the reason why CBS and HBO are moving into this new territory (more on this in a bit).
The second wave of television consumption came in the mid to late 2000s as DVR usage spread, the rise of original cable programming dwindled the amount audiences for broadcast shows, and television shows with even a modicum of success had DVD’s promoting each season flanking the shelves of local Best Buys. in came Netflix the modern day Blockbuster video. Netflix began simply enough, as a DVD rental service. They were the Fresh Direct of video stores. Want to watch that new movie? Don’t want to walk 5 blocks to Blockbuster (or whatever mom and pop shop that Blockbuster didn’t ruin) why simply go online, add that film to your que and it will be there within a day or time. It was simple, easy, and convenient.
Then Netflix decided to change the game. It was subtle at first, nothing crazy and it almost backfired on them in long run once they got greedy. They launched a streaming service which allowed customers to watch movies instantly over the internet. Films that they had licensed the rights to show. Their catalog was limited and most new films took at least a year or two if ever to stream. But it was model custom made for television consumption. Ever wanted to marvel at a young Tom Selleck’s machismo mustache? Why there is the entirety of Magnum P.I. Want to know why Buffy the Vampire Slayer is always on EW’s 100 best television shows list? Go ahead and watch all seven season. Wait a minute, what’s that episode of Cheers where Norm comes in a everyone knows his name? Find out now! Netflix was no longer the destination for old obscure movies or even new obscure movies, it was the new TV Land, minus Hot in Cleveland. And it was good.
Soon networks took notice of how powerful Netflix’s streaming service became. Shows that had middling ratings drew huge numbers in streaming formats. Breaking Bad went from a show on the bubble that starred that guy on that show that time to the show everyone knew starred the indomitable Bryan Cranston and his alter ego Heisenberg. In a relatively short time Netflix became the go to place for television syndication which new streaming deals being struck left and right. Soon they faced new competition from the likes of Hulu (who had the advantage of showing first run episodes from ABC, NBC, and FOX the day after they originally aired and eventually added the CW and various cable networks to their stable) and Amazon who launched their Prime Subscription service in direct competition with Netflix and Hulu.
By now we all know that none of these providers were satisfied with merely licensing material from production companies and each decided to launch their own original content in the hopes of luring new subscribers and creating three De-facto new networks. This becoming the clearest instance of why HBO has decided to jump into the streaming only game which CBS following close behind.
THE RISE OF THE THIRD
As I’ve suggested the first two waves have created opportunities for this third wave of television consumption. DVR’s presence and the fact that broadcasters are still having trouble adjusting to its affect on Nielsen ratings has forced these companies to look for additional ways to add revenue to their bottom line. In HBO’s case, offering their streaming HBO GO service independent of having an existing cable service provider is a clear indication that HBO is going to war directly with Netflix (neither Amazon, Hulu, or fledgling Yahoo offers even a remote level of competition to either now). We should soon expect other networks to follow suit. On the pay cable front Showtime is prime to make the break from over dependence on cable providers as it has it’s own extensive library of hit critically acclaimed shows from Homeland, Dexter, and Masters of Sex. Expect FOX, NBC, and ABC to also make the leap in one form or another but only after accessing the success or lack thereof of CBS’ experiment. Which then brings me to how CBS’ decision to provide it’s own subscription based channel independent of traditional methods is unique and in my opinion ultimately flawed.
HOW IS CBS’ MODEL FLAWED?
CBS’ streaming model has one immediate weakness. CBS by design is one of the original 3 FCC approved free broadcast networks (NBC and ABC are the other two originals with FOX and the CW representing the later eras). CBS’s model is main revenue source is Ad revenues generated from having hit television shows which draw substantial ratings. And thus far CBS is winning… by a lot. It boats the most most top ten shows on current broadcast network TV including the #1 comedy (The Big Bang Theory) and the #1 drama (NCIS). The idea of finding additional revenue by offering a library of CBS owned shows via their own paid subscription isn’t a terrible idea by itself, but where you lose me is a potential subscriber is that CBS also expects those paying $6 a month ($5.99 technically) to also sit there and watch commercials that CBS is also being paid for.
What this in essence means it that CBS is trying to have it’s cake and eat it too. This is not actually a new method for them or any other broadcaster though. As we’ve seen in the past CBS has been allowed to blackout it’s television networks from Cable providers who refused to pay their asking price to license their network. In practical terms CBS’ main two sources of income currently are cable providers (Time Warner/Verizon/Direct TV) and commercial ad revenue generated by their prime time line. Now they looking to keep the two system form by charging you the consumer the direct licensing fee that they charge cable companies as well as ad revenue from those wonderful car companies and laundry detergents. So the question becomes where is the value added to us the consumers? If you really want to watch Big Bang Theory but hate paying a greedy cable conglomerate money for it what is the advantage of paying CBS directly when you still have to sit their an indeterminate amount of commercials?
To me this seems like a flawed system and one that could backfire on CBS quickly. Right now Netflix does not have ad assisted revenue sources on it’s streaming material (though that may change). Hulu does have an advertising based policy but that can be attributed to the fact that much of their content streams the next day from their network broadcast. Amazon Prime does not feature ads and presumably whatever form HBO’s new subscription service takes will also askew ads. For CBS to charge customers $6 dollars a month ($72 a year!) and still have the gumption to force third party advertising down their customers’ throat is a bad play and unless other networks quickly follow their lead, and I doubt they will immediately, they may quickly find themselves in a potion where they have to amend their original plan.
Streaming television service is an eventuality. However, broadcasters must carefully plan how they decide to present their back catalog of media. CBS should be commended for taking the first brave step into the third wave of television consumption but they should reevaluate how much value their service offers the consumer in the long run.