Two tech firms that undermine the broadcast TV model

Description: Two fledgling technologies could dramatically reshape the $60-billion-a-year U.S. television broadcast industry as they challenge the business model that has helped keep broadcasters on the lucrative end of the media spectrum.


Date: April 8, 2013


The threat so far is limited. The number of people using Aereo – backed by media heavyweight Barry Diller, who launched the Fox network in 1986 – is miniscule compared to the number of pay TV customers in the United States. Dish’s Hopper is a more mainstream device that Dish’s 14 million subscribers have access to.

But broadcasters fear the services will continue to expand, cutting into their viewing audience and advertising revenue.

Both the Hopper and Aereo take advantage of changes in how TV viewers get their shows. Increasing numbers are “binge watching,” or tuning into libraries of recorded episodes on their DVRs or on the Internet. As many as 5 million homes now “cut the cord” and get their TV shows from sources such as streaming on the Internet or watching DVDs or game consoles, according to a March 11 Nielsen study.  READ REST OF STORY

 Questions for discussion:

1. Describe the business (revenue) model that network TV employs?  Are these new technologies a serious threat to threat model?

2. What would you do a manger of a TV network to combat what you see happening in the network TV environment? What changes if any could you make to strengthen you position in the market?


16 thoughts on “Two tech firms that undermine the broadcast TV model

  1. mark schmitz

    The business model consists of paying out those networks that attract the most viewers, selling subscriptions, and who retain those viewers. This model facilitates reaching consumers through advertising. These new technologies are a future threat to this business model. The more prominent broadcasting companies need to change with the times. Everyone uses the path of least resistance. If consumers can get TV programming for far less commercials and money, they will. Since consumers are the revenue driver for broadcasting companies, they should tailor their services to what the consumers want. If they don’t, they will be gobbled up by technology.
    If I were a TV network manager, I would use the assets of the company today to acquire these little emerging technology start-ups and adopt their business model slowly. This isn’t something that will change overnight. Like most things, it will take years. But it will happen. If you can’t beat’em, join’em.

  2. Alex King

    TV providers make money by selling us a subscription to broadcasters which make their money by offering high quality programming laced with advertisements. The service providers then monitor who is watching what to pick the best mix to maximize profits. Broadcasters make their money based on advertising.

    New service on demand viewing is a huge threat to traditional Service providers. Combating these SOD companies will prove to be a serious challenge as they are bound to what the broadcasters can offer. Bundling services and targeting traditional TV watchers and bundling packages effectively is the best way to stay floating. The broadcasters too must start to think about which shows they want to make exclusive and do what they can to keep them from selling out to video on demand companies.

  3. senura suduweli

    1. Describe the business (revenue) model that network TV employs? Are these new technologies a serious threat to threat model?

    The way that network T.V make their money using the revenue model is by getting subscribers and airing T.V commercials. Subscribers are a big part of networks revenue model. First they get the viewers to sign up with their services then they attach all the accessories. t.v commercials are the biggest money makers for the networks. If a network has a special event on such as the Super Bowl companies pay big amounts of money to the networks to air their commercial. Yes the new technologies are a threat to the revenue model.Biggest one being hopper because it lets the viewer skip the commercial. Which will decline the opportunities for airing commercials. And commercials are the biggest money makers.

    2. What would you do a manger of a TV network to combat what you see happening in the network TV environment? What changes if any could you make to strengthen you position in the market?
    They can offer special bundles to existing customer and to new customer. This can help the networks to create a a good customer base. They can also create new technology of their own to compete with them. I would strengthen up customer service base because the networks already have a big customer base were the new companies don’t.

  4. Chane van Nierop

    I believe that these new technologies are a threat. More and more people are downloading shows off the internet instead of subscribing for shows. This is a threat to TV networks, because they will continue to lose clients in the years to come. I think that the TV networks should start focusing on their revenues and how they can get the internet involved in it. FOr example, for a small fee per month Netflix is a great alternative for getting the shows that you want without having to download.

  5. Mervin Kwok

    Based on the number of viewership, marketers would pay an amount to ensure their product/service would receive maximum exposure during advertising periods on network TV. However, with these new technologies, the amount of advertising exposure is severely reduced and the economic worth of buying an expensive TV spot is becoming lower and lower. As well, these services do not package their channels inconveniently, so a consumer has to pay for a bunch of channels he/she doesn’t want to get the ones he/she does want. With these two services providing a service that consumers would much rather prefer, it would stand to reason that these new services are a threat to network TV.

    If I were a manager of network TV, I would take careful note of the current trend that my consumers are moving in. They clearly prefer some channels to others, and we have to accept that we are now in heightened competition with other channels. As well, people are preferring to watch differently, so it’s important we identify how best to provide these customers with a better service. An example would be to allow streaming of older shows on the internet, supported by ad spots on the network’s site.

  6. Helen Reina

    1. Describe the business (revenue) model that network TV employs? Are these new technologies a serious threat to threat model?

    People is getting more into the internet and looking for other alternatives to access to the stuff they like and the things they want to watch in this special case. Internet is definitely a serious threat to the network TV industry.
    Historically, the television pie was carved up along the demographic lines that defined the networks. Ten’s audience was exclusively young. Nine’s audience was broad and affluent.
    Nowadays people prefers to pay just for one service and take advantage of these more than paying for something that they can watch through other ways.

    2. What would you do a manger of a TV network to combat what you see happening in the network TV environment? What changes if any could you make to strengthen you position in the market?

    It is difficult to give a good advice in this type of case, I should just say that the have to start thinking in which ways they can make revenues combining internet and their business, or doing something similar like the music industry that went through the same because is something that they will have to deal with in the future. Even though it is a slow change from watching TV to watch everything through internet, (specially young people) someday everybody will do it ..

  7. Nicole Freeman

    Steve Jobs got it right with iTunes. Pay for what you only want to listen to, not the whole CD of an artist if only 1 or 2 songs are worthwhile. The broadcasting and cable companies still have the attitude of the Recording Industry of years ago. The only means of protecting their interests are by suing small start-up companies and individuals that are using the latest in technology to bypass the bloated expensive packages that are offered by the networks. This is more of a scare tactic than trying to resolve the problem.
    Subscriptions are down because more people are getting their entertainment fix from the internet. For a nominal fee you can watch Netflix any time you would like on your computer or your television without annoying (and often louder than the program one is watching), commercials.Granted the income from sponsors (commercials) are the main source of money for these companies and a company like Hopper is zapping said commercials, the networks should see that the old model must be changed. New thinking and ideas are required in this paradigm shift, but as with most large corporations and institutions, it is very hard to turn the Titanic around.

  8. Jordan Gibson

    1. Network TV employs a mass majority of companies and their employers at the same time, so these new technologies are a huge threat in this case. Basically they give the viewer all the power and control as to what this wish to watch and view at any given moment in time. This would allow people to simply skip over campaigns and promotional ads and allow them to watch television without ever having to sit through a commercial again. Just imagine for one second watching the SuperBowl without commercials. How strange would that be? Companies pay millions of dollars to networks to broadcast these commercials. If these new technologies really begin to take off across the country, the networks are going to be in a serious financial bind. How will they be able to pay all of there employess? There will have to be rollbacks and more than likely jobs will be lost. Not a pretty situation to be in.
    2. I am not exactly sure, but I would have to take a similar approach as to what the music industry did in the case of free downloads. You would have to begin by taking these technologies and their producers to court over huge lawsuits. Perhaps this would wake them up and they might just realize that what they are doing is wrong.

  9. Ida

    I am all for saving money here and there but I personally am against pirating in all of its forms. I feel that if quality television is to remain available for me to find on the television then I should be supporting the channels that offer the shows and in turn, the studios that produce the shows. It is not free to produce a television show and everyone in the making whether it be acting or make up wants to get paid at the end of the day. Those costs and then pushed on to the consumers in the form of the buyer of the DVD or BlueRay disks or cable company. I would agree that all the parties involved are trying to get the most money that they can out of the product being offered and it is the end consumer that pays for it. But it is also the end consumer that is driving the price up. Any of the television broadcasting services that are publically own always has the shareholders’ interests first in their minds, and the shareholders are always looking for the top dollar return possible. It is a never ending cycle where every party is looking to get the most money possible but no one will give up a penny at any point. The major corporations will find a way to either buy out or shut down the small companies offering the same or better product and a smaller price.

  10. Edward Agyapong

    Network TV employs the business strategy of allowing marketers and other firms air time to advertise their products. This strategy makes them more millions than even their ratings and any other activity they partake in. Now these new firms and their new technologies will ran them out of profits as quickly as possible. Cutting the advert that all satellite and cable customers hate to see during their shows will attract more subscribers to them. Besides it is free to use the new companies technology than it is for the satellite firms.
    Well as a TV network manager, the best I can do in the current crisis will be to offer an incentive to subscribers to maintain them. Thus provider either cheaper and more available channels than the new firms will. As for the adds, I’d try selling the idea of using a DVr that will pre-record their shows so they can skip and fast forward the advertisement.

  11. James Perry

    These new technologies are deffinately a threat to the cable networks. The elimination of commercials would decrease the the income that is needed to run the daily shows, it is the commercial revenue that provides these shows to even exist. Although commercials are annoying and sometimes monotnous they are benificial to overall entertainment. I have Netflix and apple tv and i dont watch alot of regular cable or satellite tv anymore. Netflix and apple tv are really affordable and offer so much. The cable and sattelite companies like mentioned in the article are hurting and i dont forsee that getting any better. One of the benefits for having cable or sattelite is it is great for those sports enthusiasts and those who are following tv series. With this being said you can find almost everything that would be offered on cable or sattelite for free on the internet. I think that if I were to manage a tv networking company i would try and lower some of the costs involved to make it more affordable for consumers. With the wide rang of lower cost and free entertainment that is out there I think that you would need to cut the needed costs to stay competitive and keep the market share.

  12. Jessi Chrapko

    These new technologies certainly are a threat to TV networks and they will have to implement different strategies if they are to stay in business. As others have mentioned, cost reduction might be one avenue to try. I also think it would be beneficial for most networks to get involved with companies like Hopper, Dish and Netflixs since it is unlikely these companies will be disappearing anytime soon. Networks might be able to improve their revenues if they join forces with these companies since they seem like they will continue to gain popularity and be more widely used.

  13. Justeen Kolody

    This new model of a purely subscription system, that eliminates the commercials during a previously recorded TV show is a definite threat to the Cable networks. Many have become quite irritated with commercials and many people may even go as far as just having a streaming account, such as Netflix. Which all one needs is to pay for internet and the monthly fee. But the upside is you have no commercials. This is why Dish and the Hopper are gaining substantial momentum in this industry. They found a want od the consumer that has not yet been done.
    As a manager of a large TV network this would be a very difficult decision, you can’t very well eliminate your ads as that is a main stream of revenue. But you could put forth a proposal of a merger between your network and the Hopper. By joining you still have the segment of cable and subscription television. By conducting this you can control what TV channels and shows are where and thus by popularity of the shows/channels control the flow of the profits.

  14. shaunagregus

    Not only to TV providers rely on subscribers to attain revenue, they also then need advertisers to earn a profit. With the introduction of these new technologies it’s going to be really hard to keep business as it was. If I was in charge of a TV company I honestly don’t know what I would do to help things. The way I see it, like the article says, it’s just an analogous situation of what happened with the music industry; technology is making it harder and harder to make people pay for things. When downloading became huge, record labels had to find a way to make purchasing music appeal to the consumers once again. Although most of them failed with this, Apple is a great example of a company that took innovation (with their introduction of iTunes) and made purchasing music an easy and intriguing thing for consumers once again. No, it’s not the same as it was, nor will it ever be… but it’s better than it was. I think that fighting these new developments might be a lost cause. These TV companies need to find a solution that makes their services appeal to consumers over the AD-free models. It’s definitely not going to be easy, but if Steve Jobs can take down-loaders and turn them into buyers, then why can’t someone in the TV business come up with an idea to combat ad free systems?

  15. Tayler Orban

    These new technologies are a serious threat to the TV environment. This is because they offer what the consumer wants: no commercials, shows whenever they want, and a major number of the shows that they want. My generation is a “we want what we want and we want it now” generation. We have grown up in the age of technology and we like the easiest, fastest and most reliable technology we can get our hands on. I watch my TV shows on Netflix because I can play, pause, fast forward and rewind whenever I want and the whole season is uploaded to Netflix. If I feel like watching 1, 3, or 10 episodes in one sitting then I can because all of the shows are available at once. This works better for my generation because we are always doing something and most of us have smart phones and computers instead of just TVs. This enables us to view what we want off almost any device no matter where we are and we favour convenience. My generation is the start of the technological era and this is only going to continue. I do not think that TV networks will be popular in the next few decades and they are going to have to find a way to maintain their popularity or look at it from another angle.

  16. haley

    It appears that TV networks rely alot on the quantity of subscribers to their services. These new technologies then are a huge threat to the TV networks because if they continue to lose clients that will reduce their sales which will overall reduce their bottom line. So instead of focusing on their sales aspect of the revenue paradigm, they perhaps need to focus on the cost aspect. If they can minimize their costs, as well as the cost to subscribers each of these will result in an increased bottom line. If I was a manager I would take advantage of the fact that so many people are familiar with your networks, and that you already have a solid stance in the market, so just play that up. Give current subscribers initiatives to stay with this network and not to switch to a different one. That may be by reducing the cost to the subscriber so they save money. Try and intice potential clients to subscrise by using marketing techniques and trying to capture their interests and getting them to subscribe as well.


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