Service or application providers faced with disruptive new competition typically can take one ot two fundamental paths to counter the new competition. They can enhance the product under assault, especially when the attacker is “disrupting from below” with an offer that is significantly cheaper, but also lacks key features or full user experience. Or, companies can cut prices to reduce the gap between attacker value-price relationships and the value-price relationship of the incumbent offer. Sometimes service providers try a bit of both.
At the moment, video entertainment subscription providers are trying to emphasize “more value” as an alternative to “cutting prices.” The primary case in point is the “TV Everywhere” movement, where the effort is to “glue” customers to the existing products by adding the ability to watch some of the video users have purchased on their smart phones, tablets and PCs.
So far, there has been precious little movement to refashion “lower priced” video entertainment subscriptions. What remains to be seen is the success of such tactics, over time. In that regard, “content” is a qualitatively different business from communications. Compared to “communications,” content has high brand uniqueness. A hit TV series is not interchangeable with any other series. That is one reason networks spend so much money crafting one or two signature, highly-viewed anchor TV series, as such products can boost viewership of an entire channel.
That arguably creates an enlarged realm of possibility for content businesses. Since people buy “content,” and since most of the popular content is not easily available online or over the top on the Internet, video subscriptions still have drawing power when extending viewing to new untethered devices such as smart phones and tablets.
Monday Night Football is but one example of video content that remains exclusive to subscription services, and the tactic will be widely embraced by subscription video providers, The Hollywood Reporter reports.
In the past, telcos have had mixed success trying to “add value” rather than “cut prices.” In fact, you might argue, even over the top messaging and voice services that do provide added value mostly are successful because they represent lower-cost alternatives to traditional voice and messaging services, not necessarily the enhanced value.
That arguably is a structural problem. Communications capabilities do not generally include high “brand” related stickiness. One service can be positioned as “same product, lower price” with some ease.
But video is a different sort of product than “communications.” The clearest example is the steady upward prices for video subscriptions every year, compared to declining nominal rates for communication services, or at least declining costs per unit.
That suggests service providers have more chance to successfully protect themselves from over the top content competitors by extending content access to new devices, as a feature of the basic video subscription. That is much harder to do with communications services, though you might well argue that this was precisely what service providers did by providing free public Wi-Fi access to fixed network broadband access or mobile broadband customers.
