Andrew Ducker (andrewducker) wrote,
Andrew Ducker

The economics of subscription TV is interesting

I find the difference in behaviours between subscription TV (HBO, Netflix, Amazon Prime) and broadcast TV fascinating. One thing that didn't really click for me, until today's announcement, is how ratings drive their behaviours very differently.

For a broadcast TV channel, they make their money from advertising. They want as many eyeballs watching them every second as possible, so they can charge their advertisers as much as possible.

But for a subscription TV channel, they don't care if an individual show has six-million viewers - they care whether it appeals to six-million viewers they don't already have. There's no point Netflix producing Blue Is The New Black, a spin-off which appeals to exactly the same people as watch Orange Is The New Black. Those people already have a Netflix subscription, and they don't pay more if they binge-watch two series a year. But if they can pick up Jeremy Clarkson: Swearing At Foreigners* then that's going to largely be several million different people, all of whom have to pay their monthly subscription in order to see what wacky hijinks Clarkson gets up to this week.

Of course, one must-watch TV series per year probably isn't enough to have people paying £60/year. But one must-watch TV series plus a bunch of reasonably good old TV and movies probably is. After all, HBO are happy to produce three dramas, eight comedies, and ten unscripted shows over the course of a year. It's not a lot - but clearly it's enough to keep people subscribing.

*Which Amazon just outbid them for.

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