On my 12th birthday I discovered what it meant to be a millennial.
As a present, my sister offered to take me to a music store and buy me a CD. Eleven years my senior, and a solid “Gen X’er,” my sister wanted to share her love of music with me. At that point in my life I had never bought a CD, but I certainly liked presents, so I bounded into the car and off we went to the music store.
When we arrived at the music store I wandered up and down the three main aisles looking at all of the CDs. There were thousands. After about 15 minutes of wandering up and down the same three aisles my sister asked me which CD I wanted. This was a very difficult question for me, because I didn’t want any of the CD’s. What I wanted were three songs, but each song was part of a separate album and they were all on separate CDs. After some coaxing, I explained my predicament.
I specifically remember the frustration in my sister’s voice while she was trying to explain to me – a 12 year old – that the art of the music was in the full album and how all the songs fit together to create something uniquely beautiful. I didn’t argue back. After all, she was buying me a birthday present. I selected an album by the Rolling Stones and we went home. The ride home was quiet. In the car I remember looking out the window and thinking how weird it was that we had to buy 9 songs that didn’t interest me just so I could listen to “Sympathy for the Devil.”
Fast forward to 2012…
My girlfriend Miranda and I lease an apartment in Brooklyn and we start thinking about our options for Television. Because we both work full time, our appetite for television is pretty limited – about 30 minutes to 1 hour per day, just enough time to watch an episode of The Daily Show or Modern Family before bed. Occasionally we’ll want to watch a movie on the weekends or live sports/events. I suspect our viewing pattern is relatively common for millennials.
Currently we have two options for television:
Option 1) Pay $100 – $120 per month for 5000 channels, every sports game and every event.
Option 2) Pay around $16 for Hulu Plus and Netflix
We’ve gone with Option 2 – but in actuality, neither of these options are a perfect fit. The first is way too much money for a service we barely use. The second has some of what we want, but no HBO (for weekend movies), no live sports and we have to wait 24 hours after all the shows air for us to watch them. This means we have to be those people at the office covering their ears when everyone is talking about the latest episode of 30 Rock or How I Met Your Mother.
We would be happy to pay an additional fee for access to HBO and live sports, but currently no such service is available. The silly part, to me, is that this infrastructure already exists! Both Comcast and Time Warner have digital delivery systems for their cable content that enables subscribers to watch on computers and iPads. Additionally, HBO has its own digital distribution system called HBO Go. The problem is that most of these digital distribution systems are not available for purchase a la carte. According to some articles I’ve read online, the main issue is billing. Content providers (like HBO) are not set up to bill customers directly. Therefore in order to get access to the content you want (e.g. HBO) you have to buy into a cable package.
There I am, right back in that music store wondering why I have to buy ten songs when I really just want one.
To me there is a huge market opportunity that is ripe for the picking: “Build Your Own” cable TV package. Simply opt in for the channels you want and pay a fee based on what you selected. The average customer may select 5 or 6 channels and pay $15 – $30 per month. Depending on what channels are chosen, this should be plenty to cover the cost of the content, plus a nice margin for the cable provider. Make this service only available through digital distribution (partner with Boxee or Roku) and you don’t even have to worry about the fixed cost of maintaining a network of wired connections. The service would be a simple, low friction way for consumers to pay for the content they want. Also, shifting to a primarily digital distribution platform means no more local monopolies, no more home service calls, and (if implemented correctly) much more valuable data for targeted advertisements. Consumers can choose their Internet provider and their cable provider separately, rather than being bootstrapped into a package full of things they don’t need (e.g. a home phone).
I suspect whoever cracks this market first will learn exactly what Apple learned when they opened the iTunes store. Give people a low friction affordable way to purchase the content they want and they will flock to you in herds.