Professor Ben Compaine is currently teaching technology entrepreneurship at Northeastern University, Boston, Massachusetts and is a senior consultant for the Innovation International Media Consulting Group. Here he discusses the latest front in the competitive media and entertainment world – online streaming.
Is the playing field tilted in BBC Worldwide’s favor in its competition with other European programmers because of its connection to the pool of programming that has been paid for by British license fee payers? Probably somewhat. But so what? Everyone is looking for a “fair advantage.” Big companies have an advantage over small producers. Spanish content providers have an advantage over English language programming in the vast South American market. And so on.
While the much broader discussion of what role, if any, there should be for public service broadcasters these days and whether it is time for the BBC to truly stand on its own in the market place, without mandated license fees, is a good fight for another time. And this American would not want to get in the middle. But a successful Global iPlayer can only be a plus now for British viewers: let the rest of the world pay if they want what the British viewers have paid for.
For BBC Worldwide to launch the Global iPlayer application is as close to a “no-brainer” as there is in the new world for the old media.
What are the upsides? First, a new source of revenue for content that has already been created and paid for. Beyond the development of the app and the modest maintenance and marketing expense, there is little cost. (As BBC Worldwide is a commercial operation and technically separate from the BBC broadcasting service, there will no doubt be some internal licensing costs. But that is essentially switching funds from one wallet to another).
Television has always been a business that scales well. That is, any added revenue comes with very low costs. The traditional BBC can’t really take advantage of that, as it does not get revenue from advertising that would increase with higher viewership. But with an ad-supported affiliate, the more viewers (for the same, fixed cost content) the higher the return. Now, with the iPlayer service, BBC Worldwide can increase revenue–again with already existing programming–at low marginal cost.
The second reason this is a natural development is that the BBC already has an excellent feel for demand through its existing website. It knows where the viewers are by country and even by region. This eliminates the FUD factor–fear, uncertainty and doubt–that truly new media businesses face on day one.
A third factor is its adoption of the “Freemium” model, which has been a successful business model on the Internet. The freemium model involves giving something away for free (online back-up services may offer 5 gb of storage, a photo sharing service a modest amount of storage) but then offers a premium level with benefits that might be desired for some fraction of total users. Given the low marginal cost of serving additional users, most of that revenue flows to the bottom line.
BBC.com has reported it has 50 million users monthly outside the UK. If just 1% of those downloaded the Global iPlayer and subscribe to a service at £6 /month, that would be £36 million annually. Many millions more would limit themselves to the free content, which generates advertising revenue. Thus the BBC has a new way to monetize content that is already in the can.
A fourth, less tangible, plus is that all those UK households that have been funding the programming and news so popular around the world, will have another source of subsidy.
The downsides are twofold. Firstly, perhaps fewer than 1% will subscribe at something near that price. It’s hard to know how price elastic such a subscription is. But different price schemes can be tested in different markets to find the best combination of price and number of subscribers.
A second is the trend for wireless providers to meter broadband data. The iPlayer has wisely addressed this by allowing for iPads to download programs from a Wi-Fi connection even when nominally at sleep. But it does mean that spontaneously watching video on the go (from the BBC, Hulu or any other service) is going to be severely curtailed, upsetting many business plans.
I have no idea what measure BBC Worldwide has set to determine “success” of the iPlayer. But on the narrow issue of Global iPlayer, with development costs relatively modest, marketing costs likewise moderated by the well known BBC brand and built-in audience, its hard to resist putting the Global iPlayer out there. Indeed, a no-brainer.