The challenges to design a business model around a new TV product and service were enormous. Especially because I was not dealing with the conventional balance of customer desirability, technology and own value creation to make it sustainable. On the center of the new value proposition was a whole new way for people to obtain and enjoy content, which can only be made possible with the involvement of the major content creators who, by the way, already have established profitable businesses.
Put on air
NO filling up
a full schedule with
content on air 24/7
LESS or NO
Today, content creators face many constraints when distributing and monetizing upon their work via cable tv services. The channel structure impose too much costs for operation, like the maintainance of satellite transmissions, expensive equipments and staff devoted exclusively to everything related to distributing content through that means. Addicionally, there's the need to fill up a full tv schedule with contents on air 24/7 which is expensive since it requires too many of them and end up forcing networks to license a great percentage of what they offer from third party creators, as producing everything would skyrocket their cost structure.
On the proposed service, the responsibility to fill the stations with content is shared among all distributors and further minimized by the freedom given to users to pick a previously posted content. In practice, they wouldn’t run out of options for what to watch if there’s a time nothing is on air at a certain station. This scenario could free distributors from the obligation of offering more content than what they have produced or are able to and extinguish the need to license from third-party creators.
*Graphic built on estimacies only for illustrative purpose
As the service doesn’t require from distributors the high expenses of maintaining a channel, they could operate under higher margins. With the no existense of individual tv schedules or need to have a content on air 24/7, the signature of many distributors would carry only production costs, since original content is what their value proposition would exclusively be made of. With no costs associated to third-party content licensing whatsoever.
Despite that, the signature price, which distributors would then establish independently, wouldn’t necessarily get down. For customers, value, in this context, is not only determined by how great is the amount of content they are offered to, but how better they are able to enjoy what they have available. On cable tv, too much content is given away every day, but the restrictions imposed by its channel-based system prevent customers from enjoying them all. It’s a waste!
Most cable tv networks in the US today operate with earnings of under one dollar for each cable tv owner signing for their content. The low price is the reflection of the restrictions imposed by the system for content distribution that harm the networks' potential to offer customer greater value. Each channel is limited to offering one content at a time and the only way to do better is to create a whole new channel. This low value offered by each channel is the reason many cable networks to go after advertising revenues to sustain their business and the cable companies relentless search to offer more and more channels on their package offers.
By getting rid of the limited current channel system, content distributors could be empowered to deliver more meaningful value for customers and hold greater importance individually to their entertainment experience. The freedom given to users to choose any content ever aired without the time restriction absorbs the need for too many distributors to give customers options, enabling a better environment for business inside the service.
To overcome such limitation, tv package offers are led to go for hundreds of channels
With the significance and value of each channel down, cable companies end up paying too little per subscription!
...then permiting to reduce the need for too many of them...
...and consequently confering each one greater value and a deserved higher payment for individual signature.
“Fewer networks means better distribution of revenues and greater earnings for each content creator.”
The commoditized nature of current TV sets have led companies to try to revive their products by adding features borrowed from the smartphone industry. They also keep taking the easier path when trying to make TV better with incremental technologies such as 3D image or 4K resolution. No great effort though has either been given to make those technologies useful for people or to solve the television major deficiencies.
By designing a proposition where the value is on the whole experience and not founded on the presence of sophisticated tech features, the costs for the product could be kept down, extending its profit margins. From that, most of the addicional investments would be reserved to the development and maintainance of a service that’s a second revenue stream in itself and not a mean to singularly sustain product sales.
“Most of the addicional costs involves the development and maintanance of a service that is a second revenue stream in itself and not only a mean to sustain product sales.”
The impact of the service on business perfomance could be huge. As the TV set was designed from the beginning to work seamlessly alongside the service for a better customer experience, product sale revenues would very likely come accompanied by constant and steady earnings from content signatures. Considering that the upgrade cycle of a TV set isn't short and existing customers would hardly adopt a new version of it as soon as it comes out every one or two years, that’s a smarter and more efficient way to increase revenues per customer. Maintaining profits from existing users along their whole period of use, instead of waiting five or six years for each product upgrade. Finally, the service could also have a fundamental role on keeping customers loyal to the product when coming to change it. Largely because of the better integrated ecosystem it sets the TV to be part of.
I hope you’ve ejoyed it! It’s been a great journey and it’s increadible how much we learn accompanied only by the enthusiasm to create amazing things.
I’m now looking for an opportunity to keep envisioning and designing all sorts of great products, services and business.
Now focused on designing amazing products and experiences at Huge in Rio.