Made for Internet TV

ABSTRACT:
As we explore in The Age of Boutique Everything, television is migrating to Internet delivery.  That is certainly nowhere near as controversial a statement today as it was when I first started making it in the mid-1990's.  However, the process, as exhibited by Netflix, Hulu, et. al is just starting.  We have not yet got to "Made for Internet" TV which, over time, will come to dominate the market.  We will, however, be there soon.

Based upon the research of Leta Hollingsworth and D. K. Simonton, approximately 4% of the population have a degree of sophistication in their News consumption preferences that cannot be satisfied, even with the smaller audiences enabled by cable television.'  This unfulfilled demand will  likely facilitate an Internet delivered News, commentary and analysis industry that will eventually grow to over 30 million viewers and produce revenues in excess of 10 billion 2012USD.  The market will be segmented by Cultures of Affluence.  Essentially, one's cultural values informs one as to what constitutes a relevant news story and what is likely to be considered objective coverage of the story.

The earliest entrants into the Made for Internet Market will likely be in the area of News, Analysis and commentary.  In fact Glenn Beck just introduced the first significant success, gaining over 250K subscribers to GBTV.com  It is quickly becoming a full service Internet delivered News netork.  The degree of success he is enjoying suggests that this will be a  very fast growth market.

Over time, the mainstream news and popular press will migrate to Internet delivery as well.  However, because they have markets large enough to be supported on Cable TV, they will not be creating their content exclusively for Internet delivery at the outset.  Ultimately, however, as the Income Explosion and the Cultures of Affluence change the News business, everything will end up Internet delivered.  However, that will likely take a little more time.

Entertainment television is more about good story telling and emotional validity than intellectual sophistication.  However, because the upper 5% or so will be early adopters of the Cultures of Affluence and actually do have somewhat different tastes, the market for "Made for Intnernet" sitcoms, dramedies and dramas could emerge any day and as dramatically as GBTV.com. 

Internet delivered television will emerge in one of three ways.  First, it may begin as a start-up television network similar to GBTV.com.  Second, Web Television shows could increase in length until they reach industry standard 22 or 44 minutes.  Third, Cable or broadcast shows that are cancelled due to overshooting the market often retain a relatively small but fanatically loyal followings that will gladly pay a download or streaming fee in order to continue the production of the show.  All three will, no doubt, contribute to some degree.

Made for Internet television programming produced for the intellectually and/or culturally sophisticated market has an initial advantage in that its members tend to be early adopters, Internet capable and English speakers.  The total market, although highly fragmented, may be as much as 30 million viewers.  While this market traditionally has not consumed much television, the reason is likely that the programming has not been well matched to their tastes.  We might assume that a better selection will increase consumption to 10 hours per week.

Cable Networks that produce original series, such as USA, SyFy, CW, Fox, Disney, etc., typically garner audiences of between 2.0 million and 5.0 million.  Because Internet delivered television can charge what the market will bear, rather than what advertisers are willing to pay, there is no hard bottom to the number of viewers required to support a show.  Depending upon production costs and price per episode, shows with less than 500K viewers world wide, however, could certainly be profitable.

Over time, there is evidence that the preferred format will be ten to twelve 90 minute episodes per season.  Most of these will likely be dramedies such as Royal Pains and Warehouse 13 or straight dramas such as The Closer and House.  While aggregating websites, such as Hulu, Netflix or the boutique homepages that will arise to satisfy Cultures of Affluence, will likely offer a per show streaming fee or individual episodes with embedded advertising, the market, reflecting the Income Explosion, will migrate toward season subscription downloads.  Sitcoms, while likely not offered in 90 minute episodes will probably expand in length as the 'time slot' mentality of broadcast and cable fades.
 
The primary enablers of the move to 'Made for Internet' television will be Producers, Investors, Creators, Writers and Directors of the shows, themselves.  As is the case today, many participants will likely fill several roles.  It is unclear of the shows will drive the boutique homepages, the boutique homepages will drive the shows or if they will co-evolve. 

A show with 500K viewers and a Season Subscription rate of $44.95 would have gross revenue of $22,475,000.  The marketing and delivery aggregators will take 15%, leaving $19,103,750 for the producers.  Talent, writers, director and actors, at current cost per viewer, would cost no more than $5 million  leaving $14 million for production costs and profits.  However, market forces will probably drive up talent costs and lower the profits somewhat.

30 million viewers watching 520 hours per year with 500,000 viewers per show would support about 1,700 shows.  At $44.95 per season, total industry revenue would be about 39 billion 2012USD.  Industry profits would like be about 4.0 billion 2012USD.  Average income for the 12,000 or so creatives enabled would be over 1.5 million 2012USD.  Nearly 2,000 passive investors could be supported at annual returns of 400 thousand 2012USD each.


The Future 101 is primarily an educational service.  However, it is also a portal to communities of action.  Whether a creative or just someone who thinks they can 'pick 'em' as an investor.  Subscribing to The Future 101 will provide you with potential access to this developing industry.  It is clearly a route toward early entrance into the Knowledge Class.

This Abstract is of an extended article that will be published in The Future 101 under 'The Age of Boutique Everything.'