And when you let newbies run your business.
Music was the canary in the coal mine for digital disruption. Not that anybody paid attention to what happened. The music business is seen as a poor stepsister run by street hustlers purveying substandard content. Everybody forgets that the Warner Music Group's profits built the Warner cable system, everybody forgets that music used to make more money than movies, Richard Parsons has never been held accountable for blowing out Warner Music at a rock bottom price, when it rose in value not long thereafter, and is still rising in value. That's corporate owners, they play for the short term, not the long term. As for the music business, it's doing quite fine, thank you. Turns out there was a lot more money in concert tickets than previously thought, prices have gone through the roof and customers have paid them. And more opportunities to partner with third party companies. As for recorded music revenues, they went up when rights holders stopped trying to bring back the past and admitted we live in a new era, and that the public wants on demand and that streaming satisfies this. Sure, recorded music revenues haven't returned to their pre-internet level yet, then again, today recorded music revenues are a smaller piece of the pie than ever. Furthermore, music was in the right place at the right time when it turned out the younger generations were more interested in experiences than acquiring goods.
Never underestimate a founder. Steve Jobs came back and revitalized Apple and Reed Hastings pivoted Netflix from DVD by mail to streaming and created a monolith, one that traditional outlets sold to and derided at the same time and then decided they must compete with.
Credit Disney, they came out with a rock bottom price. They own modern movies, albeit superheroes, and they own children's television, and they shocked the sphere by coming out with a product for $6.99 a month. That's less than Netflix. It's a shot across the bow. They're here to compete, and they're going to be in the marketplace in two weeks.
And then there's Apple. It's giving away its TV streaming service for free to people who buy its products. As for others...it'll be $4.99. If Apple has a hit show, you can rationalize that amount, it's certainly less than a movie. It's barely more than a latte.
But HBO Max? Demonstrating its hubris, the price is gonna be $14.99, when the service launches in May. Ever hear of a first mover advantage?
One thing is for sure, at this late date the entertainment world still doesn't understand the lessons of tech, wherein you give it away for free, grow your fanbase and then charge and then raise the price. Audience is key, audience is everything. And also-rans have a hard time generating mass. Try to compete with Facebook lately? How about Google? Even Microsoft couldn't put a dent in Google search.
But HBO/AT&T can't piss off its cable partners.
This is just like the record labels saying they couldn't piss off their retail partners, those selling CDs who either went out of business or threw the labels under the bus. There is no more Tower Records. As for Best Buy? It didn't mind taking back all that floor space to hawk other products.
You never protect your legacy customers, where are they gonna go?
Out of business!
The biggest threat to cable systems is not channel pricing, it's not even streaming services, it's 5G. I can't wait to get rid of my cable provider. They charge a car payment for service and if you want to get rid of TV they just up the price of internet. It's kinda like the record labels at the turn of the century. People were so pissed about one good track on an overpriced CD that they didn't think twice about file-trading, acquiring MP3s. I'd love to see Spectrum go out of business.
As for AT&T...
Acquiring DirectTV? In an era of internet supremacy? That deal is one of the worst of all time. While they're at it, why don't they invest in diesel cars. If something is going in the wrong direction, you buy it at a rock bottom price, not a premium. But that's what happens when wankers with no history, no understanding of another business, dive in, ultimately to their detriment.
We saw this movie already in music. With Andrew Lack. Yup, he came from television, he came from news, he must know more than the idiots in music. He instituted the rootkit and decimated the credibility of Sony Music, and then was blown out and returned to news. What does John Stankey know about entertainment...NOTHING!
This is what happens when you get the consulting companies involved, the bean counters, the accountants. They run on numbers, not instinct. And believe me, entertainment is about instinct. There are no numbers that will tell you what's a hit. Furthermore, if you're lucky enough to have one, you need relationships, honed over years, to make it one in the marketplace.
Of course AT&T would lose money if it lowered the price of HBO to cable systems. But it would be building towards the future, when cable systems die! And what is a cable system gonna do, keep HBO offline? Then customers will just sign up for AT&T's streaming product! That's right, AT&T doesn't even have to lower the price to cable systems, they have nowhere to go! Did labels lower the price of CDs to retailers when people were stealing their product willy-nilly online? Of course not!
Everybody is not going to subscribe to every streaming service, no way. Right now I refuse to sign up for Hulu. I'm paying Spectrum for all the cable channels, I've got Netflix, Amazon Prime... It's not like I don't have enough programming, I feel insulted, ripped-off.
This is another thing purveyors of visual content don't understand. Streaming music sites have everything. Why can't there be the same offering in TV? They're balkanizing the product to their detriment. Not to mention that those with little new product, like HBO Max, will experience churn...i.e. viewers will sign up and sign off based on hits. If you've got everything in one place, churn is reduced.
Kinda like it used to be on cable. If you wanted the product, there was nowhere else to go.
But now there are a ton of places to go.
Someone should roll up all these streaming TV channels for one low price. That's what I want. Charge me $39.99 and I get everything, today and forevermore. Sure, you can raise the price, but not right away. Spotify is still growing its audience, now is not the time to alienate customers. When they're hooked and have no other options, that's when you stick it to them.
Netflix has first mover advantage. It has a plethora of new product. If you think people are going to disconnect because of Disney Plus and HBO Max, you're wrong. Those two outlets have to convince customers to add their services, forcing viewers to make an economic choice. Do I need two cars? How many pairs of skis do I need? Am I really gonna feel left out if I don't have your service, in a world where we're all watching different product anyway, where ratings for shows are lower than ever, where the only club is in your house, in a Tower of Babel society.
You don't price based on Excel, you price on gut.
Customers no longer expect new products to be expensive with kinks to be worked out, they expect it to be cheap and flawless, with the price rising when the market is stabilized.
The road is littered with legacy companies bitching their cheese has been moved. The key is not to placate them, but to put them out of business. And to survive, first you need eyeballs. In a world of cacophony, where there are so many options, that is difficult to do.
As for HBO Max's launch, they couldn't even get that right.
Apple launches to the public, via its keynotes. The public pays, not the scribes. Furthermore, the scribes mean less than ever before. Sure, it's a business story, and the investors are eager for information, but this is the same press that went along with WeWork and... Facebook stock went down before it went up, the street is clueless when it comes to the value of a new business, the key is customers. And AT&T/HBO Max left them out of the equation, in an egalitarian society where the hoi polloi believe they're equal to the titans.
I'm not saying that HBO Max will be a complete failure. But I am saying good luck reaching your projections, which come out of thin air anyway. Steve Jobs had no idea the iTunes Store would be a runaway success, neither did his suppliers, the labels. Predicting the future on a new product is like...making it up. Yup, that's what they're doing, making it up there is no data that can establish the success of HBO Max.
But everybody prints the story and moves on to the next.
But not me!
And not the customers.
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