Scott Burns: With paid content, end of TV could be near

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The blogosphere erupted when Google announced Chromecast. The new $35 device for putting the Internet on our television sets brought new predictions of doom for cable TV. Some of the early hyperventilators treated it as the End of TV as We Now Know It. Competing gizmos like Roku and Apple TV were also given short life expectancies.

In fact, such discussions are sideshows. Gizmos are secondary to the two big issues we face with media content: choices and time.

Consider the Burns household. When it comes to TV, we find ourselves in what psychologists call a “double avoidance” situation. Instead of being in a tunnel facing a man with a whip at one end and a rabid dog at the other, we face scrolling through the many channels of cable TV that are unworthy of our time. The alternative is going to Netflix and scrolling through the multitude of movies we would regret seeing.

Don’t get me wrong. I’m not pulling a highbrow thing here. There’s plenty of good stuff on TV. There’s something for everybody, even for those very weird people none of us would want to meet in real life.

No, it’s the needle-in-a-haystack problem. The haystack keeps getting bigger and the needle keeps getting harder to find. Or maybe it’s better described as the optimistic kid problem — you know, the kid who gets a box of manure for Christmas and paws through it gleefully, shouting, “Surely, with all this manure, there’s got to be a pony!”

The basic problem here is what futurist Alvin Toffler called “overchoice” — the dilemma of having an overwhelming number of alternatives and choices, of living in a world where every choice menu is as large as the menu at Denny’s or as endless as the number of mutual fund choices in some 401(k) plans.

Again, don’t get me wrong. I’m not about to suggest a hair-shirt future. There are times when I am thrilled with the maniacally grand cornucopia of cheeses at Whole Foods. There are other times, in other places, when I would just like to order a simple hamburger rather than sort through eight objects that were hamburgers before their description got longer than a paragraph.

Honk if you’ve ever felt this way.

Basically, we’re overwhelmed by a proliferation of minor decisions. It’s a burden, but few will volunteer to return to an economy so poor there are few choices. Whether we watch cable, satellite or Internet content, we’ve all got a problem until something comes along to help us reduce the menu to something we can live with.

The second issue is time. Not time per se, but the value of our time. When we select media, we make economic choices. We can buy movies at different prices on cable or the Apple Store. We can watch movies for free on Netflix or Amazon Prime. We can watch network television shows on cable for “free.”

In fact, nothing is free. To see an hour of media content on cable, we have to watch 30 minutes of advertisements. Increasingly, that’s a very high price to pay, particularly after viewing an ad for the eighth time in a single evening. I don’t care how cute and clever they are, no ad merits viewing so many times that it is involuntarily committed to memory, like lines from the Rocky Horror Picture Show.

The economics here are simple. With the gross average hourly earnings of American workers now running at $20, every hour of content we see “costs” a typical viewer a half-hour worth $10. That makes Netflix, at $7.99 a month, an incredible bargain. If one person in a household watches for less than an hour a month, it’s cheaper than the imputed value of time lost to watching advertising.

Here’s another example. On the iTunes store you can rent 42, the story of Jackie Robinson, for $4.99. It runs two hours and eight minutes, which means you’ll have to watch one hour and four minutes of advertising to see it on network television, when it gets there. So if you make $20 an hour, it’s a good buy even if you watch it alone. Watch it with another person, and it’s twice the bargain.

Television isn’t dead, but as more and more people move to paid content, traditional television advertising will die.

Trust me, we’ll get over it.

SCOTT BURNS is a principal of the Plano-based investment firm AssetBuilder Inc. His website is www.scottburns.com.— Universal Uclick


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