Ready for a seismic shift in the cable TV business model? And I'm not talking about the cable industry unbundling, nor the cords that are getting cut (or getting "skinny," in Verizon FIOS' case), nor non-linear TV options like Netflix becoming the rule, and not even the cable stations like CBS and HBO going direct to consumer (see Nelson Granados' excellent article on HBO going direct here). I'm talking about something much bigger and more profound. A shift from advertising products during TV shows to trading actual sales of products for access to TV shows.
I'm talking about a paradigm-shifting opportunity that will empower consumers through their purchase choices, underwrite content development for the cable channels, and increase sales for advertisers without any advertising.
Curious?
Unbundled channels will need a new business model.
All this cable channel unbundling looks like a positive at first. The big cable monopolies everyone loves to hate are getting theirs. But there was efficiency in all those channels we didn't watch. Paying for ESPN directly might now cost $40 per month, according to some analysts. But when it's part of a cable bundle of channels it's more like $6 per month.
So the question is, how will consumers pay for individual channels in an unbundled world? Yes, they can pay for only what they want, but what they want is going to cost exponentially more. So will it really save any money in the long run? Probably not.
We need a new business model. One that reinvents the advertising model, combines it with the wonders of big data, and, most importantly, encourages an intellectual realization that marketing does not have to be a passive game of influencing consumers and hoping it works.
It's time to tie entertainment not to advertising dollars, but to actual product purchases.
Buy enough Budweiser beer and CBS is yours free.
We all buy groceries, right? We make decisions as to which brands to buy based on our personal preferences, which are shaped by all kinds of passive marketing. But it's an odds game, where the theory holds that the more brands advertise a product, the more likely people will buy that product.
Why not tie the content people want to the purchases of other branded products and let consumers effectively "earn" their TV content?
CBS, for example (though it could be HBO, Fox, ESPN, or any other cable channel), pre-negotiates offers with a list of hundreds of brands across a broad array of grocery store aisles - beer, wine, mayonnaise, breads, hotdogs, milk, anything. One brand is chosen by CBS per category (exclusivity). And then CBS tells consumers if they agree to spend, say, $100 per month on any of the brands on the CBS List, they get CBS streamed to any device free.
CBS gets a cut of sales to underwrite its content. The brands on the CBS List get a spike in sales. And consumers get access to CBS free and without a cable company simply by buying the categories of groceries they were going to buy anyway, but now buying specific brands on the corresponding cable channel's list.
Big data makes it possible.
The CBS app could now include a shopping-list feature that allows you to build your weekly list using the CBS brands. Of course, no one would have to buy all the brands, just the ones they want, so long as the total adds up to a certain threshold of spending per month (in my example above, $100, but that number would have to get worked out by people with sharper pencils than mine).
Further, it can be easy and seamless at retail to keep score once a customer signs up for the program. The customer at Stop 'N Shop, say, opts into the system before going to the store, so his or her Stop 'N Shop purchases can be logged against the CBS requirements. It's just a data integration play between CBS and Stop 'N Shop.
Once the threshold of spending is reached, the customer is notified, and that month's CBS fee is waived. If a customer fails to make the threshold of spending, that's ok too. Whatever percentage of the spending threshold is reached is the amount of the discount on CBS that month. The customer is billed for the rest.
But is every channel going to have a separate deal with its customers? Probably not. Does this idea work only with groceries? Absolutely not. And here's where it gets interesting.
Imagine one mechanism across all cable channels.
I could see a loyalty company, or credit card company expanding their current financial infrastructure to take this idea on. They could create the customer interface, the database management, the accounting, and the transactional interface at retail.
Customers would be empowered to "scheme" with their purchases each month depending on what they want to watch.
If a consumer is in the market for new tires, he can see which tire brands are associated with which TV content. Or, if the NFL is important to a consumer, he or she may look at the brands the network carrying that the NFL has on its list to choose which tire brands to buy.
And this idea can scale all the way up. I open a new bank account with Wells Fargo and, depending on my transactions, maybe Netflix will be free for a year.
Incidentally, cable channels could experiment by unbundling themselves and offering specific shows for certain purchases on their respective "show list." And grocery stores could merchandise "HBO Packages" of products for those browsing in store.
Big data can not only make this idea happen, it can make this idea easy.
We'll still need advertising.
Don't get me wrong, this idea is not a replacement for advertising. Marketers will still need to influence people to prefer products, particularly when they are not on a certain popular cable company's "list." And everyone will still need to build awareness of new products.
But an idea like this could empower consumers to strategically leverage their purchasing choices in one area (groceries, services, etc.) with the reward of underwriting their monthly entertainment. And at the same time provide cable companies the financial support to keep making great content without the need of the cable-company middle man.
Getting on these cable-channel lists will become the new "up fronts" for brands, only instead of negotiating media prices, we're negotiating fees to be on the right cable lists; "right" from both demographic and reach standpoints. The money saved in advertising (not all but some) would go towards these list fees. And perhaps product placement on the cable shows could be part of the deal.
It's the perfect storm, really. Cable companies unbundling, big data maturing, consumers getting more savvy, product marketers looking for new ways to increase sales, retailers looking for differentiation.
Or is it?
Now it's your turn. Poke holes in this idea in the comments section below. Seriously, bring it on. Let's see where this goes.
Postscript: I'd like to acknowledge the help of my retail expert and friend, Chris Harper, for helping me think this idea through.
