Columbia Prof: To Survive, Broadcast TV Must Disrupt Its Own Business Model

First went the publishing industry. Now, it’s broadcast television watching its profits sink as the internet and the rise of cable TV eat away at its business model.

So, what’s a CBS or NBC or ABC to do? Disrupt its own model, argues Columbia Business School professor Rita Gunther McGrath.

In a post on the Harvard Business Review, she writes:

The basic problem is that the constraints which broadcasters have historically used to protect their profits have now been relaxed — or have even disappeared. Indeed, the New York Times recently noted that the profit model for broadcasters is under assault, citing “cracks in the citadel of TV profits.” The issue is that when you sell things in bundles you can charge for a whole bunch of things nobody really wants — customers will pay for the entire bundle in order to get the one or two things they actually want. This worked for years in cable television — give customers hundreds of channels they won’t watch but will pay for anyway in order to obtain ESPN or HBO.

And in the face of competition over re-transmission rights from startups like Barry Diller’s Aereo — the subject of heated legal wrangling by the major broadcasters — the TV giants must break down the dam that’s already springing leaks.

Aereo’s argument, which the courts have so far supported, is that those signals are free for the taking and that all they are doing is offering a sort of souped up set of rabbit ears to their customers. To understand just how disruptive this is, consider one of the more dramatic moments of the conference when News Corp.’s president, Chase Carey, very calmly said that if the networks lose the right to charge re-transmission fees, they would consider abandoning the business model of sending content over the airwaves and instead adopt a pay-only model.

The barbarians are at the gates, so to speak. Besides Aereo, consumers and tech-watchers have long awaited a major disruption from Apple.

Do you think the broadcasters can save themselves from themselves? Tell us in the comments below.

Image: [VentureBeat]

Publish date: April 26, 2013 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT