Internet TV: Business Models and Program Content

Internet technology should eventually provide important improvements over established media not only in the efficiency of broadband delivery, and of particular importance, in the efficiency of business models that can be used to collect money for that programming. I identify five economic characteristics of Internet technology that should lead to these greater efficiencies: (1) lower delivery costs and reduced capacity constraints, (2) more efficient interactivity, (3) more efficient advertising and sponsorship, (4) more efficient direct pricing and bundling, and (5) lower costs of copying and sharing. The most successful Internet TV business models are likely to involve syndication to or from other media, and also international distribution. In the broader context, Internet TV is another syndication outlet by which program suppliers can segment their overall markets and thus support higher production investments. Many innovative and more sharply focused programs will surely prosper on Internet TV, but the attractiveness to audiences of high production value programming will tend to advantage broad appeal programming, such as Hollywood movies. Historical evidence about the performance of cable television and videocassettes is presented to support these points.