2min snip

Plain English with Derek Thompson cover image

How Hollywood Drove Its Business Model Off a Cliff

Plain English with Derek Thompson

NOTE

Legacy Companies' Misconception on Consumer Demand for Individual Apps

Legacy companies needed to adapt to the digital era by licensing their content to Netflix and creating TV everywhere apps. However, having multiple apps became cumbersome for consumers who wanted everything in one place like Netflix offers. The misconception was that consumers would want individual apps for each company's content, but in reality, they prefer a consolidated platform. This is similar to the concept of pay TV, where consumers were willing to pay for a bundled package even if they didn't want every single channel. It's comparable to the newspaper model, where readers would subscribe for access to specific sections.

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Speaker 1
And at the same time, they need to kind of figure out how to get into digital. So they do two things. They start licensing to Netflix, which is problem number one, but it was really strong for their revenues. They licensed Netflix. Two, kind of leaned into digital with these, you know, TV anywhere apps, right? TV everywhere. But the problem with TV everywhere apps was that you made it much more cumbersome for much more problematic for the actual consumer. If they wanted to watch ABC, they had to get the ABC everywhere app, but they wanted to watch CBS. So now you're saying we have to almost like Pokemon, you have to collect all these different apps and you have to open all these different apps. The beauty of Netflix is that Netflix said you want to watch Friends or you want to watch high prestige HBO, like programming, like House of Cards, you're going to get everything you need in one app over your internet, on your phone, whatever it might be on your iPad. Remember when the iPad app for Netflix was a big launch, all within one place for a very cheap fee. And so I think the misconception that a lot of these legacy companies took was they looked at that and said, therefore, there was strong demand for our content as well on our own individual apps. But they didn't actually learn from the TV everywhere, TV anywhere situation, which was consumers don't want a lot of apps. They want everything in one place and they're willing to kind of pay for it. This was the beauty of pay TV. They didn't necessarily want Bravo or they didn't necessarily want ESPN, but they wanted enough of it that they were willing to say, yeah, okay, we'll give you $200. If this sounds familiar, it's because it's comparable to newspapers, right? This idea of like, I don't really want sports, but I am really interested in business. So I'm going to pay for the entire New York Times bundle in order to get access to it.

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