I want to perform a small thought experiment, so follow me…
What if instead of letting you purchase individual items at Target, you were forced to buy a level of membership for a certain amount of money per month, and with that you got a certain specific set of items.
For instance, the basic membership say was $50 a month, and with that you could get 4 gallons of milk, a 4 pack of toilet paper, 4 shirts any size, 1 pair of pants any size, a set of dumbbells, a book, fishing line, a bag of charcoal, etc.
For a larger membership of $70 you also would get a few pieces of sporting equipment, a soccer ball, a yoga video, etc.
And of course some premium options for $10 each like electronics that let you get a Bluray and a Playstation Game..
Perhaps you really want the Bluray movies, and want to occasionally buy sporting equipment, so you end up paying $80 a month to target. But you don’t drink milk, or fish, and you have a gas grill. Every month though you’re paying for milk, and tackle, and charcoal whether you want it or not.
(and for the purposes of this experiment you can’t just take the charcoal and resell it, you’d have to use what you buy yourself, no reselling)
How many people would walk into Target and sign up for an $80 membership if this were the case? How many people would leave and go somewhere they could just buy what they want?
Now what if people said, “Hey Target, can’t we just buy what we want?” and Target replied, “No, see the only way we can provide such a wide variety of items to choose from is by making these deals with manufacturers. For instance, if we want to buy T-shirts from GloboIndustrial they won’t sell them to us unless we also carry their pants, their fishing tackle, and their plastic storage containers. So either we don’t have T-shirts we can sell, or we have to find a way to pay for all these other products that most people don’t want. Oh sure some people want fishing tackle, just not enough to pay for itself. GloboIndustrial doesn’t care though, they just want their products in as many stores as possible.”
Maybe you’d even have a modicum of compassion for Target, as they’re in a position where they have a hard time delivering the products people want, without being forced into weird business models like this subscription pricing structure.
I think a couple things should be obvious at this point. First, this is just not very good use of the free market. People want one product, but they’re forced to purchase 9 ones they don’t want for every one they do. Second, I’m not talking about Target, I’m talking about cable television providers.
The difference now, is that more and more people are abandoning cable television at an ever increasing rate.
If you wanted to buy milk, and now you could, without being forced to buy 9 other products you didn’t want, why would you still hold onto that Target membership? With a few exceptions (live local sports for instance) most people now are capable of watching their shows, and paying for them legally, through various means. Whether through free online streaming services like Hulu, or paid services like Hulu Plus, Netflix, or buying the episodes outright through Apple iTunes.
What will this eventually mean? I’m not sure. I’m willing to bet that the cable companies won’t take this lying down, but how will they ultimately react is hard to say. Comcast seems to be moving towards their own content production. One thing the companies don’t want to be is a “dumb pipe” utility. And now with Net Neutrality becoming more and more a thing of the past, what will that mean for other services? If you’re on Cable Company X will you be forced to use their streaming services which you are locked into paying even more money for?
My gut says it’s going to get worse before it gets better, even if you’ve already “cut the cord”.