Market Demand and Content Aggregation

In the world of TV and media, content rules all right now. However, the market is sensitive to the price. In a recent article by FierceOnlineVideo.com, they claimed that cord cutters would soon be confronted with a choice between aggregators like Hulu and Netflix or sticking with pay-TV subscription. The market preferences and demographics are changing. Pricing and content will be the biggest challenges moving forward.
The article also took a different consumer group into consideration, the people who have never had traditional pay-TV subscriptions.

"Inevitability consumers will tell content creators what they want and the content  guys will have to respond. There's a whole upcoming generation of 'cord nevers' that the industry has to consider."

I'm interested in the question of how the market demand for content and price will shift. I heard constant complaints about how people don't watch most of the channels that they are paying for on their pay-TV service, but still continue to do it. On the converse, an a-la carte type of option needs to be priced at a point not exceeding what people are paying for their TV service right now. Live programming will still need to be an option in the future, but a model where consumers can choose the content they watch will have to be priced carefully. 

The pricing model for a-la carte programming doesn't have much precedent. Consumers and media companies have no idea where a price will fall. The cable companies have an idea of how much a viewer worth to them, but knowing how much each consumer is willing to pay for each show is a completely different paradigm. Consumers themselves have little idea how much they should be willing to pay to watch certain content because it's either free or a flat fee they are paying for the whole TV service. What's the price point and how will consumers react to that? I think that's the question facing aggregators and TV Networks. 

The article states that the customer base that has never had a pay-TV service is growing, and they will be paying customers soon, it's difficult to predict their preferences and their propensity to pay. FierceOnlineVideo.com goes onto say: 

"Even though cord nevers are growing--"[n]o one brings a TV to college anymore," Feher said--"in the short term there will be a lot more pressure on aggregators like Netflix and Hulu, and the consumer will feel that in less content or higher prices."

It's going to be tough to find out how much the group of "cord nevers" are going to want to pay when they are customers. They've been accustomed to having access to free online content, or at least cheap content. If the video aggregators don't find the right mix of content and price point, it's going to be difficult to disrupt the pay-TV market. A survey that was cited by BGR.com found that American Cable Companies are among the most disliked companies in the US. The growing frustration would seem like it would be easier for consumers to join the aggregate programmers. I'm confident that traditional Cable companies will not do business in the way they are doing now, and that they will be forced to partner up with the aggregators to help provide rich content to consumers. On the same token, it is hard for me to fathom a world in which people are paying piece meal for every piece of media they want access to. There will have to be an interesting fusion between the two. The market is changing rapidly, and it's the Hulu and Netflix's of the world that have to keep up, not the other way around. 

Shawn

Source: http://www.fierceonlinevideo.com/story/content-aggregation-could-reduce-cord-cutting-advantages-short-term/2013-04-03

http://bgr.com/2013/04/01/cable-cord-cutting-analysis-408642/