Saturday, November 21, 2009

Sustainable Financial Models--broadcast TV and the Internet

There is an interesting article in today's NYT ( on the slow death of broadcast tv as a business model, in favour of cable tv, where a combination of ad revenue supplemented by subscriber fees provide greater stability and much higher operating margins.

I can't help but think of the analogue of the Internet, where many companies that have found success over the last 4 years did so with an advertising based model that is now under pressure.

The Internet equivalent of cable is the freemium service. An advertising supported free, basic offering is supplemented with subscription offerings. Many of the hot young companies gaining traction are using the freemium model.

The advertising only model is in such disarray that NBC is probably being sold to Comcast. Given the famous discipline of GE, NBC's corporate parent, that is a vote that the broadcast, advertising dependent model is mortally wounded.

There are still areas where advertising dependent models work on the Net, such as blogs, where the costs of production are sufficiently low. But for applications that have to support expensive development teams, you need something more.

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