When ABC introduced a bold plan to offer free streaming video of its most popular shows with only minimal commercials, the network was entering uncharted waters (and we all know what happens when you swim in uncharted waters). The questions were legion: would people want to watch Alias on their PCs? Would the streams cannibalize television viewership? Could ABC make any money with only four commercials per episode?
Well, the official results are in, and it looks like ABC has knocked one out of the park. In its first month of operation, the new service offered more than 11 million unique streams. Perhaps that doesn’t sound like much, but compare it with Disney’s (ABC’s parent company) iTunes offerings. For the last nine months, Disney had made most of the same shows available through iTunes for US$1.99 (though these are commercial-free). In that period of time, Disney sold 6 million downloads—nothing to sneeze at, certainly, but nothing close to 11 million per month.
Which approach makes Disney more money? It’s impossible to say without seeing the numbers, but consider some basic math. iTunes pulled in US$12 million from the sale of all those shows, but Disney received only a portion of that money. For the streaming service to pull in the same amount of revenue over the same time period (assuming that it holds constant at 11 million viewers a month), each commercial could be billed at only three cents per viewer. Because Disney actually gets less than $12 million, the real number would actually be less than this. The point is that it wouldn’t be particularly hard for Disney to make at least as much revenue with the streaming model, and consumers seem to like it.
Advertisers should like it too. It turns out that advertising recall was much higher among the streaming video viewers than it was for television viewers of the same shows. That could well be because the streaming shows only feature four unskippable commercials an episode, meaning that viewers are paying more attention to the screen (each commercial is only thrity seconds, so there are no multiminute breaks that encourage you to look away, mute the sound, go to the bathroom, or grab a snack).
So does this mark the beginning of the end for broadcast television as we know it? Not exactly. ABC found that the streaming service did not cannibalize television viewership of the shows, probably because people still prefer to watch video on their televisions instead of their PCs. The service makes it simple for people to catch up on episodes that they may have missed, however, or for curious viewers to check out a few minutes of the show to see if it’s to their liking. The strategy seems to have plenty of upsides for the network, and we can only hope it becomes widely imitated.