Last month, I wrote about how Netflix CEO Reed Hastings and Facebook CEO Mark Zuckerberg seem to share a fundamental thesis about premium video: namely that in the digital realm, it can be sustained by a single revenue stream — either advertising or subscription.
This sits in contrast to the business model of cable TV, which relies on the dual revenue stream of both monthly subscription revenue and advertising.
It’s been a big debate in the industry whether the dual-revenue model will carry over to digital. The most likely form seems to be the new “cable-lite” bundles like Sling TV, Hulu with Live TV, YouTube TV, and so on. These digital ad-supported bundles are pretty similar to traditional cable ones, but have less channels, more on-demand capabilities, and added flexibility to cancel. And they are delivered over the internet to your smart TV, phone, or laptop.
But some in the industry think the new digital video frontier will be dominated by new business models. In an interview with Variety, Peretti seems to put himself firmly in the second camp.
“I think we’re going to see the market bifurcate into two buckets,” Peretti said of longform, TV-like video.
Here’s how he described those two categories:
“One will be best represented by Netflix and HBO, and that will be subscription-based revenue models, with no advertising and premium, expensive, high-cost-per-minute content. Think ‘Game of Thrones’ or ‘House of Cards’ type stuff.
“There will be another bucket dominated by Facebook and YouTube, and a few others — we’ll see who ends up on the traditional media side being able to step into that space — that will be ad-supported media and kind of replace what broadcast TV used to be. So, massive reach. No affiliate fees. Advertising supported. And it will be lower cost per minute, but it will become more premium.”
That is a very specific vision of the future of the industry that Peretti laid out. And it has no mention of cable networks that get both subscription and ad revenue. In fact, Peretti specifically said that the ad-supported, broad-reach video companies he envisions dominating one future “bucket” will not get affiliate fees.
That is tough medicine for some TV networks. Of course, you should take anything Peretti says with a giant grain of salt, since he clearly has a huge stake in which business model rules. But still, if that world does truly come into being — the world of Hastings, Zuckerberg, and Peretti — you can bet there will be a massive culling of mediocre cable networks.
This article was originally published on Business Insider. Copyright 2017.
