Why Paying for What You Watch May Stabilize Content Costs

In the past week, fueled by a Wall Street Journal article involving our chief programming negotiator Terry Denson, and covered by many other media outlets, the topic of video content pricing was placed on the front burner.

Given the ever-increasing rising costs of video content fees, we’re equally focused on helping to stabilize those costs so that our customers can still enjoy video entertainment without placing too much of a squeeze on the checkbook. According to SNL Kagan, a leading industry research firm, the cost of video content fees have risen $10 per year for the past few years.

As Terry described to the Wall Street Journal, our conceptual video content pricing model would help us stop paying for customers who never actually go to particular channels because the payment structure would be based on a unique view in which one person who spends at least five minutes on a specific channel would count toward a fee we’d pay a content provider.

Our conceptual pricing model is based on actual viewership of any channel, rather than the use of Nielsen ratings as is the case today. Under the viewership model, we’re talking about a minimum viewer threshold of 5 to 10 minutes per channel. That means that if a customer viewed a channel for at least five minutes in any given day/month, the distributor of that channel is paid based on that percentage.

For example, if a customer tunes into Chanel X for a minimum of five minutes, this activates a payment for Chanel X. If 20 percent of FiOS TV viewers watch Chanel X for at least five minutes in that month, Chanel X gets a 20 percent payment.

To be clear, this discussion was born out of our recognition that something must be done to stabilize content costs.

So apart from helping tamp down rising video content costs, why should consumers care about this in the first place?

For video subscribers, this model would benefit consumers and help eliminate the waste of the current economic model while also encouraging more diverse content availability by helping to eliminate the risk to video distributors like FiOS TV. It would also put the onus on content creators (aka, the providers) to produce compelling content that would entice viewers to watch content for longer stretches of time and not just passing glances.

As with any conceptual model, conspiracy theories will emerge. We won’t cover all those here, but we do want to say that this concept seeks a creative solution to not only today’s content pricing challenges and increasing costs for consumers, but also the conundrum that involves loss-leader content being bundled with more popular content by content providers.

Bottom line: We’re a video content distributor that’s thinking outside of the box and looking for a new model that benefits both consumers and content providers, and helps monetize the investment we’ve made in our FiOS network.

We've just begun talks with small and mid-tier video content providers, and as discussions continue and we get more feedback, we’ll share additional information. Until then, we look forward to growing our FiOS TV fan base.