The present and future of post production business and technology | Philip Hodgetts

Archive for July 19th, 2010

Yesterday’s post about $10 being the “magical figure” for video-on-the-web from prime sources, and I basically said that there’s no way I’d pay for a service that included advertising. I hate advertising: it’s intrusive and about 99.9976% irrelevant to my needs or interests.

I also hate advertising for another reason: it’s an economic intrusion on my life. It costs me far, far more than the benefit that Hulu – or a network – gets from advertising even though they’re charging more than they would normally get from advertising.

Here’s why. Typically a major network TV show will garner 25-65c per viewer per show. Very occasionally a top-rating, network-leading show might crack 85c per viewer per show.

Now, an “hour” long TV is is 42 – 44 minutes, not 60. The other 16-18 minutes are advertising. My time to watch those ads has a finite value and it’s not an equitable one at all.

Hulu does not have anywhere near the ad load of a Network but there’s less inventory so the same ads keep repeating in a very annoying fashion. Let’s say that there are 5 x 20 second spots in each 45 minute show. At best Hulu will be getting 65c from those five ads, more likely they’ll be getting a fraction of that, but let’s be generous.

At my charge-out hourly rate, that 2.5 minutes costs me $6.25!!! At my nominal salary rather than charge-out rate that’s still $2.79!! An average plumber would have a $3.33 opportunity cost from the advertising!

So, Hulu Plus wants to charge me $10 a month and then cost me $2.79 for every show to cover my attention to the show. Every single show I watch. Since we watch very little TV, way under 2 hours a day, that’s an additional (using the extremely generous 65c per hour show figure) $78 in revenue to Hulu Plus, although given the size of Hulu’s audience I doubt they get even 20c per viewer per hour show making that closer to $24 in advertising revenue.

But that time has cost me $334.80 for the month in attention.

And that, Hulu, is why you can’t have it both ways.

And before you all start in the comments, watching any TV is an opportunity cost. I choose to do that but I choose not to watch advertising because watching the advertising adds an additional $335 in opportunity cost to watch the advertising.

The cost to me is 4.3 to 16.5 times higher than the benefit to Hulu. I guess I’ve just convinced myself that a Hulu-like service, that I can watch on my TV and covers all programming ever made, will be worth $20 a month to me. Without advertising. With advertising it’s just too expensive.

PS, the numbers supporting advertising still don’t make sense at even more modest salaries. AT $20 an hour, the five Hulu ads still “cost” 83c up against a maximum revenue at Hulu of 65c (and more likely 20c). Monthly opportunity cost at $20 an hour is $59.40 for Hulu’s $79 down to $24 in revenue.



New technology allows users to “feel” 3D images.

New technology allows users to literally “feel” 3D images

Quite possibly the early days of the Star Trek ‘holodeck’:

The key piece of technology is a special touch sensor that emits feedback to the user’s hand and is able to manipulate it into feeling like the actual object that is being displayed. The 3D images themselves, though, can be projected on something as ordinary as a Samsung 3D TV.

It’s still a long way from visible light beings that have solid form, but I imagine the sensation is more real – even with goggles – than regular 3D.

Still, I have to contemplate the thought that the most likely initial use of this technology will be for more baser pursuits.

“Pay what you want” benefits companies, consumers, charities

When pay nothing is an option, there will be a group of people who will pay nothing, but like Radiohead found, the total revenue from pay-what-you-want can be (is always?) higher. This article is interesting because they tried a number of strategies that took average profit per person from 6-7c with the normal fixed price option, up to 20c per person.

According to the authors, the “pay what you want” strategy works because it allows companies to chare social responsibility with consumers. When buyers are able to set prices in a way that directly shows their support for a cause, everybody wins.

July 2010
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