(NOTE: This post was translated into English from Pittsburghese.) So whilst trying to watch my Beloved Pittsburg Steelers tonight, I ran into a perfect example of businesses unable to deal with the rate of change in the market and as a result leaving money on the table.
Situation: Many, many, many Americans (and folks in other nations) have “cut the cord” on cable for video-on-demand (VOD) and Live-Streaming of their favorite shows. This trend has been accelerating thanks to devices and HDTVs with built-in apps such as Netflix, Amazon Prime, NFL Live, ESPN Live, and Hulu+ and the gradual increase in bandwidth available to houses. If my numbers are anywhere near correct, we reached the Tipping Point and LiveStreaming/VOD went mainstream about 6-9 months ago.
So I go on to ESPNLive on my computer and find I can’t watch tonight’s Pre-Season Game against the Washington Redskins because I am no longer affiliated with any of the contracted cable providers. No, worries… I have technology! I fire up WatchESPN on my Verizon-locked Apple iPad 3. Nope… can’t watch the game there either. So I head over to my NFL Preseason App. Nope… because ESPN has the game on, I get the dreaded “Blackout” status. Fearing no hacking, I fire-up my encrypted proxy connected to a server far west of Washington DC and Pittsburgh only to find I am still in a Blackout zone because ESPN is carrying the show on cable providers nationwide. No Steeler Nation love for me.
So what is going on in this situation?
- NFL has licensed exclusive rights to ESPN to be the carrier of the Steelers game.
- ESPN has contracted with a limited number of cable providers exclusive rights to carry the game in order to garner advert revenues and only making live streamed viewing available to subscribers of those cable providers.
I watch the compressed version of the Carolina Panthers tragedy on the NFL Preseason Live app (with no ads but $15 subscription to the NFL for the preseason) while running on the treadmill.
- In this case… the NFL loses viewers and ESPN loses viewers.
- NFL and ESPN lose advert revenues.
- The NFL and ESPN both leave money on the table.
There are a number of possible reasons behind this. My money is on the following combination:
- Lawyers put language into licensing agreements without understanding that the rate of change in technology is such that any binding agreement lasting longer than three months is likely going to cause lost revenues.
- Content providers clinging to cognitive bias towards traditional broadcast channels because “it is a known quantity”, have reacted to the shift to narrowcasting channels and VOD.
- Content providers are still using traditional product development lifecycles instead of Agile and adaptive product development lifecycles and can’t develop viewing functionality rapidly enough to create their own direct channel marketing capability even though their viewers have been demanding it for some time (even when it wasn’t feasible).
Executives should look at this case study and realize the importance of Organizational Agility. The solution for the NFL, ESPN and/or the cable distributors is simple… change your business model, change your organizational structures, policies and procedures to embrace being able to change your business model every 6-9 months. (Yes… I just said that.) If cable distributors were savvy, they would be allowing me to buy entire cable packages, without the cable, to compete against encroaching upstarts like Hulu+ and Epix (owned by media giant Viacom). If media providers like ESPN were savvy, they would have a subscription model as an alternative to their cable distributors. If content creators and owners were savvy, they would go direct to the consumer with their own subscription or PPV models.
So how do business executives shift so quickly? Use Lean Startup in the Enterprise and Agile Product Development as organizational models, not processes. If they can’t figure this out, they should look to firms like ResultLinq Associates, LLC
to coach them through the transition.
No matter what, don’t leave money on the table.