Net Neutrality and Internet TV Services

President Trump has talked about rolling back Obama-era net neutrality rules since the campaign. This would be an enormous victory for Internet service providers, many of which are also cable companies.

The purpose of net neutrality regulations was to keep the Internet open. What this means is that, under no net neutrality, cable companies are free to slow down service to whatever they want. Suppose you have Time Warner Cable. If you are like me, you realize that the service is terrible and probably overpriced. As a rational consumer, you would like to purchase a Netflix or Hulu account. Time Warner can now slow down your streaming service in order to keep you from using it.

This would be a huge victory for an industry that hasn’t had a lot to cheer for recently. As consumers are continuing to forego their cable packages in favor of more affordable options, cable companies have been clamoring for ways to retain more users. This would certainly help that cause.

Verizon has been one of the companies that have felt the sting of “cord-cutters.” To help make up for this, the company has been securing streaming rights with several television networks in order to pitch a nationwide launch of a live TV Internet service. Unlike regular cable packages that often have potentially hundreds of channels that users don’t want, the Internet service would be far more flexible in terms of being able to pick what you get.

This would be a potential game changer in the industry, especially if net neutrality rules are rolled back. Since Verizon already has a large consumer base using their home Internet service, this is an opportunity for the firm to capitalize. Besides the fact that Verizon’s service will have live TV, as opposed to just movies and television shows, they will now have the ability to slow down future competitors such as Netflix.

It will be interesting to see how live TV internet services play out in the future, regardless of what happens with net neutrality laws. Even to someone like me who has always valued the ability to watch live TV, as cable packages get more expensive and the service almost seems to get worse, switching to services like Netflix, Hulu, or Amazon are beginning to seem like “no-brainers.”

 

Sources:

https://www.bloomberg.com/news/articles/2017-03-30/verizon-said-to-be-planning-online-tv-package-for-summer-launch

https://www.wsj.com/articles/cmo-today-verizon-readying-new-tv-streaming-service-1490961171

https://www.wsj.com/articles/net-neutrality-rules-could-be-eased-under-donald-trump-some-say-1478728957

https://www.nytimes.com/2017/03/30/technology/net-neutrality.html

https://www.washingtonpost.com/news/the-switch/wp/2017/03/31/verizon-is-reportedly-planning-a-new-streaming-tv-service/?utm_term=.b040a0d13418

Is a Super Bowl Ad Really Worth it?

A 30 second commercial during the Super Bowl this year cost $5 million. There are several reasons for this lofty price tag. The first is the reach. Over 110 million people watched the Super Bowl this year. To give some perspective, the highest grossing movie of 2016, Star Wars Rogue One, sold 55 million tickets, game 7 of the NBA finals this past year garnered about 31 million viewers, and only 9 million watched the season finale of HBO’s Game of Thrones. This alone doesn’t justify the hefty cost of an ad. Networks and the NFL realize there is something different about Super Bowl commercials than regular ones: people actually watch them. Every other day of the year, people try to avoid advertisements as much as they can. However, 17.7% of adults say that advertisements are the most important part of the event, according to Prosper Insights and Analytics. The advertisements drum up conversation among viewers when they discuss their favorite ones.

When just observing data it is hard to understand how the price could be so high, and how it has exponentially grown. The cost of a 30-second ad in 2007 was 2.39 million, meaning the price has doubled in ten years. The price has gone up by about 60 percent in the past 5 years despite no significant increase in viewership or number of commercials.

Despite the unique features of a Super Bowl ad, it is still rarely “worth” it. The $5 million price tag the network charges doesn’t include the cost to make the ad or drum up publicity to make it a successful campaign. A study by Wesley R Hartmann titled “Do Superbowl Ads Affect Brand Share” found that commercials from common Super Bowl Advertisers, like soda or beer, had a “null and/or insignificant effect” on revenue. Companies realize that they’re paying millions of dollars for something that won’t help the company, so why do they do it? It is possible for companies to receive significant lifts from a Super Bowl ad. The issue is that any market share gains to be made by a company like Coors is going to be negated by another commercial from Budweiser. This presents a Prisoner’s Dilemma for companies: if none advertised during the Super Bowl, they could save millions of dollars and not experience any change in market share. Instead, everyone advertises and significant amounts of money are lost for no reason.

Some companies are using strategies that make the purchase more reasonable. SunTrust is using digital media to their advantage. They created a website that was designed solely because of their commercial where there is a lot more information for a consumer and opportunities to share through other forms of media like Facebook. For example, they can take a pledge to better their financial health and create their own version of the Super Bowl Commercial. Chief marketing officer Susan Johnson said it best: “We’re not launching a product. We need to get people aware of the issue… The best way to do that is through the Super Bowl Stage with the digital wrapped around it.”

This makes a lot of sense for a company like SunTrust, and probably would for many others. However, a lot of the big boys are wasting money for nothing. With $5 million, they’d likely be better off getting a lot of slots elsewhere.

  1. Average Cost of a 30 Second Ad Spot During Super Bowl
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  3. super-bowl-ads-waste-5-million
  4. is-a-super-bowl-ad-really-worth-the-5-million