In Q1 2023, PARQOR will be focusing on four trends. This essay focuses on "The definition of scarcity is continuously evolving away from linear. What happens next?"
Author's Note: My latest opinion piece for The Information, "Disney's Hulu Deal Ain't Over Till It's Over" is live! With the help of New York Yankee legend Yogi Berra, I analyzed why Hulu has obvious value for both the supply (content producers) and demand (TV watchers) sides of the business, and that is why no one is an obvious taker.
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The dissolution of the Regional Sports Networks (RSN) business model reminds me of my argument in “The Linklater Problem.” I built that argument around a quote from “Built To Fail”, an excellent book on the history of Blockbuster Video written by former retail franchisee Alan Payne.
At one point, Payne highlights how the rental video market under Blockbuster changed the economics of movie productions because it:
So, the additional revenue from Blockbuster stores catalyzed the supply of film productions, and Blockbuster stores catalyzed the demand for those films.
Similarly, the RSN model is not feasible without the built-in customer base guaranteed by multichannel video programming distributors (MVPD) and on-demand TV services like satellite broadcasters. But the catalyst is different: whereas independent films only generate revenues when a film is rented, RSNs earn from 100% of MVPD subscribers, whether or not they ever watch the RSN.
Scarcity and subsidies are two details worth focusing on in these examples. First, scarcity: Blockbuster’s focus on growing retail stores created scarcity that was beneficial. But in the long run that narrow focus left it vulnerable to Netflix's consumer and data technology strategy. Whereas the successes of the profitable MVPD model have prevented any competitors or alternative models from emerging for RSNs. Second, subsidies: Blockbuster's retail store growth unintentionally and indirectly subsidized the independent film industry, but MVPDs intentionally and directly subsidized RSNs.
Both details help to flesh out what an alternative to the MVPD model for RSNs may look like.
Will we ever see a model like MVPDs to subsidize RSNs again? No. The future may lie in a Blockbuster-like business that may unintentionally subsidize RSNs.
Total words: 1,700
Total time reading: 7 minutes
Scarcity is the linear distribution model’s historical moat — the linear model enabled multichannel video programming distributors (MVPDs) to aggregate millions of households locally, regionally and later nationally. It has similar business logic to the ...