Blog @ Digital Bazaar

Where does your entertainment dollar go?

Follow the Money Trail

We now know that you spend roughly $0.42 per hour of television that you watch. Keep in mind that the content that you see is riddled with commercials. You don’t have any rights to the content other than recording the program and watching it at a later date. You do not get to keep the content unless you have a TiVO-like device.

One figure that we do not have yet is how much the content creators are getting paid. In other words, what are the artists getting paid? Unfortunately, I couldn’t find that figure but we can safely assume that the television content creation industry is not as large as the movie box office and rental industry, at $27.7B/year [10,11]. This would mean that the artists get around 30% of what you pay – the remaining 70% is devoured in distribution costs ($27.7B per year / $55.2B per year + $36.8B per year). In other words, of the $1000 each cable television household spends on entertainment per year, $300 gets split between all of the artists and a whopping $700 goes to the cable company.

Collaborative Content Distribution questions whether this is fair. It is true that the cable industry has invested billions of dollars in distribution infrastructure for cable television. Then again, so have the telecom companies that provide your Internet connection.

As of June 2005, a typical DSL connection in the USA was priced around $32 per month [12]. If you have basic cable at $50 and a cable modem, the price of your cable service jumps to around $91 per month[12]. Of that $91 per month, only $15 go to the creators of the television programs that you watch (30% of the $50 basic cable fee). It will eventually be possible to legally stream all of your television shows via the Internet, therefore you could save $44 per month by ditching your cable service entirely ($91 for basic cable and modem – ($32 for DSL + $15 for content royalties) = $44 in savings per month).

Let me repeat that – you could save $44 per month or $528 per year by getting your video content via the Internet instead of via basic cable. That is a savings of $48.5 billion dollars a year for all cable television based US households.

If there is no cable television provider, who is going to distribute the content? This is where Collaborative Content Distribution comes in – in the CCD model, it is you that distributes the content. You get the content either directly from the content creator or a distribution source for the content creator. Legal peer-to-peer distribution takes care of the rest.

In the end, how much do you end up paying? Well, there is $32 per month for DSL and there is $15 per month for the content creators. We have not set a price yet for the content distributor because that price could vary widely – your download would be provided via a free market. The content distributor, who is another peer on the network, could charge anywhere from nothing (if they are one of your friends) to $15 per month. Let us assume an average price of $15, although this price would be cancelled out if you provided the same service to other peers on the network. Which puts us back at your total cost being $47 per month instead of $91 per month.

There is one last thing, we haven’t factored in advertising yet. The price above is for commercial-free downloads. If you agreed to have commercials integrated with your downloads, advertisers could pay you directly. If we average advertising on a per household basis, it would provide you with a $33.33 credit towards your television watching ($36.8B per year in advertising / 92M households with cable television / 12 months = $33.33 credit per household per month).

Your monthly television AND data services bill would total $13.67 instead of $91.00 ($47 per month for data services and television content – $33.33 credit per household per month due to advertising = $13.67 total cost for data services and television content).

The US economy could save $85.4 billion dollars per year under this scenario. More importantly, you would save $77.33 per month on your data services and cable bill. This outlines a very clear advantage to transition to Collaborative Content Distribution models…

3 Comments

1. This is an extremely wonderful and well thought out essay. I would love for everything to happen like that, and to tell you the truth–if we are ever able to build this model I will GLADLY pay $20-$30 more to keep commercials out of my life.

   On the other hand, I don’t see this happening. I hope I am wrong. What you are proposing is to cut out the middle man, who gets at least $92 Billion a year to provide us with "entertainment". With this much money on the line, I really don’t see the big telecom just "giving up" their content. They will surely put up a hell of a fight to preserve the old model. Just look to what they did to "a-la-carte" model that was just floating around a couple of years ago.(ability to buy only cable channels that you want). This had an overwhelming support among the Congress and the General Public who is sick of paying $100 a month to basically watch their 3 or 4 favorite channels. There were even hearings on the Hill scheduled. And what happened? Poof! GONE! Not even a peep.

   Comment by BrooklynNY — December 12, 2006 #

2. It’s not so much the networks that control the conent of our favorite entertianment shows on tv as much it is the companies that advertise. It’s sort of scary that a cat food or plastic company has a lot of control over our favorite sitcom or reality show!

   Comment by Luke Schmucker — January 23, 2008 #

3. Hi,

   I am looking for an open source solution that I could install on my own server so I can distribute my music my self without giving away precious % to middle sites, plus getting paid in 60 plus days…

   Anyone knows of something like that?

   Thanks in advance,

   Thierry Deruelle
   http://www.dztd.ca

   Comment by Thierry Deruelle — May 23, 2009 #

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