New Media Financing, Part 1: The McDonalds Conundrum

The annual Cable Show ended last week in Los Angeles, and it's apparent that the status quo before the conference (the set-top box is the primary target device, and everything else gets TV Everywhere) is still the status quo. But why do a relative handful of companies have so much power over what people watch and how they watch it? The reason is what I call the "McDonalds Conundrum".

We all know that McDonalds' food is bad for you--it has too much salt, sugar and fat. Nevertheless, millions of people eat at McDonalds every day, because they like how the food tastes, and there's a McDonalds just about everywhere. Television today is much the same as McDonalds--there's tons of crap, but it's enjoyable and easy to find. Turn on your TV, and it's there. It's on your DVR. It's everywhere.

For all of YouTube's power, it never would have gotten off the ground if it didn't have a steady flow of content from television and cable. Hulu wouldn't exist if it didn't have NBC's and Fox's programs. People like to watch the television shows from the major networks and studios. They can find those shows incredibly easily. That gives the suppliers the power to limit access and to set terms for consumption.

There is nothing available on the Internet that has anywhere near the reach or ease of access of broadcast or cable television...unless it's broadcast or cable television shows that have found their way to the Internet. So, a critical step toward building a sustainable business model for Internet video programming is to make it incredibly easy to find and consume.