Tuesday, May 6, 2014

Revenge of the Cord Nevers

            More and more young users of the Internet will access the cloud without ever having used a corded device--what older folks know as telephones and personal computers.  These “Cord Nevers” do not have to accept the limitations of wired telephone and cable television service.  A nomadic species, Cord Nevers have little tolerance for tethered telephones and “appointment television” where content creators and distributors decide when, where and how often viewers can access programs.  Cord Nevers want access anytime, anywhere, via any device and in any format allowing them to talk, text and watch video content via different screens on their terms.                        

            Cord Nevers are technology agnostic.  They care little about the medium used to deliver service, only that access occurs quickly, reliably and without impediments.  Netflix and some new media players understand this mindset and try to accommodate it.  For example, Netflix allows subscribers to binge on an entire season of “must see” video content by downloading all episodes, instead of applying the appointment television model that rations access to one episode per week.  HBO appears ready to become more accommodating by offering Amazon customers access to some programing without requiring proof of a cable television subscription.

            Cord Nevers appear quite flexible on the size and quality of the screen used to view content.  They want flexibility on the device they use to access content, but appear willing to tolerate much smaller screens than what televisions and computer monitors have to offer.  While screen size does not matter much, the interface providing access has to operate in a user friendly and intuitive way. 

            Cord Nevers may appear both fickle and loyal.  On one hand they constantly seek the next great application and cloud enhancement, quick to jettison one site for another.  Few even recall the early social networking success of MySpace.  On the other hand, Cord Nevers appear willing to stick with a brand, such as Apple, and even pay a premium if a device or service continues to enhance the perceived value proposition. 

            Cord Nevers have the potential to disrupt the status quo in many segments of the Internet ecosystem.  The expectation of anytime, anywhere content access threatens the longstanding distribution model that relies on several “windows” of access at different price points. Disruption will occur when movie access deviates from a standard course of theatrical display, limited and locked down access on a pay per view basis, DVD release, rental and download opportunity, availability on cable television premium networks, etc.  

            However disruption does not mean destruction of business plans and revenue streams.  When cable television made its market debut, movie theater operators and their content producers feared annihilation.  In reality accommodation occurred and so too will Cord Nevers trigger change without causing incumbents to fail. 

            Incumbents need to think strategically rather than simply conclude that Cord Nevers constitute a threat to their intellectual property and livelihoods.    Cord Nevers will pay for content, sometimes in ways that generate more profit than via previously limited commercial options.  For example, some cellphone subscribers regularly paid more for 20 seconds of a song for use as a ringtone, than for access to a disc or file containing the entire song.  Yes, many Cord Nevers think nothing of violating copyright laws, but if the content is compelling and the interface friendly, most will pay for convenient access.

            Incumbents—particularly telephone and cable television companies—appear quick to consider Cord Nevers as threats, rather than premier customers.  Cord Nevers are vilified as bandwidth hogs, copyright thieves and cheapskates.  Many incumbent punish them for these tendencies by throttling the bit transmission speeds of heavy users, threatening litigation and sneaking new billing line items.  A more profitable strategy seeks to reward and accommodate power users, particularly when doing so migrates them to more profitable service tiers.

            Cord Nevers bring their televisions and computers with them everywhere they go.  Incumbents should understand that such expanded access can translate into more services and higher revenues.

 

           

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