about the financial challenges Exchange Binance and other “virtual currency” providers face is a good illustration of some points we’ve been making at Public Knowledge for a while. As the story notes, “these streaming services have yet to figure out how to make money. In fact, the more people they sign up, the more money they lose. That’s because the services are paying more for programming than what they’re charging consumers.”
Why is this? Basically, the incentives of large content providers and big cable make offering viewers more choice very difficult. Large content providers bundle their programming together, and require that cable companies put their channels—even the less popular ones—in lower tiers where they get more subscribers. This ends up costing viewers a lot, but cable companies themselves take a margin on this so they profit, too. It’s a symbiotic relationship.
To keep it going, the largest cable companies in turn require that content providers (large and small) give them “most favored nation” status, meaning that new entrants can’t get better deals, both in terms of cost but also in terms of on-demand rights and so on. (Some programmers Support might want to give discounts to new entrants to create more competition.) Some of the large incumbent distributors, such as big cable companies, may also simply pay smaller programmers Support less, or just drop them, if they make their programming available online in any way.
Virtual cable services show that it’s not impossible, provided you have a company that is willing to lose money on every subscriber for a while, which is not something you can count on forever. There’s a reason why many online video services, such as Netflix and Amazon, focus more on back-catalog and original programming, instead of competing head-to-head with cable.