It used to be so easy. The electronics store sold devices. You plugged in the device, or inserted batteries, and the device (usually) worked. Maybe you bought a maintenance contract, but that was about the only ongoing option you could get for using that nifty electronic product.
Now, as we all know, nothing is very easy, and electronics retailing is not simply about products. Dealers are peddling access--not in the sense that Washington lobbyists use that term, although there is a connection (read on).
As more and more products require a subscription, retailers are extending their reach deeper into the value chains. As a result, consumers are tied more to the dealer, with subsequent questions about responsibility.
LET THERE BE ACCESS
The first widespread access products were mobile phones. Thanks to oft-confusing package deals between cell phone carriers and handset makers, consumers got a "free" or "cheap" device by signing up for years of access, usually at a retailer or at the carrier storefront. Satellite TV also burst on the retail scene with subscription access integrated into the retail sale that seemed, at first glance, to focus merely on the receiver.
Ironically, the first widespread access service involving consumer-purchased equipment went in the opposite, and more understandable, direction. Court rulings in the 1970s that allowed customers to buy and attach their own telephones to the old Bell network launched entire new industries. In that case, the legacy access service was still sold by an existing provider. Customers were simply buying cheap retail devices to plug into a familiar service.
In the past few years, product-plus-service packages, with the emphasis on access, have become a pre-emptive business model. The hardware is not much good without the access fee for digital video recorders, satellite radio and sporadically to broadband access, such as the sale of cable and DSL modems and service at selected computer retailers.
The iPod phenomenon--which has put those music devices into nearly one of 10 American homes in just over a year--extends the process into a slightly different direction. The hardware is a standalone product that can be fed from existing music resources. But Apple seeks to make it clear that customers will get the greatest benefits from iPods via access to iTunes (a highly profitable ancillary Apple business).
Even the new Napster, sold as a retail product in the form of prepaid access cards, has found its way onto store shelves without taking up room as a tangible device. And we're waiting to see how access and pricing are structured for the new TV-to-cell phone services, such as Verizon's VCAST.
Digital television, for now, is not directly part of this emerging access value chain, but its retail presence is, in many ways, tied to the trend. Consumers are being acclimated to a process in which hardware is not enough; the tools are merely entry points to a package deal. Somewhere, sometime, shoppers will be paying for access service--and probably paying again and again on a monthly subscription or per-use basis.
THE GRAVY TRAIN
For retailers, the setup is immensely appealing; sometimes it offers a short-term annuity, assuring a revenue flow for the life of the product. In other cases, the "access" sale represents just another one-time spinoff for performing as a sales agent. In any situation, the access fee is an addictive additional revenue source that retailers will not want to lose.
For consumers, the growing dependence on access services is coming at a price--about $250 per month for a typical American family. That tally includes cable and/or satellite subscriptions, Internet access fees, wireline phones (local and long distance for the old fogies who still are tied to land lines) and mobile phone charges (for two or more family members). It also encompasses outlays for add-ons, such as pay-per-view or video-on-demand, DVR subscriptions, Netflix, and maybe phone ring tones and WiFi fees at Starbucks. Overall, a family's monthly communications, information and entertainment bills are nearly a magnitude higher than a generation ago, when $30 covered local phones (plus the occasional long-distance call) and a newspaper subscription--the entire available lineup (except for those rural and Manhattan cable customers).
As consumers pay more and as they expect access reliability as part of what they buy, positions shift within the value chain. The retailer on the front lines becomes the face of access--even though most customers recognize that he is just a storefront representative of access providers.
Nonetheless, he is the only identifiable face in front of all those video-, voice- and data-access services. Through intricate service-provisioning relationships, the retailer is truly just a faade--but there's a valid concern that consumers cannot appreciate the hierarchy of responsibility.
It does not help, of course, that the retail industry is traditionally in constant flux. How appropriate that Circuit City was the subject of a takeover attempt during the same week in February that Best Buy unveiled plans to build 60 "next-generation" superstores this year.
It is part of the tectonic shift that constantly alters the face of retailing. Of course, a change in Circuit City ownership may not resonate through to individual customers. But it can affect the relationship with service providers, and it creates a sense that alteration is always looming, whether for product rearrangements, pricing structures or the inevitable shortages.
Nonetheless, that retail environment is the one in which digital TV will confront its audience. It is a landscape in which profitable and ongoing access services are critical. The continuing chaos about selling Digital Cable Ready devices is a reminder that the cable industry knows how to stymie access when it wants to, or more specifically, how to control the way access is administered, no matter what rules the FCC mandates.
(That is what I meant above about Washington access peddlers. The cable industry's notoriously aggressive and successful lobbyists--fresh from their FCC victory in the digital TV must-carry skirmish--are certain to be watchful about other factors affecting access to cable facilities, by broadcasters or consumers.)
In the new digital environment, it is still fun to make and play with bigger and better toys, er, products. But the only way to use many of them is through system access. And a very small cadre controls that access. It is not going to be easy.
Gary Arlen, a contributor to Broadcasting & Cable, NextTV and TV Tech, is known for his visionary insights into the convergence of media + telecom + content + technology. His perspectives on public/tech policy, marketing and audience measurement have added to the value of his research and analyses of emerging interactive and broadband services. Gary was founder/editor/publisher of Interactivity Report, TeleServices Report and other influential newsletters; he was the long-time “curmudgeon” columnist for Multichannel News as well as a regular contributor to AdMap, Washington Technology and Telecommunications Reports; Gary writes regularly about trends and media/marketing for the Consumer Technology Association's i3 magazine plus several blogs.
Future US's leading brands bring the most important, up-to-date information right to your inbox
Thank you for signing up to TV Tech. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.