Cable Technology Feature Article
Sears Launches Alphaline Streaming Video Service
By Gary Kim, Contributing Editor
Alphaline Entertainment, the new video streaming service owned by Sears, offers instant access to thousands of premium movies and TV shows produced by all major studios with a click of a button for rental or purchase, on the same day content is made available for DVD sale. New TV shows are available for viewing one day after they are shown on broadcast outlets.
The content can be viewed on Internet connected TVs, Blu-ray Disc players and home theater systems from multiple manufactures, as well as on PCs. The service has no subscription fee (or any other recurring fee) and you are only required to pay for content you buy or rent.
New releases tend to be priced at $3.99 per rental. TV episodes are rented for $1.99.
At least so far, the pricing and content availability are about what one would expect for an a la carte service. But some observers think a subscription model will make more sense, at least for regular, rather than episodic viewers.
Like Hulu (News - Alert) Plus and Netflix, Bitbop is a subscription-based mobile application that brings TV shows, trailers and other behind-the-scenes footage to the user, for a monthly fee of $9.99. After adding shows to a queue, users can watch their favorite episodes and other features on their BlackBerry or Android (News - Alert) smartphone device. However, asking a user to pay a buck or more every time they want to watch a TV episode seems counterintuitive to some.
But that debate never ends. Just as there is good reason to believe that flat-rate charging promotes adoption by removing variable cost from the equation, others argue that a la carte pricing makes more sense because users only pay for what they consume.
There's no way to permanently settle the question because each model is better for some consumers. Heavier users will find the subscription more economical, while lighter users typically benefit from on-demand payment methods.
There seems a bit more agreement about revenue models in a larger sense, though. Few seem to think ad-supported streaming works as well as for-fee models for longer-form content, while ad support for TV episodes has not been proven.
One analysis shows why. Assuming Hulu could monetize every view (and they can’t) 373,000,000 streams at a $10 cost per thousand (CPM) represents $3.7 million a month in advertising revenue. That works out to $44.4 million a year.
Even if Hulu could argue a $30 CPM, that's only $11.1 million a month, or about $133 million a year. A more realistic scenario would have revenues closer to $40 million a year.
That is about all you need to know to figure out why premium Hulu services, using a subscription model, have been launched.
But Sears clearly believes a simple, no recurring fees model will prove attractive, compared to a subscription model, and Alphaline could prove viable if Sears can keep costs under control.