VPNs, Netflix et. al. Global Distribution + Implications in Canada

The widespread use of Virtual Private Networks (VPNs) to access US-geo-blocked content from the likes of Netflix, Hulu and others has received significant attention in the last few weeks.

While most of the conversation has been focused on whether or not using VPNs to access content from outside a territory that has been licensed to is legal or not (not surprisingly), the real issue slowly getting attention is that the widespread adoption of VPNs is a loud evidence of the online demand for video content not being properly satisfied by the existing supply.

Many US movie studios and TV producers seem to be stuck to a dated geo licensing process that grants without much though full exclusivity on online distribution rights to overseas TV broadcasters (on a show by show and country by country basis). This practice does not seem to challenge the virtues of what international licensees offer to them that they could not do on their own to reach viewers online. In my view the parent companies of CBS, NBC, CBS, Fox as well as HBO, MLB, FIFA, ATP, Formula 1, etc. they are all leaving money on the table by not going direct to viewers online regardless of where they are. The good news is that slowly (veeery slowly) but surely they are all finding this out.

Now, the consequences of this for the “vertically integrated” media companies (VIMCs) in Canada will be profound. In Canada being vertically integrated media company means that the company with “distribution rights” also owns the distribution channels. Do note that in Canada, the shows enjoying the most eyeballs (by an enormous margin) are licensed shows from the US. What VIMCs in Canada own are the rights to commercialize and air their shows locally through multiple channels for the duration of the license. They do not own the content; CBS, Disney & Comcast do.

And with this, VIMCs in Canada are left only to battle online others online in a leveled playing field where owning over the air broadcasts licenses provide no advantage whatsoever online.

This is still being sorted out and it will likely take years to materialize.

Real Time Pricing. Physical Retail's only viable response against online only retailers

Since the early days of e-commerce, traditional physical retail has been under pressure to deliver results justifying its existence in a competitive environment. Physical retail will never be able to compete in selection of the likes of Amazon, Ebay or even Craigslist, and at the same time they seem to be stuck in the pricing cycle model that is surely older than me: weekly flyers.

We are all familiar with them. Big box retailers are notorious for their use. But what they seem to ignore is that the second a shiny flyer is printed, the information contained in it is used by all their competitors seeking to beat them.

Many physical retailers have also adopted price matching guarantees seeking to ensure patrons get the best deal possible, however a number of pitfalls remain in making this a process with too much friction:

1. Retail exclusive SKUs: Large retailers usually request OEMs to manufacture just for them a part of their products so nobody can have the same exact SKU (despite sharing all the same bill of materials as the next retailer). This causes smaller batches and in fact increases the prices for the OEMs while retailers ensure that those items cannot be subject of the price matching guarantee policy (in most cases it has to be the same SKU with the same UPC code in order to be able to honor the price matching policy.
2. Processes impacting client experience: Now you actually found that an item with the same SKU and UPC is in fact priced lower at a competitor and you, as a consumer on a mission, seek to exercise the price matching policy. What happens next is that the person on the floor can rarely do that, he needs to call a manager, you as a client have to wait for that person to show up, they will go on a computer and verify that you are right and they will take you to check out approving the discount. End result, sure you exercised the guarantee and saved a few bucks (perhaps more than a few if you purchased something like high end appliance, TV, etc. But how was this experience?

Here is an idea: physical retailers have an enormous advantage over online retailers. It is the fact that they are in your way to the office or to your home. You make it a point to visit it to check with your own senses all about the desire product, but what follows next is that you likely, despite the fact of having made a purchase decision, you have chosen to log into your favorite online retailer and get it there instead

What is the cost for a retailer to lose you as a client? Why did they lose you in the first place? Chances are you are convinced there is a lower price online.

So what would happen if the price of that item changed in real time as commodities do? Basically you would pay the lowest price the market can bare for that very item on that moment.

Implementing real time /dynamic pricing:

The tools to implement real time pricing are available today. Comparison shopping tools have existed for a number of years now (e.g. pricegrabber.com) They match items with the same UPC code, have detailed metadata about the items (images, description, features, etc.) showing the best prices available in real time, which is in my view the lowest price the market can bear at that moment for that price. Sure there are some exceptions such as loss leaders, going out of business sales, but in considering large numbers that is actually the market telling us what is the lowest possible price for that very item.

Now, on the retailer side prices are dynamic. Now the consumer has a mindset that wherever he chooses to buy the moment he checks out, he is getting the lowest price at that time. Period. Price hunting is now out of the mind of the consumer. Now retailers can focus on the client experience, developing long term client relationships through loyalty programs, seek convenient locations, while leaving OEMs to battle each other on features, price, etc.

Last but not least, if big box retailers abandoned the idea of exclusive SKUs from major OEMs, prices would actually be lower since the OEM can then manufacture at a larger scale.