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Josh Braun’s Blog // I have it written down somewhere . . .

Gym Memberships and Online Video Feb 4, 2011

GOOD Magazine’s Website has an intriguing post up by culture editor Cord Jefferson, in which he discusses Gym-Pact, a Boston-based company that has created “a gym membership [plan] that charges you for not exercising.”  In other words, the more you exercise, the less you pay the gym, and the participating facilities make the bulk of their money off the loafers who don’t work out.

What’s interesting to me about this is how it might translate to online video businesses.  Netflix’s original business model is famously based off of gym membership plans.  Here’s how G. Richard Shell and Mario Moussa describe in their book, The Art of Woo:

As [Reed Hastings] was driving to the gym, he began to think about the video store’s business model.  The store charged customers by the rental and penalized those who were returning movies.  The gym he was going to, by contrast, charged a flat fee and did not keep score on his usage.  As someone who had just been burned by a big late fee, he liked the gym’s business model better.  As he continued his drive, a question presented itself: would it be possible to run a movie rental business the way the gym worked—by charging a flat fee and not worrying about how many movies people rented or how long they kept them?

Most gyms make money off the people who pay in and then subsequently never use the equipment or facilities.  The Gym-Pact model is a riff on the normal business model, in that it actually privileges those customers who do make regular use of the facilities with lower fees, while adding a small penalty to those who loaf.  Applying similar logic to online video subscription services would encourage users to watch more, just as the Gym-Pact model encourages customers to exercise more.  Rather than calling the tiered pricing a penalty for not viewing as with the gym example, you’d probably call it an incentive for fans or something with a positive spin.  But the effect would be similar: to quickly select for groups of heavy viewers and/or dedicated fans.  The threshold for just how heavy or dedicated that audience is could then be adjusted by pricing.

But why would you do this as a distributor?  After all, you’d be providing incentives for people to tax your system resources.  Here’s a potential answer: I can imagine a world in which content providers to a streaming platform subsidize subscriptions for their most loyal audiences in the faith that these people will (a) drive ratings up, thereby making, say, a particular show more valuable to advertisers, and (b) be dedicated enough to buy swag and support the show in other ways.  So, for instance, if you watched Chuck every week, perhaps Warner Brothers might pay to make your subscription a little cheaper in the hopes that they could turn around and charge more for better-targeted ads or sell more Chuck t-shirts.

This notion would rely entirely, however, on two elements that don’t yet exist in the TV distribution ecosystem.  One would be a shift in the way content providers value audiences.  Such a shift may be in the works over the longer term—Hulu CEO Jason Kilar’s recent essay pointed out the increasing role of social media in spreading buzz and increasing viewership for good shows, or conversely tanking bad ones.  NewTeeVee’s Liz Shannon Miller has made similar points and also explored the “gamification” of television viewing, in which audiences’ viewing habits are logged and loyal viewing is rewarded with physical merchandise and other incentives.  The question here is partly whether a relatively small, but rabidly loyal and demographically known fan base would ever be valued above a relatively large, but nebulous and indifferent general audience.  There are scattered examples of this already—for instance, the Chuck example above is deliberate on my part.  Enthusiastic fans of the ratings-challenged show actually saved it from cancellation in 2009 by frequenting Subway, one of the program’s primary sponsors.  Subway got so much business out of the deal that the company subsidized the show’s return to television the following season.  Whether or not this particular model is sustainable, personally I imagine that the general commercial importance of Henry Jenkins-esque fan culture will continue to grow rapidly in coming years as fans find new digitally-enabled ways to connect, while advertisers and content providers find similarly sophisticated ways to target them.

The second “missing element” is, of course, the reticence of many content providers to have audiences log their viewing hours online, when they are so apparently committed right now to traditional cable and broadcast distribution methods—a topic I’ve written about elsewhere.  Suffice to say, at the moment few traditional premium content providers are going to encourage online viewing, but rather will continue attempting to direct people to their television sets.

At any rate, if you’ve read this far, thanks for bearing with me thinking aloud.  In the end I’m not suggesting a Gym-Pact business model is best for online video or whether it would even work.  Rather, I’m intrigued by the twist on a traditional business model that’s been carried over to digital distribution, and curious to play out the analogy.  If any of the lovely lurkers on this blog would care to comment, I’d be interested in your own thoughts on the subject.

[Image Credits: 3D Gym RenderingChuck]

This entry was posted in digital television, Journalism, New Media & Digital Culture and tagged , . Bookmark the permalink.
  • http://twitter.com/yifanz Yifan Zhang

    Thanks! I’m one of the co-founders of Gym-Pact and I wanted to say thanks for the feedback and thoughts. Looking forward to keeping in contact as we grow!

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