To date, there are 2 and a quarter business models for TV. One and a half is ads. half is paid subscription and the remaining quarter is split between DVD sales, PPV, product placement and such. People are just not going to pay enough in large enough number to compete with advertising. The stuff they do pay for is generally better quality, so I don't want to knock it, but it isn't enough to cover the 23.5 hours per day that we consume.

Paid/subscription has the internet going for. Hulu/Netflix/etc. can operate without (much) infrastructure. But there are (IMO) real pathologies in the economy that we are seeing play out. A nice UI is a plus, but not a long term strategic advantage. The long term strategic advantage is exclusive content. That's great in the sense that it competitively promotes high quality shows. But, it also turns services into silos. People subscribed to Netflix, Premier League and BlubbyTV still don't get Game of Thrones' newest season because HBO.TV need an 8 month exclusion period to sell their $7.99 subscription.

Exclusivity is a waste. TV shows are noncompetitive goods. In the age of torrents, it's also a cause of instability.

Back to ads… A lot of what is bad about TV advertising is based on the old FMCG advertising model. Since they're shown to everyone in a region, they can only sell tampons, cereal, cars, bank accounts, washing powder… products that everyone uses. Products most people care about very little. Branding for mature products where all options are near identical is that dull repetition thing. It takes 100s of views per uninterested person to make sure people remember that Coca Cola is THE real coke.

OTOH, ultra-targeted ads while worrying and creepy from the privacy perspective, are much more relevant. Relevant usually means less annoying. More importantly, it doesn't require that much repetition or overall airtime to do the work. With ideal targeting, a 10 second preroll ad (ad plays before the show starts), banners on pause and other minimal ads can achieve more than 4 X 3 minute ad breaks on regular TV.

This ties into the competitive environment that Netflix-like service compete in. Ads suck and people will switch to itunes, DVDs or torrents. That will help keep them honest and minimize the space/time they can have. Internet streaming has more room for competition. Services will compete on user friendliness and that means there will be a lot of pressure not to annoy people with ads. In fact, minimizing obtrusiveness and maximizing revenues will be the main competitive pressure. Too little revenue and the shows will opt out of your service, too much and subscribers will switch to another service. 10X better than the pathological cable market.

On the business model/economics side of things, ad revenue is better than subscription at distributing the loot. Shows can get a portion of ad revenue for their views, hopefully the lion's share. This gives shows an incentive to increase viewership across all platforms. Exclusivity can go away. All content can be available everywhere. just make the best show to win.

Shows won't need to go around trying to cut exclusive deals. It will be in their interest to be on all platforms. For a platform to buy exclusivity, they will need to beat the potential ad revenue earned on all the other platforms, a high bar for any show worth pursuing.

Overall, I think that an ad-based TV economy will have the best effect on the complex as a whole. Ads will reward shows that are successful across all on-demand platforms and that will encourage the types of high quality binge-watchable shows that I think are finally rivaling novels from a story, character and art perspective.

Outliers will still have the option of purchasing shows on itunes and stuff like that. If they are really a decent market, some of the streaming services might offer ad free options at a higher price. But, I think sufficient competition (no reason there shouldn't be) will arrive at a result with more revenue, less overhead and a lot less airtime dedicated to ads.

^The giant mammoth in the living room is privacy. I think it'll be 10 years before we've worked this one out. I haven't gone into it because I don't know what I think.