• July 28, 2014

Target jumps into digital video fray

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Posted: Thursday, September 19, 2013 4:30 am

By one estimate, the average monthly cable or satellite TV bill is expected to increase to $123 by 2015 and $200 by 2020.

Yet there are plenty of options out there for consumers looking for more affordable TV alternatives, and on Oct. 1, Target Corp. will launch a digital entertainment service of its own called Target Ticket. With more than 30,000 movie and TV titles (some of the latter on a next-day basis), the new service will operate on a pay-as-you-go basis.

The fast-evolving market for digital video is a fierce mosh pit of competition, and Minneapolis-based Target is relatively late to the game. Subscription-based services such as Netflix and Amazon Prime, where customers pay monthly or annual fees, dominate the space — along with Apple’s iTunes and even Wal-Mart’s Vudu service, among others.

The traditional model of television viewing, where patrons dutifully pay their cable or satellite bill every month, is disintegrating rapidly. Roughly 1.8 million consumers dumped cable in the past year, with many opting instead to download or stream their movie and TV content from the Internet, according to industry reports.

This represents a sea change in consumer behavior, and now Target will enter the fold. “We spent a lot of time talking to guests, researching what they need,” said Anne Stanchfield, Target’s division merchandise manager of entertainment. “It’s a pretty complex marketplace that is sometimes confusing.” She declined to quantify how much the $73 billion retailer devoted to the launch.

Target plans to differentiate itself by simplifying the process of downloading and streaming content, especially since “a significant portion of our guests have yet to adapt to digital video,” Stanchfield said. In addition, Target hopes to stand out by offering parental controls, early access to some popular shows and a 5 percent discount for its Redcard patrons.

“We found guests were worried about what kind of content their kids are exposed to, and as a parent myself I absolutely agree with that,” Stanchfield said.

To that end, Target is partnering with Common Sense Media, a San Francisco-based nonprofit group that helps parents choose appropriate content.

About 43 percent of Target’s core customers have children. With that in mind, family Target Ticket accounts can have different profiles, so parents can control the content each child views.

Michael Greeson, president of the Diffusion Group, said “it was a bit of a head-scratcher when I saw Target was getting into the field,” though he noted it makes sense since retailers in general are smarting from declining DVD sales.

“Wal-Mart made the jump into it with Vudu (in 2011), and Target didn’t,” Greeson said. “It should have been the other way around, since Target’s customers are probably more tech-sophisticated.” (Target’s core customer is roughly 40 years old, two-thirds are college-educated, and their median household income is $64,000.)

Greeson said Target needs to be in the digital entertainment space, but it’s unlikely the retailer will emerge as a game-changer in the field. “To be honest, it’s just another transactional video service,” he said. “The differentiator is going after a family-friendly audience, the soccer moms with children.”

Either way, consumers will continue to search for alternatives as pay-TV costs rise and their spending power stays flat, according to the NPD Group. The Port Washington, N.Y., research firm predicted in a study last year that monthly cable and satellite bills will surge from $86 a month in 2011 to $200 by 2020. NPD concluded that this traditional TV business model “appears to be unsustainable in the long term.”

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