Online Content and Media Chapter 10

Learning Objectives Understand the major trends in the consumption of media and online content, the major revenue models for digital content delivery, and digital rights management Discuss the concept of media convergence and the challenges and opportunities it creates Understand the key factors affecting the online publishing and online entertainment industries

Online Content No other sector of the American economy has been so challenged by the Internet and the Web than the content industries The online content industries are organized into two major categories: Print (newspapers, magazines, and books) Entertainment (television, movies, music, radio, and games) Together, the online content industries generated revenues of about $22 billion in 2015 What is the common characteristic across each of these industries?

Annual media consumption (Figure 10.1)

Media revenues by channel (figure 10.2)

Online content consumption (figure 10.3)

Three Revenue Models for Digital Content Delivery There are three revenue models for delivering content on the Internet: Subscriptions (“all you can eat”) A la carte (“pay for what you use”) Free (with advertising) and freemium A newer alternative model is completely free user-generated content Contrary to early projections that free content would drive “paid” out of business, it turns out that both models are viable now and in the near future

Free or Fee: Attitudes About Paying for Content and the Tolerance for Advertising In the early years of online content, most Internet users expected to pay nothing for online content Users were also willing to accept advertising as a way to pay for free content By 2015, consumer behavior and attitudes had greatly changed In a demonstration of just how much quality online content is worth paying for, by 2015, Apple had sold 35 billion songs, 700 million TV shows, and more than 200 million movies As it turns out, free content is not worth much and should be free, but premium content is worth a great deal and should be priced accordingly

Digital Rights Management and Walled Gardens Content producers generate revenue and profits from their creations, and they may protect these revenue streams through copyrights Digital rights management (DRM) refers to a combination of technical and legal means of protecting digital content from unlimited reproduction and distribution without permission Content producers and distributors are still trying to find the right balance between usability and protection One solution is a “walled garden” that ties content to the hardware and operating system For example, Kindle books cannot be converted to other e-book or document formats

Media Industry Structure The media content industry prior to 1990 was composed of many smaller independent corporations specializing in content creation and distribution in separate industries of film, television, book and magazine publishing, and newspaper publishing During the 1990s and into this century, after an extensive period of consolidation, huge entertainment and publishing media conglomerates emerged Some of this is due to a phenomena called media convergence

Media Convergence Technological convergence Content convergence Development of hybrid devices that can combine the functionality of two or more existing media platforms into a single device Content convergence Convergence in the design, production, and distribution of content Industry convergence Merger of media enterprises into synergistic combinations that create and cross- market content on different platforms

Online Content Revenue Models Marketing Free content drives offline revenues Advertising Free content is paid for by online advertising Pay-per-view/pay-for-download Subscription Monthly charges for service Mixed Combination of the above models

The Online Content Industries The Online Publishing Industry Newspapers Magazines Books The Online Entertainment Industry Television Movies Music Games