1. ELC 200 Introduction to E-commerce
DAY 25
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved

2. Day 25 Overview Questions? Assignment 7 Posted Course Evaluations
Due Dec 12:30 PM
assignment 7.pdf
Course Evaluations
Online content and media

3. Final Countdown Nov 30 Dec 4 Dec 7 Dec 14 @ 1Pm
Online content and media
Dec 4
Social Networks, Auctions and Portals
Assignment 7 Due
Dec 7
B2b E-commerce: Supply Chain management and Collaborative Commerce
Dec 1Pm
Quiz 4 and Final Presentations and papers Due

4. E-commerce 2017 business. technology. society. 13th edition
Accessibility standards-compliant
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved

5. E-commerce 2017 business. technology. society.
13th edition
Chapter 10
Online Content and Media

6. Learning Objectives
10.1 Understand the major trends in the consumption of media and online content, the major revenue models for digital content delivery, digital rights management, and the concept of media convergence.
10.2 Understand the key factors affecting the online publishing industry.
10.3 Understand the key factors affecting the online entertainment industry.
Slide 3 is a list of textbook LO numbers and statements.

7. Cord Cutters and Cord Shavers: The Emerging Internet Broadcast System (IBS)
Class Discussion
Do you subscribe to any online video streaming services? If so, which ones?
What sites have given you the best overall viewing or entertainment experience, and why?
What are the advantages of watching traditional television over watching online TV and films?

8. Trends in Online Content (1 of 2)
Mobile platform accelerates the transition to digital content
Distributors become significant players in content production business
Continued growth of online video and music
E-book sales growth slows
Digital music sales top physical sales
Console games flatten as mobile games soar

9. Trends in Online Content (2 of 2)
Four Internet titans compete for ownership of online content ecosystem: Apple, Google, Amazon, and Facebook
Netflix the largest consumer of bandwidth
Cloud storage serves huge market for mobile device content
FCC issues new net neutrality rules
Time spent with digital media exceeds time spent with television

10. Content Audience and Market
Average American adult spends 4,300 hrs/yr consuming various media (and only 2080 hours working)
2015 U.S. entertainment and media revenues (online and offline): $262 billion
50% U.S. population watches TV online
Desktop and mobile use: 5.7 hrs/day
80% television users multitask

11. Figure 10.1: Annual Media Consumption
Figure 10.1, Page 653.
Each American spends around 4,300 hours annually on various types of media. Time spent on the Internet (both mobile and desktop) is expected to exceed time spent on traditional television.
SOURCES: Based on data from eMarketer, Inc., 2016a; authors’ estimates.

12. Insight on Society: Are Millennials Really All That Different?
Class discussion:
What are some of the defining socioeconomic and behavioral patterns of Millennials?
In what ways does the hard evidence about Millennials not fit stereotypes about them?
Why are Millennials so sought after by advertisers?
Do you self-identify as a Millennial? Why or why not?
Millennials born 1981 – 2000, 80 million, >30% of workforce

13. Internet and Traditional Media
Cannibalization vs. complementary
Does time on Internet reduce time spent with other media?
Massive shift of audience to Web, tablets, smartphones
Television viewing, music consumption remains strong, reading has increased
Impact of Internet:
Increase in total demand for media, including traditional products like books
Physical products replaced by digital

14. Figure 10.2: Media Revenues by Channel
Figure 10.2, Page 646.
Traditional media (television, print, and radio) still dominate the entertainment and media market, but Internet media (streaming videos, music, and content) is the fastest growing segment.
SOURCES: Based on data from industry sources; authors’ estimates.

15. Digital Content Revenue Models
Online content delivery revenue models
Subscription
A la carte
Advertising supported (free/freemium)
Free content can drive users to paid content
Users increasingly paying for high-quality, unique content

16. Figure 10.3: Online Content Consumption 2015
Figure 10.3, Page 647.
SOURCES: Based on data from eMarketer, Inc., 2016c; industry sources; authors’ estimates.

17. Free or Fee
Early years: Internet audience expected free content but willing to accept advertising
Early content was low quality
With advent of high-quality content, fee models successful
iTunes
Millions of users buy from legal music sites
YouTube cooperating with Hollywood and New York film production studios

18. Digital Rights Management (DRM)
Technical and legal means to protect digital content from unlimited reproduction and distribution
DRM hardware and software encrypts content
Streaming content
Difficult to copy
Walled garden

19. Media Industry Structure
Three separate segments
Print
Movies
Music
Each dominated by few key players with little crossover
Transmission industry highly oligopolistic
Two dominant players in each distribution market
AT&T and Verizon; Comcast and Time Warner Spectrum

20. Media Convergence Technological convergence Content convergence
Hybrid devices –iPad
Content convergence
Three aspects: Design, production, distribution
New tools for digital editing and processing
Industry convergence
Merger of media enterprises into firms that create and cross- market content on different platforms

21. Figure 10.5: Convergence and the Transformation of Content: Books
Figure 10.5, Page 652.
The Internet is making it possible for publishers and writers to transform the standard “book” into a new form that integrates features of both text and the Internet, and also transforms the content of the book itself.

22. Online Publishing Industry
$93 billion based originally in print, moving rapidly to Internet
Three segments
Online newspapers
E-books
Online magazines

23. Online Newspapers Most troubled segment of publishing industry
Revenues shrunk from $60 billion in 2002 to about $30 billion in 2015
Four factors in decline
Growth of Web, mobile devices as alternative medium
Alternative digital sources for news
Failure to develop suitable new business models
Rise of social media and role of directing traffic to newspaper content

24. Figure 10.6: Newspaper Revenues 1980–2015
Figure 10.6, Page 665.
Newspaper ad revenues have declined by 50% since As a percentage of total revenues, circulation subscription revenues have become more important. Digital is a small source of revenue but growing up until recently.
SOURCES: Based on data from Newspaper Association of America, 2016; Pew Research Center, 2016.

25. Figure 10.7: Online Newspaper Models 1995-2016
Figure 10.7, Page 667.
Newspapers have gone through three different business models as they adapt to the Internet.

26. Online Newspaper Industry: Strengths and Challenges
Strength: Newspaper audience size and growth
OnLine growing 2 10%/year
Challenge: Digital ad revenue
Coming to articles from the side door (social networks links)
Strength: Content is king
Challenge: Finding a revenue model
Paywalls chase customers away
Challenge: Growth of pure digital competitors
Craigslist, Huffman Post, Vox , Weather Under Ground
Challenge: Can newspapers survive digital disruption

27. Magazines Rebound Physical magazine circulation falls after 2001
Exception is special interest magazines
Digital replica magazines
Ad revenue growing
Total audience size increasing
Popular websites drive traffic to online magazines
The New Yorker Today app
iPad Subscription Service
Magazine aggregators

28. E-books and Online Publishing
E-book sales have exploded in recent years—$7.6 billion in 2016
26% of all consumer book sales
New channel for self-publishing authors
Hugh Howey’s Wool (2013) 1 million in royalities
Major publishers still dominant source of book content
While some large bookstore chains have disappeared, small independent bookstores have grown 27% since 2009.

29. Figure 10.12: E-book Sales Figure 10.12, Page 681.
This figure shows the total revenues and the percentage that e-books sales constitute of total trade book sales revenues, as well as the change in the growth of revenues. As the graph shows, growth in e-book revenues has slowed significantly since 2013.
SOURCES: Based on data from AAP, 2016; authors’ estimates.

30. Amazon and Apple: The New Digital Media Ecosystems
E-book hardware, software, combined with online megastores
Amazon Kindle: Linked to Amazon store and cloud storage
Apple iPad: Multipurpose tablet, linked to Apple stores
Authors able to bypass traditional agent, publisher channels

31. E-book Business Models
E-book industry composition
Intermediary retailers (booksellers), traditional publishers, technology developers, device makers (e-readers), vanity presses
Wholesale model
Retailers pay wholesale price and establish retail price
Agency model
Distributor as agent must charge publisher’s retail price
Apple and book publisher price-fixing
Amazon vs. Hachette

32. Challenges of E-book Platform
Control over pricing
Amazon controls largest market share for e-books
Amazon’s own book publishing brand
Further evolution of digital distribution platform
Kindle Unlimited subscription service
Digital marketplace exchanges for peer sharing of digital files
Converging technologies
Interactive books, iBook Author, iBook Textbooks

33. Online Entertainment Industry (1 of 2)
Four traditional players, one newcomer
Television
Radio broadcasting
Hollywood films
Music
Games (new arrival)

34. Online Entertainment Industry (2 of 2)
Internet is transforming industry:
Mobile devices
Social networks featuring video streaming
Download and streaming services
Growth in broadband access
Closed streaming platforms reduce need for DRM
Emergence of very large-scale, integrated technology media companies
Amazon, Google, Apple, and Netflix

35. Figure 10.14: Projected Growth in Online Entertainment
Figure 10.14, Page 688.
Among commercial forms of mass entertainment, online TV and movies engage the largest number of people and generate the largest online revenues in By 2019, online TV and movies are expected to account for around 57% of all online entertainment revenues.
SOURCES: Based on data from industry sources; authors’ estimates.

36. Television Transition to new Internet delivery platforms
Streaming and downloading services
OTT: Over-the-top (Internet) delivery
Mobile platform
Binge watching vs. linear TV
Social TV
FCC’s proposed “open set top box plan”
Social network influences
Uncertain future for cable TV growth

37. Feature-Length Movies
Hollywood maintaining control of content creation, delivery, and revenue
DVDs, rental DVDs
Electronic Sell Through (EST) – downloading movies
Subscription streaming
Video On Demand (VOD)
Challenges
Digital formats produce less revenue than physical
Pressure to change release windows
Growing strength of online movie distributors like Netflix
Sites streaming or providing downloads of pirated content

38. Figure 10.17: Major Online Movie Distributors
Figure 10.17, Page 695.
Apple dominates downloading and purchasing of movies, while Netflix leads in streaming movies and TV shows.
SOURCES: Based on data from industry sources, authors’ estimates.

39. Insight on Technology: Hollywood and the Internet: Let’s Cut a Deal
Class Discussion
What challenges has the Internet posed to traditional Hollywood movie distribution? What is the biggest challenge?
Can Internet distribution work with the “release window” strategy?
Do you think Hollywood is doing a better job of protecting its content than the music industry?
What is the most realistic and profitable path forward for the Hollywood film industry?

40. Music Most disrupted of content industries
Move from physical to digital product
Distributor market dominated by Apple’s iTunes
Digital revenues: 70% of all revenues
Two types of digital music services
Streaming subscription services (Internet radio)
Digital download (download to own)
Increasingly uses cloud storage
33% of all digital music industry revenue

41. Figure 10.18: U.S. Music Revenues: Digital vs. Physical
Figure 10.18, Page 700.
Music industry revenues have fallen by 50% since 2000, and have only recently stabilized at around $7 billion. Digital music now makes up about 70% of all music revenues.
SOURCES: Based on data from RIAA, 2016, 2015.

43. Games Online gaming has had explosive growth Types of digital gamers
Pokemon GO
Mobile platform
Types of digital gamers
Casual
Social
Mobile—fastest growing market
Massively multiplayer online (MMO)
Console
Business models in flux
E-sports, Twitch.tv

45. Figure 10.21: Online Gaming Audience
Figure 10.21, Page 704.
SOURCE: Based on data from eMarketer, 2016c.