1. Copyright © 2012 Pearson Education, Inc.

2. Online Content and Media
Chapter 10
Online Content and Media

3. Information Wants to Be Expensive
Why did the Wall Street Journal succeed with a subscription model?
Would you pay to read a daily newspaper online? Why or why not? Would you pay for access to online archives of newspapers and/or magazines?
Do you think newspapers can make the transition from “print on paper” to “news on-screen”?
What do you think about the New York Times’ new subscription-based model?
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4. Trends in Online Content, 2011–2012
Increased media consumption
Smartphones and tables create “fourth screen”
Growth of social and local content
User-generated content growing, inverting traditional production/business models
Apple, Google, Amazon, Facebook vie for ownership of online content ecosystem
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5. Trends in Online Content (cont.)
Internet advertising revenues expanding rapidly
Increased consumer acceptance of paying for premium content
Content owners adapt mixture of advertising, subscription, a la carte payment for business model
Convergence
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6. Content Audience and Market
Average American adult spends 4,400 hrs/yr consuming various media
2011 media revenues: $580 billion
Over 75% of the hours spent consuming TV, radio, Internet
2.5 hrs/day on Internet
Internet usage doesn’t reduce TV viewing
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7. Media Consumption Figure 10.1, Page 651
SOURCE: Based on data from U.S. Census Bureau, 2010, authors’ estimates
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8. Internet and Traditional Media
Cannibalization vs. complementarity
Time spent on Internet reduces time available for other media
Books, newspapers, magazines, phone, radio
Conversely, Internet users consume more media of all types than non-Internet users
Internet users also often “multitask” with media consumption
Multimedia—reduces cannibalization impact for some visual, aural media
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9. Media Revenues by Channel
Figure 10.2, Page 652
SOURCE: Based on data from U.S. Census Bureau, 2011; authors’ estimates.
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10. Relative Size of the Content Market, Based on Per-Person Spending
Figure 10.3 Page 653
SOURCE: Based on data from U.S. Census Bureau, 2011; authors’ estimates.
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11. Digital Content Delivery Models
Three commercial content business models
Paid
Free with advertiser support
Freemium
Free content can drive users to paid content
Users increasingly paying for high-quality, unique content
Music, games, newspapers, movies
Online paid content audience growing rapidly
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12. 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
29 million buy from legal music sites
Newspapers charging for premium content
YouTube cooperating with Hollywood production studios
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13. Media Industry Structure
Three separate segments, each dominated by few key players
Publishing,
Newspapers
Entertainment
Larger media ecosystem
Includes millions of individuals, entrepreneurs (blogs, YouTube, independent music bands)
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14. Media Convergence Technological convergence: Content convergence:
Hybrid devices combining functionality of existing media platforms, e.g., smartphones
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
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15. Convergence and the Transformation of Content: Books
Figure 10.5, Page 659
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16. Online Content Revenue Models and Business Processes
Marketing
Free content drives offline revenues
Advertising
Fee content paid for by advertising
Pay-per-view/pay-for-download
Charge for premium content
Subscription
Monthly charges for services
Mixed
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17. Making a Profit with Online Content
25% users will pay for some content
Four factors required to charge for online content
Focused market
Specialized content
Sole source monopoly
High perceived net value
Portion of perceived customer value that can be attributed to fact that content is available on the Internet
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18. Revenue and Content Characteristics
Figure 10.6, Page 664
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19. Key Challenges Facing Content Producers and Owners
Technology
Bandwidth issues for HD video, CD-quality music
Cost
Internet distribution more costly than anticipated, for migrating, repackaging, and redesigning content
Distribution channels and cannibalization
Digital rights management (DRM)
Use of technology to circumvent DRM
Interests of content creators vs. technology companies that profit from illegal downloads
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20. Who Owns Your Files?
Why does digital content need any more protection than analog content stored on records and tapes?
What is DRM software? Have you ever encountered digital content that is protected with DRM?
Why did Apple abandon its DRM software? Is DRM working for Amazon’s Kindle?
Does it matter to the consumer whether content purchased is “owned” or “licensed”?
How does DRM potentially interfere with “fair use” of copyrighted material?
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21. Online Newspapers Most troubled segment of publishing industry
60% have reduced staff
Failure to protect content from free distribution
However:
Online readership growing at 16%
Mobiles, tablets provide new avenues
More users willing to pay for premium content
Aggregators are recognizing need for high-quality content to distribute and use for advertisements
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22. Monthly Unique Visitors at Online Newspapers
Figure 10.7, Page 671
SOURCES: Based on data from comScore, 2011a; Compete.com, 2011.
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23. Newspaper Business Models
Initially fee-based, then free, and now beginning a return to fee-based
Newspaper headlines are primary content on Google News, Yahoo News
New York Times now charging for premium access
Newspaper efforts to ally with Internet titans
New reader devices with reader apps
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24. Convergence in Newspaper Industry
Technology:
Slow move to Internet; beginning to incorporate video, RSS, user feedback
Content:
Four content changes
Premium archived content
Fine-grained searching
Videos reporting
RSS feeds
Timeliness allows competition with TV/radio
Industry structure: Has not seen much convergence due to limited returns
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25. Challenges: Disruptive Technologies
Newspapers: a classic case of disruptive technology?
Industry still in flux
Newspapers have significant assets:
Content
Readership
Local advertising
Audience (wealthier, older, better educated)
Online audience will continue to grow in numbers and sophistication
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26. E-books Some predicted that Internet would mean dwindling of books
Today, book publishing generates $24 billion
Publishing industry concerns:
How much to charge for e-books
What content enhancements encourage purchasing of e-books
Best business relationship with distributors
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27. E-books Evolution Types of commercial e-books
Project Gutenberg (1970s)
Voyager’s books on CD (1990s)
Adobe’s PDF format
Types of commercial e-books
Web-accessed e-book
Web-downloadable e-book
Dedicated e-book reader
Kindle, Sony, Nook
General purpose reader
Print-on-demand books
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28. Book Audience Size and Growth
Americans read about 10 books per year per person
Americans spend $95/year on trade books, more than video games, in-theater movies
Book readership is flat, anchored in the 40+ population
Professional, educational publishing growing 2 times as fast as economy
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29. Growth of E-book Revenues 2009–2015
SOURCES: Based on data from Assoc. of American Publishers, 2011; eMarketer, 2011b; authors’ estimates.
Figure 10.9, Page 680
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30. E-book Industry Revenue Models
Wholesale model
As with traditional publishing, retailer pays wholesale price and marks price up
With lowered prices of e-books, profits to publisher are also lower
Agency model
Publishers set retail price and designate an agent who receives 30% commission
Leads to higher, fixed prices for e-books
Google, Amazon, Apple benefit primarily by selling e-book readers
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31. Convergence in Publishing Industry
Technological convergence slowed by:
DRM concerns
Competing standards (Kindle, Nook, iPad)
Content convergence
User experiences is still turning pages of text and graphics
Industry structure
Print publishing industry in flux
Non-physical books
Authors bypassing traditional publishing and distribution
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32. The Future of Books
What technologies are changing the concept of what a book is?
Do you consider Wikipedia a “book,” and if so, what type of book?
What qualities makes Unigo a threat to traditionally published college references?
Are some types of traditional books more threatened by Internet technologies than others?
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33. Online Entertainment Industry
Major players:
Television, radio, Hollywood films, music, video games
Internet is transforming industry, along with:
Smartphones, tablets as video, music platform
Online streaming, Netflix
Social network platforms
Viable business models in music subscription services
Widespread growth of broadband
Business models that eliminate need for DRM
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34. The Five Major Players in the Entertainment Industry
SOURCE: Based on data from U.S. Census Bureau, 2011; NPD Group, 2011, authors’ estimates.
Figure 10.10, Page 686
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35. Online Entertainment Audience Size
Online “traditional” entertainment
Online video has largest audiences, followed by music, games
User-generated content:
Substitutes for and complements traditional commercial entertainment
Two dimensions:
User focus
User control
Sites that offer high levels of both will grow
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36. Projected Growth in Traditional Online Entertainment (in Millions)
Figure 10.11, Page 688
SOURCES: Based on data from industry sources; authors’ estimates.
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37. User Role in Entertainment
Figure 10.12, Page 689
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38. Content
Internet has greatly changed packaging, distribution, marketing, sales of traditional entertainment
Greatest impact: Music
From CD of 12–15 songs to single-song downloads
Groups can bypass traditional marketing and sales
Revenue Models:
Marketing, advertising, pay-per-view, subscription, value-added, mixed
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39. Convergence in Entertainment Industry
Technology convergence:
Smartphones, tablets become music listening devices, video players, game stations
Game stations connect to Internet, stream movies
Movies and television
Move toward Internet distribution
iTunes Store
Netflix
Hulu
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40. Convergence in Entertainment Industry (cont.)
Content convergence
Significant progress toward digital tools for content creation and production
Digital cameras, workstations
Music recording and production highly digitized; some distribution direct to Internet, bypassing CD production stage
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41. Convergence in Entertainment Industry (cont.)
Industry structure
Fractured: Many players and forces shape industry
Reorganization of value chain needed for aggressive move to Web
Possible alternative models
Content owner direct model
Internet aggregator model
Internet innovator model
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42. Entertainment Industry Value Chains
Figure 10.13, Page 693
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43. What strategies has Hollywood pursued to combat movie piracy?
Insight on Technology Hollywood Meets the Internet: Round 3 Class Discussion
What strategies has Hollywood pursued to combat movie piracy?
Are there legitimate ways that videos can be distributed on the Web?
How can the differentiation of DVD products help in combating piracy?
Do you think Hollywood is doing a better job of protecting its content than the music industry?
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44. Copyright © 2012 Pearson Education, Inc.