1. E-Commerce in action Content Providers – Digital Media

2. 2 The Media  The web is a communications medium and so a source of on-line content.  The major elements of the media are :- –publishing - newspapers, books and magazines and –entertainment - television, film (including videos & dvds), games and music.  These industries constitute the largest share of the commercial content market place both off-line and on-line.  Internet usage is beginning to cannibalise (take away part of the market of) the traditional media distribution channels.

3. 3 Online Content Providers – media revenues  Television remains the major producer of media revenues - 25%.  newspapers still generate a surprisingly large 14% of revenues.  On-line content revenues are rising but still relatively slow except say music via platforms such as iTunes

4. 4 Major challenge  The major challenge is overcoming the expectation of free content.  Content on the web is still mostly free but getting less so, but most web users expect it to be free.  In a recent survey a group of Internet users were asked to pay for content that used to be free: –50% found an alternative source –38% stopped getting the information or service –only 12% agreed to pay for content!  Content providers like the Wall Street Journal are enhancing their content to entice more fee-paying customers.  Subscribers to the printed version of The Economist get free on-line access to its archives.

5. 5 Media convergence There are three different categories :-  technological convergence – the development of hybrid devices;  content convergence – design, production and distribution;  media industry convergence – the merger of media enterprises using multiple platforms.

6. 6 Technological convergence Hybrid devices combine the functionality of two or more media platforms, such as books, newspapers, television, dvd / video, radio and stereo, into a single device. Examples :- –Smart phones can be used as mobile phones, book readers and Satnavs –television sets (increasingly digitally interactive) which can surf the web; –video game machines that can also surf the Internet; –PCs that can record and play music; –smart phones with web access.

7. 7 Content convergence Here there are three aspects – design, production and distribution. Design : Content becomes transformed as artists learn to exploit the capabilities offered. Example: –European painters of the 16 -17th century - Caravaggio, Vermeer etc. quickly adopted new devices, as they were invented, like lenses, mirrors and early projectors such as the ‘camera obscura’. –paintings took on more precision and detail and realism. –new theories of perspective and new techniques of painting landscapes and portraits were developed. –a similar process is taking place today as artists assimilate new digital and internet tools.

8. 8 Content convergence (cont) Production  the most significant cost of content is its creation;  new tools for digital editing and processing are now available;  content is created on digital devices (hardware and software) once only;  it can then be delivered on multiple digital platforms;  it can be modified as necessary for a variety of platforms and distribution channels.

9. 9 Content convergence (cont) Distribution  distributors and consumers need new devices to receive, store and use the product. Example:  film distributors now deliver copies of new films to most cinemas as 35mm film ($1500 – $2500 per copy);  digitally downloading via satellite requires cinemas to be equipped with servers, storage devices etc;  new digital projection equipment is also needed.  This area is developing very quickly

10. 10 Media industry convergence  is the merger of media enterprises into powerful synergistic combinations.  They can cross-market content on many different platforms.  Traditionally each medium (film, text, music, television etc.) had its own separate industry.  The internet has created forces which make mergers plausible or perhaps even necessary.  Substantial investment is needed to finance the necessary changes in technology and content.  An example is the merger between AOL and Time Warner.  This merger provides a simple platform for the creation and distribution of high value content (but eventually broke up)

11. 11 Media industry convergence (cont) Industry convergence is only very slowly happening because:  customers still prefer the traditional media;  technology is not yet quite ready to distribute content effectively, conveniently and economically;  content creators, who are still creating content for each of the separate media, need to know what features are sellable to consumers;  a profitable business model is still not clear as technology changing so rapidly.

12. 12 Revenue models There are five basic models :-  marketing  advertising  pay per view / pay for download  subscription  value-added.

13. 13 Revenue models (cont) Marketing  Content is given away free in the hope that site visitors will purchase the product or see the show off-line.  This increases brand awareness and loyalty.  Costs are partially recouped by sales of product-related paraphernalia. Advertising  Content is free to the consumer while advertisers pay for the costs of that site.  This has been fairly unsuccessful in generating revenue – some, however, like the W S J have generated enough revenue to cover costs and more.  Now contextual advertising replacing “traditional” advertising on content rich sites.

14. 14 Revenue models (cont) Pay per view  Content providers charge for each viewing of premium content such as video, book, article, report etc.  This is not very successful (yet) with general audiences.  It tends to work for targeted audiences looking for niche / rich content.  As more bandwidth becomes available to domestic customers so that the internet can deliver television quality video or live coverage of sports, music concerts etc. then this model will work.  Pay per track – iTunes – very successful  Apps pay per download also showing enormous growth

15. 15 Revenue models (cont) Subscription  A monthly or annual fee is charged for access to content.  Fierce competition with free content makes it a difficult model.  It works well for some niche offerings which are unavailable elsewhere.  Access is available to rich, archived files and reports.  The Times and The Sunday Times now following a subscription model.

16. 16 Revenue models (cont) Value added.  An access fee (included in price) is added to the price of a traditional product which allows premium content to be viewed.  Example - text books are often sold with a value-added CD stuck in the book.  The CD adds perceived value as well as to the price of the book.  Similarly a web access code can be pasted into a book and users can access premium content on the web site.  As a model it is still unproven and measuring the revenues generated is proving rather difficult.

17. 17 Revenue model (cont)  There are four main factors in making a profit from free to fee :- –target a focused audience. –provide specialised content. –be the sole source monopoly for the content. –engender high perceived net value so consumers believe there is value in obtaining the information instantaneously on the web.  An example is Hoover Online which offers specialised content on businesses and executives to business analysts and executive search firms.  It has high value because it can be quickly accessed, searched and downloaded into other documents and made part of the process of business decision-making.

18. 18 Key challenges The key challenges for owners and producers are:  bandwidth – critical bottlenecks in home bandwidth must be overcome;  platform – the unsuitability of the PC screen is a brake;  cost – internet distribution is far more costly than originally anticipated;  consumer attitudes – resistance to paying for web content must be overcome;  cannibalisation of existing distribution channels must be contained;  rights management considerations need careful handling.

19. 19 Key challenges (cont)  Bandwidth is not a problem for newspapers, e-books, magazines etc. nor for audio.  For textual material including still images, the whole item is normally downloaded before play back starts.  This is not acceptable for audio or video clips of any length because the download time is too long  Therefore streaming is used. The material is played back as it is received. This requires the network to provide a guaranteed throughput in order to avoid jitter  The limiting factor is not the capacity of the network as a whole but the capacity of the ‘last mile’, that is, the link to the customer’s home.

20. 20 Key challenges (cont)  Full motion video is bandwidth intensive. VCR PAL quality requires 1.5 Mbps (megabits per second) and normal TV quality 15 Mbps.  Distributing the same video signals to many customers simultaneously (multicasting, e.g., of a live sports event) does not load the network too heavily but still requires a high bandwidth link to the customer.  Video on-demand, that is, distributing different video signals (or the same signals at lots of different times) to many customers is a challenge to the supplier’s server and to the network.  BBC iPlayer was a cause for concern but increasing bandwidth has dealt with it

21. 21 Key challenges (cont)  Substantial costs of migrating, repackaging and ultimately re-designing content.  Simple first step is to migrate existing content.  Even this requires staff with new skills, web designers and technicians and a delivery mechanism.  Re-design is most costly – a creative team of artists, writers, producers, directors and editors is needed that understands demand of the WWW.

22. 22 Key challenges (cont) Consumer attitudes  consumers have strongly resisted paying for content;  however, this is changing - media companies are delivering high value, focused and deep information and content. Cannibalisation  what happens to existing channels when books, music and videos are available online for half the price?  what about cinemas when films can be downloaded?  prices from producers must not be so low as to choke off higher priced channels;

23. 23 Key challenges (cont) Intellectual property rights  Once digitised, content can easily be stolen, copied and distributed.  Peer to peer networks exploit this fact and are difficult to control.  Preventing high quality theft is daunting and perhaps it helps to prevent more high quality content from reaching the web.  Various encryption schemes have been employed to keep out thieves and hackers.  Most countries have laws to protect the legitimate owners but in some countries they are enforced more effectively than in others.  Another major issue concerning rights is how to calculate the royalties paid to artists and writers for electronic editions.

24. 24 On-line publishing and entertainment On-line newspapers: key factors  audience size and growth –nearly 75% of internet users read news on-line, spending some 30 – 45 minutes per week on average; –in terms of volume this is the most successful type of on-line content;  content –premium archived content; –fine- tuned search ability; –timeliness; –content with reach and depth;  competition –new on-line classified ads firms have developed rich specialist content in areas like cars, computers, cameras etc; –this has drained revenue from some newspapers – particularly local ones which depend on advertising for survival.

25. 25 Newspapers Revenue models  on-line newspapers rely predominately on advertising  some use pay per view for premium or archival content  this latter has not been a particularly successful business model  W SJ is an exception, which successfully uses the subscription model  Times using subscription and iPad/Android tablets

26. 26 Newspapers Convergence is in its infancy:  technology – the first step has been completed, which was the movement of published text to the web;  Next step is beginning with portable devices;  on-line newspapers look unmistakably like printed newspapers;  however, by using advanced page layout software, text and online content can easily be re-used.

27. 27 Newspapers (cont) Challenges  The value of a newspaper is mainly in the intellectual content created by its writers and in the classified listings created by advertisers.  Significant investment has been and is continuing to be made in web content delivery.  Newspapers face difficulties in controlling access to their valuable premium content.  Example - an archive article is paid for (nominal fee £2.00) and downloaded from a national newspaper – it can then be posted to a web site and distributed everywhere.

28. 28 E-books  Buying books on-line is one of the most popular activities of internet users.  The huge on-line audience has had a significant impact on book distribution and sales.  But will people buy electronic versions of books? –Looks like it – 1.05 : 1 (May 2011) Amazon  How much is someone prepared to pay for an e-version –Less? –More?  How convenient will they be? How portable are they?  Cost – Around £60 to £150

29. 29 E-books (cont) There are many different types of e-books. The most common are:  web accessed e-books –stored on the publisher’s servers –consumer pays a fee for reading the book on screen; –the most successful of these are online encyclopaedias.  web downloadable –can be downloaded, stored on the client’s device and printed when required; –Some are free –Some pay per book –Some annual subscription

30. 30 E-books (cont) Dedicated e-book readers  single purpose devices that have proprietary operating systems that can download files specially created for them  single purpose devices that have proprietary operating systems that can download files specially created for them  rather expensive but becoming widely used > 300 million Kindles sold (?)  being bought by serious readers  general purpose smartphone/tablet handheld devices offer a much larger potential market

31. 31 E-books (cont)  The e-book industry comprises –intermediary retailers –traditional publishers –technology developers –vanity presses.  The primary e-book revenue model is pay for download.  Major publishers (commercial) are moving relatively slowly but accelerating.  Academic textbook publishers moving towards the web rather faster.

32. 32 E-books (cont) Advantages  reduced transaction costs for the user;  instant downloading;  increased accessibility to entire libraries;  modularisation of the book’s content;  lower production and distribution costs;  increased opportunities for writers to publish;  increased availability of out-of print books;  reduced cost of library functions.

33. 33 E-books (cont) Disadvantages  less portable than printed books;  multiple competing standards;  reduced quality of print on screen;  require expensive and complex electronic devices;  uncertain business models;  copyright management and royalty issues with writers are not yet settled.

34. 34 Entertainment industry In the ideal e-world one would be able to :- –watch any film –watch any video / dvd –listen to any music –watch any television show whenever one wanted. Billing for these services would be monthly from a single provider Not yet! But the foundations are being built now.

35. 35 On-line entertainment  Traditional entertainment content in order of e use is: –music downloads, –online games, –adult content, –sports and film.  However time spent at music sites is not high because music is usually downloaded and used later.  Consumers are defining new forms of media entertainment and this is happening in the absence of the media titans.

36. 36 On-line entertainment (cont) Revenue model  mainly by subscription and pay-as-you go;  early online music sites used an advertisement revenue model but this was mostly unsuccessful;  television and film sites use a marketing model to extend their brand and influence an audience for offline products;  these now also use subscription;  content owners and producers are seeking to own their own distribution channels – cutting out the profits of distributors, resellers and retailers;  successful media companies will need to own their entire value chain from content creation to consumer use.

37. 37 On-line entertainment (cont)  The technology platform for music has converged PCs and handheld devices to become music listening stations (MP3).  The PC can now be used as a game station and games stations are now connected to the internet.  Television and films are slowed by lack of standards, slow acceptance of high bandwidth and inadequate internet backbone capacity.  However, it is expected that by 2010 many homes will be equipped with multi-megabit connections to the internet.

38. 38 On-line entertainment (cont) Digital tools  Music is recorded on digital devices and mixed using digital mixers before production and distribution.  Composers, arrangers and music educators have widely adopted two digital notation programmes – ‘Finale’ and ‘Sibelius’ – to create musical scores.  Digital cameras are now used and digital effects play a large role in lots of films.  Digital editing on computer workstations is now the rule – before the images are returned to 35mm film.  In television, editing and production are almost entirely digital.