Lecture E-commerce (7/e): Chapter 10 - Kenneth C. Laudon, Carol Guercio Traver

Chapter 10 - Online content and media. The main contents of this chapter include all of the following: Trends in online content, 2010-2011; content audience and market; internet and traditional media; digital content delivery models; media industry structure;...

seventh edition

Copyright © 2011 Pearson Education, Inc.

 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’

plan for a subscription-based model? Slide 10­3

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Trends in Online Content, 2010­2011

 Increased media consumption

 Internet media revenues fastest growing

 Growth of Internet audience outpaces other

media

 User-generated content growing, inverting

traditional production/business models

 Entertainment moves to mobile devices

 Internet advertising revenues expanding rapidly

Slide 10­4

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 Content owners adapt mixture of advertising,

subscription, ala carte payment for business

model

 Paid content and free content coexist

 Convergence

 Newspapers in transition to online models

 Web becomes entertainment powerhouse

 Consumers increasingly support time-shifting,

space-shifting in media consumption

Slide 10­5

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Content Audience and Market

 Average American adult spends

3,900 hrs/yr consuming various

media

 2010 media revenues: $973 billion

 TV, radio, Internet: Account for over 80% of the hours spent consuming

media

 20 - 30% substituting online

entertainment for traditional

Slide 10­6

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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

Slide 10­8

 Typically free, advertising supported

 YouTube the leading advertiser-supported video site

Slide 10­11

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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

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Media Industry Structure

 Pre-1990, smaller independent

corporations in separate industries

 Today, three separate segments:

Publishing, newspapers, entertainment

Each segment dominated by a few key

players

 Larger media ecosystem includes

millions of individuals, entrepreneurs (blogs, YouTube, independent music bands)

Slide 10­13

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Media Convergence

 Technological convergence:

Hybrid devices combining functionality of

existing media platforms, e.g PDAs

Merger of media enterprises into firms that

create and cross-market content on different

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Making a Profit with Online Content

 25% users will pay for some content

 Four factors required to charge for

online content

1. Focused market

2. Specialized content

3. Sole source monopoly

4. High perceived net value

 Portion of perceived customer value that can be attributed to fact that content is available on the Internet

Slide 10­17

 Distribution channels and cannibalization

 Digital rights management (DRM)

 Use of technology to circumvent DRM

 Interests of content creators versus technology

companies that profit from illegal downloads

Slide 10­19

 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?

Slide 10­20

 Online newspapers one of most

successful forms of online content to date

Few have reached break-even

 Aggregators have used Web to take away part of newspapers’ content/business –

classifieds (Craigslist), weather, news, etc.Slide 10­21

672

 Newspaper headlines are primary content on

Google News, Yahoo News

 Newspapers have sought industry-wide

alliances, e.g CareerBuilder

 Other strategies

 Revenue sharing with Internet titans

 New reader devices

Slide 10­23

 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

Slide 10­24

 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 Slide 10­25

Dedicated e-book reader

 Kindle, Sony, Nook

General purpose PDA reader

Print-on-demand books

Slide 10­26

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Growth of E­Book Revenues 2009­2014

Slide 10­28

SOURCES: Based on data from Assoc of American

Publishers, 2010; authors’ estimates Figure 10.9, Page 680

 Licensing of entire e-libraries of content

 Similar to subscription model, monthly or annual fee

 Customers typically major institutions, libraries

 Advertising-supported model

 Distributor (e.g Google) arranges for rights to display book, shares ad revenues with publishers

Slide 10­29

1 Poor resolution of computer screens

2 Lack of portable reader devices to compete with

book

3 DRM concerns

4 Lack of standards

 Potential solutions

 Sub-pixel display technologies

 Electronic ink technology

 DRM software

 Emerging standards: OEB, ONIX

Slide 10­30

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Convergence in Publishing Industry(cont’d)

 Content

 E-books in media integration stage

 XML and large-scale online text/graphic storage systems have transformed book production and made it more efficient

 Industry structure

 Industry still dominated by a few titans

 Some challenges from:

 Google, Microsoft in indexing copyrighted books

 Barnes & Noble move into publishing

 Self-publishing

Slide 10­31

 What qualities makes Unigo a threat to

traditionally published college references?

 Are some types of traditional books more

threatened by Internet technologies than others?

Slide 10­32

brought about by Internet, aided by:

 iPod/iPhone video and music platform

 Digital cellular networks

 Social networking platforms

 Viable business models in music subscription

services

 Widespread growth of broadband

 Business models that eliminate need for DRM Slide 10­33

Figure 10.10, Page 687 SOURCE: Based on data from U.S Census Bureau, 2010; NPD

Group, 2010, authors’ estimates.

SOURCES: Based on data from eMarketer, 2010,

Stevenson, 2010; authors’ estimates Figure 10.11, Page 689

 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

Slide 10­38

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Convergence in Entertainment Industry

 Technology convergence:

PCs and handheld devices (iPods)

become music listening devices

PC has become game station

Game stations connect to Internet

Movies and television

Move toward Internet distribution

 iTunes Store, Netflix, Hulu

Slide 10­39

Digital cameras, workstations

Music recording and production highly digitized; some distribution direct to

Internet, bypassing CD production stage

Slide 10­40

Reorganization of value chain needed for

aggressive move to Web

Possible alternative models

 Content owner direct model

 Internet aggregator model

 Internet innovator model

Slide 10­41

 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?

Slide 10­43

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