IS2505 e-Business

Lecture 5
Online Media

Prof. Yongjin Park

Department of Information Systems
 Recap
Key Elements of a Business Model

Components Key Questions

Value Proposition Why should the customer buy from you?
Revenue Model How will you earn money?
Market Opportunity What marketspace do you intent to serve, and what is its size?
Competitive Environment Who else occupies your intended marketspace?
Competitive Advantage What special advantages does your firm bring to the
marketspace?
Market Strategy How do you plan to promote your products or services to
attract your target audience?
Organizational Development What types of organizational structures within the firm are
necessary to carry out the business plan?
Management Team What kind of experiences and background are important for the
company’s leaders to have?

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 Recap
B2C Business Models

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 Recap
B2B Business Models

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 Recap
Business Strategy

Strategy Description Example

Differentiation Making products and services unique Warby Parker (vintage-
and different in order to distinguish inspired prescription
them from those of competitors eyeglasses)
Cost Competition Offering products and services at a Walmart
lower cost than competitors
Scope Competing in all markets around the Apple iDevices
globe, rather than merely in local,
regional, or national markets
Focus/Market Niche Competing within a narrow market or Bonobos (men’s clothing)
product segment W. W. Grainger
Customer Intimacy Developing strong ties with customers Amazon

Any suggestions for Bauhaus

to use any of these strategies?
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E-commerce: business. technology. society.

Chapter 10

Online Media

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Learning Objectives

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

2. Understand the key factors affecting the online publishing industry

3. Understand the key factors affecting the online entertainment industry

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Learning Objectives

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

2. Understand the key factors affecting the online publishing industry

3. Understand the key factors affecting the online entertainment industry

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Trends in Online Content

‣ Mobile platform accelerates the transition to digital content

‣ Tech companies become significant players in content production business

‣ Continued growth of digital video consumption

‣ E-book sales growth slows

‣ Online readership of newspapers exceeds print readership

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Trends in Online Content (cont.)

‣ Streaming services, the largest consumers of Internet bandwidth

‣ Cloud storage serves huge market for mobile device content

‣ Time spent with digital media exceeds time spent with television

‣ Conflict continues over net neutrality rules

− The principle that Internet service providers must treat all Internet communications equally,
and not discriminate or charge differently

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 Content Audience and Market

‣ Time spent with digital media accounts for 62% of total media time spent

‣ Desktop and mobile use: 8.5 hours/day

https://www.insiderintelligence.com/c https://www.insiderintelligenc
ontent/nearly-third-of-all-us-media- e.com/content/digital-video-
time-will-on-mobile-this-year surpass-tv-us-viewing-time
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Online Content Consumption

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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

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Digital Content Revenue Models

‣ Online content delivery revenue models

− Subscription (“all you can eat”)
− A la carte (“pay for what you use”)
− Advertising supported (free/freemium)

‣ Free content can drive users to paid content

‣ Users increasingly paying for high-quality, unique content

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Media Revenues by Channel

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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
− Millions of users buy from legal music sites
− YouTube cooperating with Hollywood and New York film production studios

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Digital Rights Management (DRM)

‣ Technical and legal means to protect digital content from unlimited reproduction
and distribution

‣ DRM hardware and software encrypts content

‣ Walled garden: to restrict the widespread sharing of (streaming) content

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Media Industry Structure

‣ Three separate segments

− Print
− Movies/TV
− Music

‣ Each dominated by a few key players with little crossover

‣ Delivery platform firms now becoming content producers

− Comcast's acquisition of majority interest in NBC Universal
− AT&T’s merger with WarnerMedia
− Verizon's purchase of Yahoo

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Media Convergence

‣ Being able to get any content you want, when you want it, on whatever platform you want it

‣ Technological convergence
− Hybrid devices: combining the functionality of two or more existing media platforms into a single smart
device

‣ Content convergence
− Three aspects: design, production, distribution
− New tools for digital editing and processing

‣ Industry convergence
− Merger of media enterprises into firms that create cross-market content on different platforms

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Convergence and the Transformation of Content: Books

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Learning Objectives

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

2. Understand the key factors affecting the online publishing industry

3. Understand the key factors affecting the online entertainment industry

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Online Newspapers

‣ Strengths

− Newspaper audience size and growth

• Online readership is growing
• Mobile traffic is continuing to grow for most newspapers

− Content is king
• Quality matters!
• The most trusted source of news
• High levels of ad engagement

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Online Newspapers (cont.)

‣ Challenges

− Digital ad revenue
• Increasing unique visitors, but less valuable:
1) Coming from social media sites just for specific articles (side-door entry)
2) Less engaged visitors from social sites

− Finding a revenue model

• Freemium: subscription fee for premium content
• Metered paywall: access to a limited number of articles for free
• Hard paywall: paid subscription service
• https://www.digitalnewsreport.org/publications/2019/pay-models-2019-update/

− Growth of pure digital competitors

• e.g., HuffPost, BuzzFeed, Vox, and Vice
• Surviving digital disruption (e.g., AI news app) 23
uReply Questions

‣ Where do you get the news? (newspaper, TV, online newspaper, portal, social
media, or else?) Why? And will you subscribe online newspaper in the future?

‣ uReply Mobile App

− or CityU uReply https://cityu.ed2.mobi/student/mobile_index.php
− or Login to Canvas → IS2505 → uReply

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Magazines Rebound on the Digital Platform

‣ Total magazine market size increased

− But, digital ad revenues are expected to be flat

‣ Magazine/newspaper aggregator
− A website or app that provides subscriptions and sales of many digital magazines and
newspapers

‣ Must create a uniquely digital online and mobile version

− e.g., The New Yorker

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E-Books and Online Book Publishing

‣ Extraordinarily rapid growth of e-book sales

− Growth in audio books

‣ Book distribution market has been greatly changed

− But, major publishing firms still maintain their positions

https://www.hexaresearch.com/
research-report/e-book-market 26
E-Book Business Models

‣ E-book industry
− Intermediary retailers, traditional publishers, technology developers, device makers, and
vanity presses (self-publishing service companies)

‣ Wholesale model
− The same model with hard cover books
− Prices are determined by retailer
− Amazon and Apple sell e-books below their cost to sell reader devices

‣ Agency model
− The retailer is an agent and prices are set by the publisher

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Learning Objectives

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

2. Understand the key factors affecting the online publishing industry

3. Understand the key factors affecting the online entertainment industry

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Growth of Online Entertainment Content Revenues

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Online Entertainment Industry

‣ Undergoing transformation brought by the Internet, growth of mobile devices,

and investments by big technology firms in video on demand subscription
services

‣ Entertainment media giants will be technology companies, not content

producers becoming Internet titans

‣ Many of the entertainment producers, film studios, and music labels are having
their own streaming and on-demand service channel, or building relationships
with tech-based distributors (e.g., Netflix, Google, Amazon)

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Home Entertainment: TV and Movies

‣ “Over-the-top” (OTT) services

− Offer consumers access to television shows and full-length feature movies using Internet
service rather than cable or satellite TV service
− e.g., Apple, Google, Amazon, Hulu, Netflix, etc.

‣ Movie industry derives revenue from digital formats

− Selling movies for download (Electronic Sell-Through, EST)
− Selling access on cable or the Internet to specific movies a la carte (Internet Video on
Demand, iVOD)
− Subscription streaming of the Internet

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Home Entertainment: TV and Movies (cont.)

‣ Hollywood faces challenges

− Rapidly changing distribution platform

• Under pressure to distribute to many channels
• Controlling the release window: staging the release of new movies across different distribution
channels within different prices

− Growing strength of online movie distributors

• Creating their own movies and entering the movie production business with the financial strength

− Piracy, illegal downloading

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Music

‣ Digital download services (download to own)

− Enables users to download tracks and albums a la carte and pay a fee for each song (e.g.,
iTunes)

‣ Streaming music services (Internet radio)

− Shifts the concept of owning music to the ability to access music from any device, anywhere, at
any time (e.g., Spotify)
− Ad-supported, subscription service
− Unclear if independent streaming music services have a viable business model

‣ Compensation issue from artists and music labels

− Refuse to allow free ad-supported streaming

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Games

‣ Smart devices drive success in online game industry

− Commission issues in mobile app market

‣ Advertisers are attracted to e-sports and game broadcast over Internet channels
− e.g., Twitch, YouTube
− Young male audience, who are difficult to reach using traditional media
− Sponsors of e-sports: Red Bull, Coca-Cola, Intel, Marvel, Adidas, etc.

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Summary

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

2. Understand the key factors affecting the online publishing industry

3. Understand the key factors affecting the online entertainment industry

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