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

E­commerce   

business. technology. society.

seventh edition

Kenneth C.
Laudon
Carol Guercio
Traver
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Pearson Education, Inc.
Copyright © 2011 Pearson Education, Inc.


Chapter 10
Online Content and Media

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Slide 10­2


Information Wants to Be Expensive
Class Discussion

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 onscreen?”
 What do you think about the New York Times’
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plan for a subscription-based model?
Slide 10­3



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

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Slide 10­4


Trends in Online Content (cont’d)


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
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

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Slide 10­5


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

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 20 - 30% substituting
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online

Slide 10­6


Media Utilization

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Figure 10.1, Page 651
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SOURCE: Based on data from U.S. Census
Bureau, 2010

Slide 10­7


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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

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Slide 10­8

Media Revenues by Channel

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Figure 10.2, Page 652

SOURCE: Based on data from U.S. Census
Bureau, 2010

Slide 10­9


Relative Size of the Content Market, Based on 
Per­Person Spending

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Figure 10.3 Page 653
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SOURCE: Based on data from U.S. Census
Bureau, 2010

Slide 10­10


Digital Content Delivery Models
 Three

commercial content business
models
 Paid
 Free

with advertiser support
 Freemium

 Free

content can drive users to paid
content
 User-generated content
 Over

89 million users have created, 124 million have
viewed
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 Typically free, advertising supported
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Slide 10­11


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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studios
Slide 10­12


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
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(blogs, YouTube, independent music
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Slide 10­13


Media Convergence
 Technological convergence:
 Hybrid devices combining functionality of
existing media platforms, e.g. PDAs
 Content

convergence:

 Three

aspects: Design, production,
distribution
 New tools for digital editing and processing

 Industry
 Merger

convergence:

of media enterprises into firms that
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create and cross-market content on different
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Slide 10­14


Convergence and the Transformation 
of Content: Books

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Figure 10.5, Page 659

Slide 10­15


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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Slide 10­16


Making a Profit with Online Content
 25%

users will pay for some content

 Four

factors required to charge for
online content
1.
2.
3.
4.

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
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Internet
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Slide 10­17


Revenue and Content Characteristics

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Figure 10.6, Page 664

Slide 10­18


Key Challenges Facing Content Producers 
and Owners
 Technology
 Bandwidth

issues for high definition 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 versus technology
companies that profit from illegal downloads
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Slide 10­19


Insight on Business

Who Owns Your Files?
Class Discussion



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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Slide 10­20



Online Newspapers
 Most

troubled segment of publishing
industry

 However,

online readership growing at

15%
 Online

newspapers one of most
successful forms of online content to date
 Few

have reached break-even

 Aggregators

have used Web to take away
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part of newspapers’ content/business –
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Slide 10­21


Monthly Unique Visitors at Top 10 Online 
Newspapers

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Figure 10.7, Page
672

SOURCES: Based on data from comScore, 2010;
eMarketer, 2010

Slide 10­22


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



Newspapers have sought industry-wide
alliances, e.g. CareerBuilder



Other strategies
 Revenue

sharing with Internet titans

 New

reader devices
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Slide 10­23


Convergence in Newspaper Industry
 Technology:
 Slow

move to Internet; beginning to incorporate video,
RSS etc.

 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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Slide 10­24


Challenges: Disruptive Technologies
 Classic

case of disruptive
technology?
 Industry still in flux
 Newspapers

have significant assets:

 Content
 Readership
 Local

advertising
 Audience
 Wealthier,

older, better educated

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 Online audience will continue to grow in
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Slide 10­25