Online Content Providers: Digital Media Created by, David Zolzer, Northwestern State University—Louisiana

Online Content The Web, by definition, is a source of online content. The average American adult spends over 3,500 hours each year consuming various media. By 2005, this amount is expected to grow to 10 hours per day or 3,650 hours per year.

Internet and Traditional Media Time spent on the Internet reduces consumer time available for other media. Internet users view television only 12.3 hours per week, compared to 16.8 hours per week for non-users. Internet users spent 15% to 20% less time reading books, newspapers, and magazines. Internet users consume more media of all types than non-Internet users. reflects the demographics of the Internet user as more literate, wealthier, more technically savvy, and more media aware. Internet users multitask when using the Internet frequently listening to music, watching television, and using instant messaging while working on other tasks.

Media Revenues Total media revenues were $242 billion in 2000 Expected to increase 5-10 times by 2005

Convergence Technological The development of hybrid devices that can combine the functionality of two or more existing media platforms into a single device. PDAs that can be used as cell phones and book readers is an example. Content Convergence in the design, production, and distribution of content. Content which is created in an older media technology migrates to the new technology largely intact, with little artistic change.

Convergence an the Transformation of Content

Industry Convergence Merger of media enterprises into synergistic combinations that create and cross-market content on different platforms. In the media industry, convergence is the merger of AOL and Time Warner. Challenges and Risks Consumers still prefer traditional media. The technology is not yet quite ready to distribute content effectively and conveniently. Content creators (artists, writers, and producers) do not yet know what features consumers are willing to pay for – they still create content for each of the separate media types. A profitable business model has not yet emerged.

Online Content Revenue Models

Making a Profit With Online Content Online content companies must continually calculate the revenues they receive by offering free content versus --- the revenue they might receive by charging for content. In general, most content firms have decided there is more to be gained by offering free content than charging for it. Four factors required to charge for online content: Focused market Specialized content Sole source monopoly High perceived net value Net value refers to that portion of perceived customer value that can be attributed to the fact that content is available on the Internet

Key Challenges Facing Content Producers Bandwidth Challenges Plenty of long-haul optical fiber bandwidth available Critical bottlenecks in home bandwidth Restrict both the ability for pay-for-view revenue models to develop for films and videos and the development of advanced e-books using video and audio Platform Challenges Current unsuitability of PC screen for viewing DVDs and e-books Unsuitability of PDAs for text display Non-acceptance of wireless cell phones as Web devices

Key Challenges Facing Content Producers Cost Challenges Internet distribution is far more costly than was originally anticipated Substantial costs are faced by media companies in migrating, repackaging, and redesigning content for online delivery Consumer Attitudes Consumers have strongly resisted paying for Web content This may change as media companies learn how to use the Web to deliver high value, focused and deep information and content

Key Challenges Facing Content Producers Cannibalization of existing distribution channels Media companies are often tempted to strike alliances with successful portals or redistributors Risk is the media firm’s brand name will become diluted or displaced Any revenue generated will have to be shared with the intermediary Pricing and value when redesigning content for the Web If the price is set too low, higher-priced and profitable distribution channels could be choked off Rights Management Challenges The ability to protect content from being stolen, duplicated, and distributed for free The issue of royalties paid to artists and writers

Web Reach of Online Newspapers

Online Newspapers Competition Revenue Models Convergence have challenged newspapers by developing deep rich content in specialized areas Revenue Models Predominately advertising model -- supplement by using a pay-per-view model for premium or archival content WSJ has successfully used the subscription model Convergence Technical convergence in infancy with only published text moved to the Web Content convergence in production & distribution Industry structure: no movement to cross-media convergence

Online Newspapers: Challenges Developing wireless mobile delivery platforms and micropayment systems to provide a low-cost mechanism for selling single articles Consumer attitudes have remained intransigent Re: the issue of paying for content Some online newspapers have experienced cannibalization of their main distribution channel Digital leakage paid for and downloaded content is redistributed via e-mail or posted for free viewing on a Web site

Exercise Go to several newspaper sites and sample their offerings – how do they differ from print versions? In your team discuss media convergence in journalism What might be some examples Do you think it is a good idea List some potential pros/cons Share your findings with the class

E-books Web-accessed e-books Web-downloadable e-books stored on a publisher’s server for consumers to access and read on the Web Web-downloadable e-books downloaded, stored as a file on the client PC, and perhaps printed – may require special software Dedicated e-book reader single purpose device with a proprietary operating system that can download from the Web and read proprietary formatted files that can read only on that device

E-Books: Audience and Growth Generated $74 million in sales, 2000 Reading books online is not a popular activity Buying books online is one of the most popular activities of Internet users Future depends on how rapidly traditional trade and academic book publishers move existing and new works to e-book format

E-Books: Content Instant downloading can reduce transaction costs Text is searchable and can be integrated with new text Modularize down to sentence or word level for easy update or change Lowers production and distribution costs Require expensive and complex electronic devices Difficult to read on screen with multiple competing standards Uncertain business models Copyright and royalty issues

E-Books: Revenue Models and Results Industry composed of intermediary retailers, traditional publishers, technology developers, and vanity presses Primary revenue is pay-for-download entirely through online bookstore intermediaries Traditional book industry revenue model has not been changed much by the introduction of e-books Second revenue model involve licensing entire e-libraries Similar to subscription model where users pay monthly or annual fee for access to hundreds of titles Neither business model is yet profitable

The Growth of E-Books Revenues

E-books: Convergence Technological convergence slowed by: Poor resolution of computer screens Lack of portable reader devices that can compete with the portability of a published book Absence of digital rights management technology Lack of standards to define cross-platform e-books so they can be viewed on different devices Sub-pixel display technologies help enhance resolution of e-book reader display screens Digital rights management software helps prevent illegal Web distribution of paid content Content production and distribution convergence XML & large-scale online text/graphic storage systems have made book production more efficient Web has opened up new distribution channel Internet has created new opportunities for authors, publishers, and distributors.

Exercise Suppose you write a book and wanted to publish it while bypassing a established published house Go to the following sites www.iuniverse.com www.xlibris.com What are the procedures Timing Cost Pros/cons Once published, how would you market your book? Select a reporter and report back to the class

Magazines: Audience Size and Growth All of the top 50 offline printed magazines have developed Web sites Online magazines have become an online consumer success story Few online magazines have turned a profit Challenge for online magazines is to become profitable revenue centers Same content advantages as newspapers Users can search archives and breaking news stories can be covered Provide access to exclusive content not available elsewhere Allow readers to share ideas with one another through chat groups and bulletin boards Magazine articles are generally short and can be printed for free

Readership of Online Magazines

Magazines: Revenue Models and Results Advertising model was used unsuccessfully Advertising model may be revived as online advertising expenditures are expected to triple by 2005 and readership is expected to keep increasing rapidly Coupled with excellent demographics, online magazines are expect to boost ad space revenues and allow online magazines to rely on advertising just as their offline counterparts Subscription revenue model is also being used to provide readers with premium content

Magazines: Convergence Very little convergence with other media No readability problems & no need for special readers or software Have not had sufficient investment capital to merge text with audio and video clips Moving branded offline magazines onto the Web has created the opportunity to leverage print content onto the new Internet channel Offline industry has not changed significantly Without old legacy magazines moving online, readership would not have accelerated as it has in 2001 Offline world of national brand magazines is driving online traffic

Online Entertainment Traditional Entertainment such as films, music, sports, and games Feature films and television shows are expected to generate a very small amount of Internet revenue

Projected Growth in Traditional Online Entertainment

Entertainment: Audience and Growth Music downloads lead the list of traditional entertainment followed by online games, adult content, sports, and film Music sites do not have high usage Highest usage level sites are those that allow high level of user control and participation Users are defining new forms of entertainment that do not involve the traditional media titans

User Role in Entertainment

Entertainment: Content Hugh online digital searchable music archives exist from which users can mix and match to create their own personalized content Enables users to become their own music packagers and distributors Offers users high levels of control both program content and program focus

Entertainment: Revenue Models and Results Television and movie sites typically use a marketing model, attempting to extend their brand influence and the audience of their offline product Early online music sites used an advertising revenue model Most entertainment sites are now moving toward subscription models

Entertainment: Convergence Technology platform for music has converged PCs and handheld devices The PC has become a game station with capabilities rivaling dedicated game stations Technology convergence for movies and television has stalled due to lack of standards and the slow acceptance of high bandwidth connections Film and television have yet to experience loss of control over digital distribution Content creation and production convergence occurring with filmmakers & television studios using digital computer workstations The Internet offers entertainment content providers the opportunity to dominate the industry value chain by eliminating the distributors and retailers and selling direct to the consumer.

Entertainment Industry Value Chain

Exercise In your group, research the following terms: Movies on demand Video on demand What are some current methods What are some pros/cons Prepare a brief report for the class.