Business Models In Media Industries

Definitions (1) A business model is an action methodology for the systematic and routine generation of money or equivalent resource

Definitions (2) “Business models are created and understood by stepping back from the business activity itself to look at its bases and the underlying characteristics that make commerce in the product or service possible” (Picard, 2002, pp )

Definitions (3) “A business model…is the mechanism by which a business intends to generate revenue and profits “It’s what a company does and how it makes money doing it” (Malone, MIT)

Components of a Business Model (1) How the business will select customers How it defines and differentiates its product offerings How it creates utility for its customers

Components (2) How it acquires and keeps customers How it goes to the market (promotion strategy and distribution strategy) How it defines the tasks to be performed How it configures its resources How it captures profit

MAJOR BUSINESS INCENTIVES The attraction of money The fear of losing money The attraction of risk-free money The attraction of continuous risk- money

Leading to… A process of constant process of adaptation and change to protect and to grow business in the face of challenges that are internal to the business or external to it.

Internal Challenges Include Insufficient or aging plant Insufficiency of human resource relating to numbers, skills, turnover, demographics Insufficiency of capital

External Challenges Include Changes in regulatory structure Changes in client demand Changes in available technologies of production, distribution or reception Changes in industry structure relating to competition, conglomeration etc

Tracking Media Change Technology Production Distribution Reception Audience Regulation

In the Case of Recording Technology From Telephone and Radio, through Vinyl to Cassette and Compact Disc to Digital Downloads Symbiotic relationship with (1) Radio technology, from being a means of promoting the sale of radio sets, through to being a means of attracting audiences to radio stations, to being a means of promotion the sale of music and records, of attracting payola revenue from the industry, and attracting advertising (2) Movies, Music Video, Cable and Satellite Television

Tracking Change in Recording (2) Production Conglomeration of labels down to four majors (Sony/BMG, EMI, Universal and Warner), accounting for 75% of worldwide sales and 85% of US sales by mid-decade. Changing relationships between independents and the majors

Tracking Change in Recording (3) Distribution (from Label to Wholesale and Retail Outlet) Symbiotic relationship with (1) Radio broadcasting first to promote sale of radio sets, then to attract audiences, to promote sale of sheet music and records, attract payola, and advertising (2) Movies, Music Video, Cable and Satellite Television Symbiotic relationship with (1) Retailers (owned by labels, independent), and sales tracking methodologies (2) Music clubs, dependent on mail and digital download (3) Peer-to- peer digital file swapping (4) Digital music store, with exclusive relationships to reception technologies (such as iPod)

Tracking Change in Recording (4) Reception From gramophone to cassette player, walkman, computer, iPod and mobile phone Symbiotic relationship between changes in hardware of reception technology and physical character of the product, so that each major change of reception technology (e.g. cassette player) required users to repurchase their music portfolios

Tracking Change in Recording (5) Audience - Audience behavior changes towards: -Great mobility of listening opportunity -Greater access to available music -Greater control over what to listen to, and when to listen to it -Greater opportunity to produce and distribute as well as to listen -Greater choice over spending strategies (e.g. reflecting rise of the vinyl single, displaced by rise of the album, in turn displaced by rise of the digital single)

Tracking Change in Recording (6) Regulation Controls over payola 1996 Telecommunications Act, and increased concentration in radio

Example: The Changing Business Models of Online Content Services (1) The Videotext Model Used TV screens to convey text (1970s) Allowed publishers to easily update Used existing content, and existing distribution infrastructure Gave added value to high end TV sets Content download fairly slow Limited words per page; limited readability Customers insufficiently impressed

Online Content Services (2) (2) Paid Internet Model (1980s) Used pre-existing Internet infrastructure Involved charging a fee for web access Complicated processes to get access Customers didn’t like to pay

Online Content Services (3) Free Web Model (1990s) Enabled by widespread distribution of browsers in standard software packages on new computers Content generally free, serving as promotional tool or special interest service Traditional media could re-use existing material But insufficient revenue possibilities

Online Content Services (4) The Internet/Web Ad Push Model Used lists of subscribers and subscriber details to attract adverts Or found adverts related to the content Similar to direct mail Audiences did not like intrusiveness of ads

Online Content Services (5) The Portal and Personal Portal Model Users of web browsers are brought to an organizing interface and to adverts Readers are brought into contact with click-through ads (often only one a page) while making other uses of the page. Lowers reader resistance to ads Portal organizes content in a way that is attractive/useful for readers; acquires brand image. Still not producing profits for most portal operators

Online Content Services (6) The Digital Portal Model Development of multipurpose digital portals, allowing combination of current content portals with streaming video and audio, including pay-per-view services, and chat facilities Revenue from ads, from pay-per-view, premium service subscriptions