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

2. 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.

3. 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.

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

5. 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.

6. Convergence an the Transformation of Content

7. 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.

8. Online Content Revenue Models

9. 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

10. 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

11. 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

12. 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

13. Web Reach of Online Newspapers

14. 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

15. 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 or posted for free viewing on a Web site

16. 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

17. 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

18. 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

19. 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

20. 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

21. The Growth of E-Books Revenues

22. 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.

23. Exercise
Suppose you write a book and wanted to publish it while bypassing a established published house
Go to the following sites
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

24. 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

25. Readership of Online Magazines

26. 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

27. 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

28. 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

29. Projected Growth in Traditional Online Entertainment

30. 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

31. User Role in Entertainment

32. 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

33. 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

34. 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.

35. Entertainment Industry Value Chain

36. 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.