1. Copyright © 2010 Pearson Education, Inc.Copyright © 2009 Pearson Education, Inc. Slide 10-1 Chapter 10 Online Content and Media

2. Copyright © 2010 Pearson Education, Inc. Trends in Online Content 2009–2010 (Page 654) Increased media consumption (2x work hours!) Internet media revenues fastest growing Fastest growing media in terms of “eyeballs” User-generated content growing Content moves to mobile devices Slide 10-2

3. Copyright © 2010 Pearson Education, Inc. Trends in Online Content Continued Paid content (for premium offerings) and free content coexist Convergence! Ex: TV and Movies streaming online & papers/mags go online and add video Newspapers/mags in transition to online models Web becomes entertainment powerhouse – music, TV, and movies Consumers want to consume media when and where THEY want it…and they usually can! Slide 10-3

4. Copyright © 2010 Pearson Education, Inc. Content Audience and Market Average American adult spends 3,600 hrs/yr consuming various media 2008 media revenues: $654 billion TV, radio, Internet: account for over 80% of the hours spent consuming media 20–30% substituting online entertainment for traditional Slide 10-4

5. Copyright © 2010 Pearson Education, Inc. Media Utilization Slide 10-5 Figure 10.1, Page 655 SOURCE: U.S. Census Bureau, 2009.

6. Copyright © 2007 Pearson Education, Inc. Slide 14-6 Internet and Traditional Media: Cannibalization versus Complementarity Time spend on Internet reduces consumer time available for other media Internet users view television only 11.2 hours per week, compared to 16 hours per week for non-users Internet users also often multitask, using other forms of media at same time as using Internet Conversely, Internet users consume more media of all types than non-Internet users

7. Copyright © 2010 Pearson Education, Inc. Media Revenues by Channel Slide 10-7 SOURCE: U.S. Census Bureau, 2009.Figure 10.2, Page 656

8. Copyright © 2010 Pearson Education, Inc. Digital Content Delivery Models Two commercial content business models 1. Paid (mostly music) 2. Free with advertiser support Free content can drive users to paid content User-generated content  Over 89 million users have created content, 124 million have viewed content  Typically free, advertising supported  YouTube the leading video site Slide 10-8

9. Copyright © 2010 Pearson Education, Inc. Fee or Free? 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 (only 29 million buy from legal music sites)  Newspapers charging for premium content  YouTube cooperating with Hollywood production studios Consumers now will pay if they perceive a value Slide 10-9

10. Copyright © 2010 Pearson Education, Inc. Making a Profit with Online Content Many online users (25%) will pay for some content Four factors required to charge for online content 1. Focused market 2. Specialized content 3. Sole source monopoly 4. High perceived net value (for being able to view the content on the internet) Slide 10-10

11. Copyright © 2007 Pearson Education, Inc. Slide 14-11 Media Industry Convergence Media content industry prior to 1990 was composed of many smaller independent corporations specializing in content creation and distribution in separate media industries Mergers crossing media industries were fueled by the arrival of the internet (biggest example is AOL/Time Warner) Today, the industry is organized largely as separate vertical stovepipes, with each segment dominated by a few key players In the future, there will inevitably be more mergers. If your crystal ball reveals who will be involved, let Prof Zatz know!

12. Copyright © 2007 Pearson Education, Inc. Slide 14-12 Challenges and Risks in Media Convergence Consumers still prefer traditional media in many cases (book portability, theatre experience, TV screen size, and more) Technology is not always ready to fully meet consumers’ needs Profitable business models have not yet fully emerged in all online media industries

13. Copyright © 2007 Pearson Education, Inc. Slide 14-13 Key Challenges Facing Content Producers and Owners Technology challenges – User’s system speed, internet speed/issues, device itself (such as screen size) Cost challenges - Substantial costs in migrating, repackaging, and redesigning content for online delivery Cannibalization of existing distribution channels Q. Who would be impacted if HBO Productions made Entourage available on a per-download basis?

14. Copyright © 2007 Pearson Education, Inc. Slide 14-14 Key Challenges Facing Content Producers and Owners Digital Rights Management (DRM) – legal & technical protection of content from copying without permission DRM challenges o Hackers o Some companies count on illegal copying to some degree (MSFT, Apple) while getting burnt by it at the same time o Content Creators royalties vs. Exposure o Innovation may be stifled if the opportunity to profit from creation is compromised

15. Copyright © 2010 Pearson Education, Inc. Online Content Revenue Models Marketing  Free content drives offline revenues Advertising  Free content paid for by advertising Pay-per-view/pay-for-download  Charge for premium content Subscription  Monthly charges for services Mixed Slide 10-15

16. Copyright © 2010 Pearson Education, Inc. Online Newspapers Most troubled segment of publishing industry However, online readership growing at 17% per year Online newspapers one of most successful forms of online content to date  However, few have reached break-even Entrepreneurs have used Web to take away part of newspapers’ content/business— classifieds (Craigslist), weather, news, etc. Slide 10-16

17. Copyright © 2007 Pearson Education, Inc. Slide 14-17 Online Newspapers The classifieds industry has been turned on its head due to the emergence of online alternatives:  Autos – national sites, dealer sites, online papers  Apartments – national sites, online papers  Jobs – national sites, vertical industry sites, company sites, online papers  Products for sale – auction sites, company sites, online papers http://www.charlotteobserver.com/http://www.charlotteobserver.com/ Why kill a tree?

18. Copyright © 2007 Pearson Education, Inc. Slide 14-18 Online Newspapers Fact – the ratio of print revenue to online revenue per customer is 30:1. That is, if a print subscriber is worth $900/year, then an online subscriber is only worth $30/year! Peril – when customers migrate from the Charlotte Observer to Charlotte.com (their own site), the paper loses a ton of money!

19. Copyright © 2010 Pearson Education, Inc. Monthly Unique Visitors at Top 10 Online Newspapers Slide 10-19 SOURCES: eMarketer, 2009d; Nielsen Net Ratings, 2009.Figure 10.7, Page 676

20. Copyright © 2010 Pearson Education, Inc. Newspaper Business Models Initially fee-based, then free, and now beginning a return to fee-based Traditional newspapers rely on advertising and subscriptions  Advertisers unwilling to pay high rates for online ads Newspapers have sought industry-wide alliances, e.g., CareerBuilder Slide 10-20

21. Copyright © 2010 Pearson Education, Inc. Convergence in Newspaper Industry Technology:  Slow move to Internet; beginning to incorporate video, RSS, etc. Four content changes 1. Premium archived content 2. Fine-grained searching 3. Video reporting 4. RSS feeds (personalized news, blogs, etc) Industry structure: has not seen much convergence due to limited returns Slide 10-21

22. Copyright © 2010 Pearson Education, Inc. The Future of Newspapers? Online news destroying existing business model Newspapers have significant assets:  Content  Readership  Local advertising  More sophisticated Audiences Online audience will continue to grow in numbers and sophistication Slide 10-22

23. Copyright © 2010 Pearson Education, Inc. E-books Types of commercial e-books  Web-accessed e-book  Web-downloadable e-book  Dedicated e-book reader - Kindle, Sony Reader  General purpose PDA reader  Print-on-demand books Slide 10-23

24. Copyright © 2007 Pearson Education, Inc. Slide 14-24 E-book Audience Size and Growth Reading books on Internet is not a popular activity (3%), though buying them sure is! (50% of all internet users) E-book sales: $100 million in 2009 Future market for e-books depends upon consumers’ willingness to use an e-book reader, how much they’ll pay, and how rapidly traditional trade book and academic textbook publishers move existing and new works to e-book format Q. Would you purchase (and read!) textbooks downloadable onto your computers if there was a 30% or even 50% discount?

25. Copyright © 2010 Pearson Education, Inc. Growth of E-Book Revenues 2009–2013 Slide 10-25 SOURCES: Bookseller.com, 2009; authors’ estimates.Figure 10.9, Page 685

26. Copyright © 2010 Pearson Education, Inc. Advantages of E-books Reduced transaction costs, retail costs for user Increased accessibility to entire libraries Searchable text Easy to update for publisher Lower production and distribution costs Longer lasting Lower barriers to entry for writers to publish Less likely titles will go out-of-print Reduced weight for book bags Slide 10-26

27. Copyright © 2010 Pearson Education, Inc. Disadvantages of E-books Require expensive (?) and complex electronic devices to use Less portability than print books (beach?) Reduced quality of print on screen Uncertain business models Copyright management and royalty issues with authors Slide 10-27

28. Copyright © 2010 Pearson Education, Inc. E-book Industry Revenue Models Primary model is pay-for-download  Publishers selling electronic versions of print books to online intermediaries such as Barnesandnoble.com and Amazon Second model involves licensing of entire e-libraries of content  Similar to subscription model, monthly or annual fee  Customers typically are major institutions, libraries Advertising-supported model  Distributor (e.g., Google) arranges for rights to display book, shares ad revenues with publishers Slide 10-28

29. Copyright © 2007 Pearson Education, Inc. Slide 14-29 The Future for E-books You are starting to see e-books converge with other media forms, with the following being included with e-books:  Author lectures, interviews  Polls, questionnaires, and quizzes  Content updating  Videos

30. Copyright © 2010 Pearson Education, Inc. Online Entertainment Industry Major players:  Television, radio, Hollywood films, music, video games Undergoing a transformation brought about by Internet, aided by:  iPod/iPhone, video, and music platform  Online video providers, led by YouTube  Social networking platforms  Viable business models in music subscription services  Widespread growth of broadband  Development of DRM Slide 10-30

31. Copyright © 2010 Pearson Education, Inc. The Five Major Players in the Entertainment Industry ($B’s) Slide 10-31 Figure 10.10, Page 694 SOURCE: U.S. Census Bureau, 2009; NPD Group, 2009 authors’ estimates.

32. Copyright © 2010 Pearson Education, Inc. Projected Growth in Online Entertainment (in Millions) Slide 10-32 SOURCES: eMarketer, 2009e, Stevenson, 2009; authors’ estimates.Figure 10.11, Page 696

33. Copyright © 2010 Pearson Education, Inc. Content Internet has greatly changed packaging, distribution, marketing, sales of traditional entertainment content Greatest impact: music  From CD of 12–15 songs to single-song downloads  From retail stores to Internet delivery  Groups can bypass traditional marketing and sales using Web and niche audiences on MySpace Slide 10-33

34. Copyright © 2010 Pearson Education, Inc. Technology Convergence in Entertainment Industry Music technology platform has converged - PCs and handheld devices (iPods) become music listening devices Gaming – PC’s and mobile devices used extensively Movies and television Convergence hampered by unwillingness of movie industry to make products available on range of Internet-enabled devices Moves toward Internet distribution  iTunes Store  Hulu, MovieFlix, Movies.com, Spike.com  Industry-supported sites for contemporary movies: MovieLink, CinemaNow Slide 10-34

35. Copyright © 2010 Pearson Education, Inc. Content Convergence in Entertainment Industry Significant progress toward digital tools for content creation and production  Digital cameras  Digital computer workstations for film editing  Music recording and production highly digitized; some distribution direct to Internet, bypassing CD production stage Distribution channels  Television and feature films still primarily use analog delivery vehicles  Content moving toward Internet delivery platforms Slide 10-35

36. Copyright © 2010 Pearson Education, Inc. Entertainment Industry Value Chains Slide 10-36 Figure 10.13, Page 700