e-commerce in action content providers – digital media
TRANSCRIPT
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E-Commerce in actionE-Commerce in action
Content Providers – Digital Media Content Providers – Digital Media
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The MediaThe Media
The web is a communications medium and so a source of The web is a communications medium and so a source of on-line content.on-line content.
The major elements of the media are :- The major elements of the media are :- – publishingpublishing - newspapers, books and magazines and - newspapers, books and magazines and – entertainment entertainment - television, film (including videos & - television, film (including videos &
dvds), games and music.dvds), games and music. These industries constitute the largest share of the These industries constitute the largest share of the
commercial content market place both off-line and on-line. commercial content market place both off-line and on-line. Internet usage is beginning to cannibalise (take away part Internet usage is beginning to cannibalise (take away part
of the market of) the traditional media distribution channels. of the market of) the traditional media distribution channels.
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Online Content Providers – Online Content Providers – media revenues media revenues
Television remains the major producer of media Television remains the major producer of media revenues - 25%.revenues - 25%.
newspapers still generate a surprisingly large newspapers still generate a surprisingly large 14% of revenues.14% of revenues.
On-line content revenues are rising but still On-line content revenues are rising but still relatively slow except say music via platforms relatively slow except say music via platforms such as iTunessuch as iTunes
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Major challenge Major challenge
The major challenge is overcoming the expectation of free The major challenge is overcoming the expectation of free content. content.
Content on the web is still mostly free but getting less so, Content on the web is still mostly free but getting less so, but most web users expect it to be free.but most web users expect it to be free.
In a recent survey a group of Internet users were asked to In a recent survey a group of Internet users were asked to pay for content that used to be free:pay for content that used to be free:– 50% found an alternative source 50% found an alternative source – 38% stopped getting the information or service 38% stopped getting the information or service – only 12% agreed to pay for content!only 12% agreed to pay for content!
Content providers like the Wall Street Journal are Content providers like the Wall Street Journal are enhancing their content to entice more fee-paying enhancing their content to entice more fee-paying customers.customers.
Subscribers to the printed version of The Economist get Subscribers to the printed version of The Economist get free on-line access to its archives. free on-line access to its archives.
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Media convergence Media convergence
There are three different categories :-There are three different categories :- technological technological convergence – the convergence – the
development of hybrid devices; development of hybrid devices; contentcontent convergence – design, production convergence – design, production
and distribution;and distribution; media industrymedia industry convergence – the merger of convergence – the merger of
media enterprises using multiple platforms.media enterprises using multiple platforms.
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Technological convergenceTechnological convergence
Hybrid devices combine the functionality of two or more Hybrid devices combine the functionality of two or more media platforms, such as books, newspapers, television, media platforms, such as books, newspapers, television, dvd / video, radio and stereo, into a single device. dvd / video, radio and stereo, into a single device. Examples :- Examples :- – Smart phones can be used as mobile phones, book readers and Smart phones can be used as mobile phones, book readers and
SatnavsSatnavs– television sets (increasingly digitally interactive) which can surf the television sets (increasingly digitally interactive) which can surf the
web;web;– video game machines that can also surf the Internet;video game machines that can also surf the Internet;– PCs that can record and play music;PCs that can record and play music;– smart phones with web access. smart phones with web access.
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Content convergence Content convergence
Here there are three aspects – design, production and distribution.Here there are three aspects – design, production and distribution.
Design :Design :Content becomes transformed as artists learn to exploit the capabilities Content becomes transformed as artists learn to exploit the capabilities
offered. offered. Example:Example:
– European painters of the 16 -17th century - Caravaggio, Vermeer etc. European painters of the 16 -17th century - Caravaggio, Vermeer etc. quickly adopted new devices, as they were invented, like lenses, mirrors quickly adopted new devices, as they were invented, like lenses, mirrors and early projectors such as the ‘camera obscura’.and early projectors such as the ‘camera obscura’.
– paintings took on more precision and detail and realism.paintings took on more precision and detail and realism.– new theories of perspective and new techniques of painting landscapes new theories of perspective and new techniques of painting landscapes
and portraits were developed.and portraits were developed.– a similar process is taking place today as artists assimilate new digital and a similar process is taking place today as artists assimilate new digital and
internet tools.internet tools.
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Content convergence (cont) Content convergence (cont)
Production Production the most significant cost of content is its creation;the most significant cost of content is its creation; new tools for digital editing and processing are now new tools for digital editing and processing are now
available;available; content is created on digital devices (hardware and content is created on digital devices (hardware and
software) once only;software) once only; it can then be delivered on multiple digital platforms;it can then be delivered on multiple digital platforms; it can be modified as necessary for a variety of platforms it can be modified as necessary for a variety of platforms
and distribution and distribution channels.channels.
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Content convergence (cont)Content convergence (cont)
Distribution Distribution distributors and consumers need new devices to receive, distributors and consumers need new devices to receive,
store and use the product.store and use the product.Example:Example: film distributors now deliver copies of new films to most film distributors now deliver copies of new films to most
cinemas as 35mm film ($1500 – $2500 per copy);cinemas as 35mm film ($1500 – $2500 per copy); digitally downloading via satellite requires cinemas to be digitally downloading via satellite requires cinemas to be
equipped with servers, storage devices etc;equipped with servers, storage devices etc; new digital projection equipment is also needed.new digital projection equipment is also needed. This area is developing very quickly This area is developing very quickly
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Media industry convergence Media industry convergence
is the merger of media enterprises into powerful synergistic is the merger of media enterprises into powerful synergistic combinations.combinations.
They can cross-market content on many different They can cross-market content on many different platforms.platforms.
Traditionally each medium (film, text, music, television etc.) Traditionally each medium (film, text, music, television etc.) had its own separate industry. had its own separate industry.
The internet has created forces which make mergers The internet has created forces which make mergers plausible or perhaps even necessary.plausible or perhaps even necessary.
Substantial investment is needed to finance the necessary Substantial investment is needed to finance the necessary changes in technology and content.changes in technology and content.
An example is the merger between AOL and Time Warner.An example is the merger between AOL and Time Warner. This merger provides a simple platform for the creation and This merger provides a simple platform for the creation and
distribution of high value content (but eventually broke up)distribution of high value content (but eventually broke up)
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Media industry convergence (cont)Media industry convergence (cont)
Industry convergence is only very slowly Industry convergence is only very slowly happening because:happening because:
customers still prefer the traditional media;customers still prefer the traditional media; technology is not yet quite ready to distribute content technology is not yet quite ready to distribute content
effectively, conveniently and economically;effectively, conveniently and economically; content creators, who are still creating content for each of content creators, who are still creating content for each of
the separate media, need to know what features are the separate media, need to know what features are sellable to consumers;sellable to consumers;
a profitable business model is still not clear as technology a profitable business model is still not clear as technology changing so rapidly.changing so rapidly.
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Revenue models Revenue models
There are five basic models :- There are five basic models :- marketing marketing advertising advertising pay per view / pay for download pay per view / pay for download subscription subscription value-added. value-added.
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Revenue models (cont)Revenue models (cont)
Marketing Marketing Content is given away free in the hope that site visitors will purchase Content is given away free in the hope that site visitors will purchase
the product or see the show off-line.the product or see the show off-line. This increases brand awareness and loyalty.This increases brand awareness and loyalty. Costs are partially recouped by sales of product-related paraphernalia.Costs are partially recouped by sales of product-related paraphernalia.
Advertising Advertising Content is free to the consumer while advertisers pay for the costs of Content is free to the consumer while advertisers pay for the costs of
that site.that site. This has been fairly unsuccessful in generating revenue – some, This has been fairly unsuccessful in generating revenue – some,
however, like the W S J have generated enough revenue to cover however, like the W S J have generated enough revenue to cover costs and more.costs and more.
Now contextual advertising replacing “traditional” advertising on Now contextual advertising replacing “traditional” advertising on content rich sites.content rich sites.
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Revenue models (cont)Revenue models (cont)
Pay per viewPay per view Content providers charge for each viewing of premium Content providers charge for each viewing of premium
content such as video, book, article, report etc.content such as video, book, article, report etc. This is not very successful (yet) with general audiences.This is not very successful (yet) with general audiences. It tends to work for targeted audiences looking for niche / It tends to work for targeted audiences looking for niche /
rich content.rich content. As more bandwidth becomes available to domestic As more bandwidth becomes available to domestic
customers so that the internet can deliver television quality customers so that the internet can deliver television quality video or live coverage of sports, music concerts etc. then video or live coverage of sports, music concerts etc. then this model will work.this model will work.
Pay per track – iTunes – very successfulPay per track – iTunes – very successful Apps pay per download also showing enormous growth Apps pay per download also showing enormous growth
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Revenue models (cont)Revenue models (cont)
Subscription Subscription A monthly or annual fee is charged for access to content.A monthly or annual fee is charged for access to content. Fierce competition with free content makes it a difficult Fierce competition with free content makes it a difficult
model.model. It works well for some niche offerings which are unavailable It works well for some niche offerings which are unavailable
elsewhere.elsewhere. Access is available to rich, archived files and reports.Access is available to rich, archived files and reports. The Times and The Sunday Times now following a The Times and The Sunday Times now following a
subscription model.subscription model.
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Revenue models (cont)Revenue models (cont)
Value addedValue added . . An access fee (included in price) is added to the price of a traditional An access fee (included in price) is added to the price of a traditional
product which allows premium content to be viewed.product which allows premium content to be viewed. Example - text books are often sold with a value-added CD stuck in Example - text books are often sold with a value-added CD stuck in
the book. the book. The CD adds perceived value as well as to the price of the book.The CD adds perceived value as well as to the price of the book. Similarly a web access code can be pasted into a book and users can Similarly a web access code can be pasted into a book and users can
access premium content on the web site.access premium content on the web site. As a model it is still unproven and measuring the revenues generated As a model it is still unproven and measuring the revenues generated
is proving rather difficult. is proving rather difficult.
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Revenue model (cont)Revenue model (cont) There are four main factors in making a profit from free to fee :- There are four main factors in making a profit from free to fee :-
– target target a focused audience.a focused audience.– provide provide specialised content.specialised content.– be be the sole source monopoly for the content. the sole source monopoly for the content. – engender engender high perceived net value so consumers believe there is value in high perceived net value so consumers believe there is value in
obtaining the information instantaneously on the web.obtaining the information instantaneously on the web. An example is Hoover Online which offers specialised content on An example is Hoover Online which offers specialised content on
businesses and executives to business analysts and executive search businesses and executives to business analysts and executive search firms. firms.
It has high value because it can be quickly accessed, searched and It has high value because it can be quickly accessed, searched and downloaded into other documents and made part of the process of downloaded into other documents and made part of the process of business decision-making. business decision-making.
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Key challenges Key challenges
The key challenges for owners and producers are: The key challenges for owners and producers are: bandwidth – critical bottlenecks in home bandwidth must be overcome;bandwidth – critical bottlenecks in home bandwidth must be overcome; platform – the unsuitability of the PC screen is a brake;platform – the unsuitability of the PC screen is a brake; cost – internet distribution is far more costly than originally anticipated;cost – internet distribution is far more costly than originally anticipated; consumer attitudes – resistance to paying for web content must be consumer attitudes – resistance to paying for web content must be
overcome;overcome; cannibalisation of existing distribution channels must be contained;cannibalisation of existing distribution channels must be contained; rights management considerations need careful handling.rights management considerations need careful handling.
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Key challenges (cont)Key challenges (cont) BandwidthBandwidth is not a problem for newspapers, e-books, magazines etc. is not a problem for newspapers, e-books, magazines etc.
nor for audio.nor for audio. For textual material including still images, the whole item is normally For textual material including still images, the whole item is normally
downloaded before play back starts.downloaded before play back starts. This is not acceptable for audio or video clips of any length because This is not acceptable for audio or video clips of any length because
the download time is too longthe download time is too long Therefore Therefore streamingstreaming is used. The material is played back as it is is used. The material is played back as it is
received. This requires the network to provide a guaranteed received. This requires the network to provide a guaranteed throughput in order to avoid jitterthroughput in order to avoid jitter
The limiting factor is not the capacity of the network as a whole but the The limiting factor is not the capacity of the network as a whole but the capacity of the ‘last mile’, that is, the link to the customer’s home. capacity of the ‘last mile’, that is, the link to the customer’s home.
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Key challenges (cont)Key challenges (cont) Full motion video is bandwidth intensive. VCR PAL quality requires 1.5 Full motion video is bandwidth intensive. VCR PAL quality requires 1.5
Mbps (megabits per second) and normal TV quality 15 Mbps.Mbps (megabits per second) and normal TV quality 15 Mbps. Distributing the same video signals to many customers simultaneously Distributing the same video signals to many customers simultaneously
(multicasting, e.g., of a live sports event) does not load the network too (multicasting, e.g., of a live sports event) does not load the network too heavily but still requires a high bandwidth link to the customer.heavily but still requires a high bandwidth link to the customer.
Video on-demand, that is, distributing different video signals (or the Video on-demand, that is, distributing different video signals (or the same signals at lots of different times) to many customers is a same signals at lots of different times) to many customers is a challenge to the supplier’s server and to the network.challenge to the supplier’s server and to the network.
BBC iPlayer was a cause for concern but increasing bandwidth has BBC iPlayer was a cause for concern but increasing bandwidth has dealt with itdealt with it
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Key challenges (cont)Key challenges (cont)
Substantial Substantial costscosts of migrating, repackaging and ultimately of migrating, repackaging and ultimately re-designing content. re-designing content.
Simple first step is to migrate existing content.Simple first step is to migrate existing content. Even this requires staff with new skills, web designers and Even this requires staff with new skills, web designers and
technicians and a delivery mechanism.technicians and a delivery mechanism. Re-design is most costly – a creative team of artists, Re-design is most costly – a creative team of artists,
writers, producers, directors and editors is needed that writers, producers, directors and editors is needed that understands demand of the WWW.understands demand of the WWW.
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Key challenges (cont)Key challenges (cont)
Consumer attitudesConsumer attitudes consumers have strongly resisted paying for content;consumers have strongly resisted paying for content; however, this is changing - media companies are delivering high value, however, this is changing - media companies are delivering high value,
focused and deep information and content. focused and deep information and content.
Cannibalisation Cannibalisation what happens to existing channels when books, music and videos are available what happens to existing channels when books, music and videos are available
online for half the price?online for half the price? what about cinemas when films can be downloaded?what about cinemas when films can be downloaded? prices from producers must not be so low as to choke off higher priced prices from producers must not be so low as to choke off higher priced
channels;channels;
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Key challenges (cont)Key challenges (cont)
Intellectual property rights Intellectual property rights Once digitised, content can easily be stolen, copied and distributed.Once digitised, content can easily be stolen, copied and distributed. Peer to peer networks exploit this fact and are difficult to control.Peer to peer networks exploit this fact and are difficult to control. Preventing high quality theft is daunting and perhaps it helps to prevent Preventing high quality theft is daunting and perhaps it helps to prevent
more high quality content from reaching the web.more high quality content from reaching the web. Various encryption schemes have been employed to keep out thieves Various encryption schemes have been employed to keep out thieves
and hackers.and hackers. Most countries have laws to protect the legitimate owners but in some Most countries have laws to protect the legitimate owners but in some
countries they are enforced more effectively than in others.countries they are enforced more effectively than in others. Another major issue concerning rights is how to calculate the royalties Another major issue concerning rights is how to calculate the royalties
paid to artists and writers for electronic editions.paid to artists and writers for electronic editions.
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On-line publishing and entertainment On-line publishing and entertainment
On-line newspapers: On-line newspapers: key factors key factors audience size and growth audience size and growth
– nearly 75% of internet users read news on-line, spending some 30 – nearly 75% of internet users read news on-line, spending some 30 – 45 minutes per week on average;45 minutes per week on average;
– in terms of volume this is the most successful type of on-line content;in terms of volume this is the most successful type of on-line content; content content
– premium archived content;premium archived content;– fine- tuned search ability;fine- tuned search ability;– timeliness;timeliness;– content with reach and depth;content with reach and depth;
competitioncompetition– new on-line classified ads firms have developed rich specialist content new on-line classified ads firms have developed rich specialist content
in areas like cars, computers, cameras etc;in areas like cars, computers, cameras etc;– this has drained revenue from some newspapers – particularly local this has drained revenue from some newspapers – particularly local
ones which depend on advertising for survival.ones which depend on advertising for survival.
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Newspapers Newspapers
Revenue models Revenue models on-line newspapers rely predominately on on-line newspapers rely predominately on
advertisingadvertising some use pay per view for premium or archival some use pay per view for premium or archival
contentcontent this latter has not been a particularly successful this latter has not been a particularly successful
business modelbusiness model W SJ is an exception, which successfully uses the W SJ is an exception, which successfully uses the
subscription modelsubscription model Times using subscription and iPad/Android tablets Times using subscription and iPad/Android tablets
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Newspapers Newspapers
Convergence is in its infancy: Convergence is in its infancy: technology technology – the first step has been completed, which was – the first step has been completed, which was
the movement of published text to the web;the movement of published text to the web; Next step is beginning with portable devices;Next step is beginning with portable devices; on-line newspapers look unmistakably like printed on-line newspapers look unmistakably like printed
newspapers;newspapers; however, by using advanced page layout software, text and however, by using advanced page layout software, text and
online content can easily be re-used.online content can easily be re-used.
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Newspapers (cont)Newspapers (cont)
Challenges Challenges The value of a newspaper is mainly in the intellectual The value of a newspaper is mainly in the intellectual
content created by its writers and in the classified listings content created by its writers and in the classified listings created by advertisers.created by advertisers.
Significant investment has been and is continuing to be Significant investment has been and is continuing to be made in web content delivery.made in web content delivery.
Newspapers face difficulties in controlling access to their Newspapers face difficulties in controlling access to their valuable premium content.valuable premium content.
Example - an archive article is paid for (nominal fee £2.00) Example - an archive article is paid for (nominal fee £2.00) and downloaded from a national newspaper – it can then and downloaded from a national newspaper – it can then be posted to a web site and distributed everywhere. be posted to a web site and distributed everywhere.
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E-books E-books
Buying books on-line is one of the most popular activities of Buying books on-line is one of the most popular activities of internet users.internet users.
The huge on-line audience has had a significant impact on The huge on-line audience has had a significant impact on book distribution and sales.book distribution and sales.
But will people buy electronic versions of books? But will people buy electronic versions of books? – Looks like it – 1.05 : 1 (May 2011) AmazonLooks like it – 1.05 : 1 (May 2011) Amazon
How much is someone prepared to pay for an e-versionHow much is someone prepared to pay for an e-version– Less?Less?– More?More?
How convenient will they be? How portable are they?How convenient will they be? How portable are they? Cost – Around £60 to £150Cost – Around £60 to £150
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E-books (cont)E-books (cont)
There are many different types of e-books. The most There are many different types of e-books. The most common are: common are:
web accessed e-booksweb accessed e-books – stored on the publisher’s servers stored on the publisher’s servers – consumer pays a fee for reading the book on screen;consumer pays a fee for reading the book on screen;– the most successful of these are online encyclopaedias.the most successful of these are online encyclopaedias.
web downloadableweb downloadable – can be downloaded, stored on the client’s device and printed when can be downloaded, stored on the client’s device and printed when
required;required;– Some are freeSome are free– Some pay per bookSome pay per book– Some annual subscriptionSome annual subscription
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E-books (cont)E-books (cont)
Dedicated e-book readersDedicated e-book readers single purpose devices that have proprietary operating single purpose devices that have proprietary operating
systems that can download files specially created for themsystems that can download files specially created for them
rather expensive but becoming widely used > 300 million rather expensive but becoming widely used > 300 million Kindles sold (?)Kindles sold (?)
being bought by serious readersbeing bought by serious readers
general purpose smartphone/tablet handheld devices offer general purpose smartphone/tablet handheld devices offer a much larger potential marketa much larger potential market
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E-books (cont)E-books (cont) The e-book industry comprisesThe e-book industry comprises
– intermediary retailersintermediary retailers– traditional publisherstraditional publishers– technology developerstechnology developers– vanity presses.vanity presses.
The primary e-book revenue model is pay for download.The primary e-book revenue model is pay for download. Major publishers (commercial) are moving relatively slowly but Major publishers (commercial) are moving relatively slowly but
accelerating.accelerating. Academic textbook publishers moving towards the web rather faster.Academic textbook publishers moving towards the web rather faster.
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E-books (cont)E-books (cont)
Advantages Advantages reduced transaction costs for the user;reduced transaction costs for the user; instant downloading; instant downloading; increased accessibility to entire libraries; increased accessibility to entire libraries; modularisation of the book’s content;modularisation of the book’s content; lower production and distribution costs;lower production and distribution costs; increased opportunities for writers to publish;increased opportunities for writers to publish; increased availability of out-of print books;increased availability of out-of print books; reduced cost of library functions. reduced cost of library functions.
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E-books (cont)E-books (cont)
Disadvantages Disadvantages less portable than printed books;less portable than printed books; multiple competing standards;multiple competing standards; reduced quality of print on screen;reduced quality of print on screen; require expensive and complex electronic devices;require expensive and complex electronic devices; uncertain business models; uncertain business models; copyright management and royalty issues with copyright management and royalty issues with
writers are not yet settled.writers are not yet settled.
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Entertainment industry Entertainment industry
In the ideal e-world one would be able to :- In the ideal e-world one would be able to :- – watch any film watch any film – watch any video / dvd watch any video / dvd – listen to any music listen to any music – watch any television show watch any television show
whenever one wanted.whenever one wanted.Billing for these services would be monthly from a Billing for these services would be monthly from a single provider single provider Not yet! But the foundations are being built now.Not yet! But the foundations are being built now.
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On-line entertainment On-line entertainment
Traditional entertainment content in order of e use is:Traditional entertainment content in order of e use is: – music downloads,music downloads,– online games, online games, – adult content, adult content, – sports and film.sports and film.
However time spent at music sites is not high because However time spent at music sites is not high because music is usually downloaded and used later.music is usually downloaded and used later.
Consumers are defining new forms of media entertainment Consumers are defining new forms of media entertainment and this is happening in the absence of the media titans.and this is happening in the absence of the media titans.
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On-line entertainment (cont)On-line entertainment (cont)
Revenue modelRevenue model mainly by subscription and pay-as-you go;mainly by subscription and pay-as-you go; early online music sites used an advertisement revenue model but this early online music sites used an advertisement revenue model but this
was mostly unsuccessful;was mostly unsuccessful; television and film sites use a marketing model to extend their brand television and film sites use a marketing model to extend their brand
and influence an audience for offline products;and influence an audience for offline products; these now also use subscription;these now also use subscription; content owners and producers are seeking to own their own content owners and producers are seeking to own their own
distribution channels – cutting out the profits of distributors, resellers distribution channels – cutting out the profits of distributors, resellers and retailers;and retailers;
successful media companies will need to own their entire value chain successful media companies will need to own their entire value chain from content creation to consumer use.from content creation to consumer use.
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On-line entertainment (cont)On-line entertainment (cont)
The technology platform for music has converged PCs and handheld The technology platform for music has converged PCs and handheld devices to become music listening stations (MP3).devices to become music listening stations (MP3).
The PC can now be used as a game station and games stations are The PC can now be used as a game station and games stations are now connected to the internet.now connected to the internet.
Television and films are slowed by lack of standards, slow acceptance Television and films are slowed by lack of standards, slow acceptance of high bandwidth and inadequate internet backbone capacity.of high bandwidth and inadequate internet backbone capacity.
However, it is expected that by 2010 many homes will be equipped However, it is expected that by 2010 many homes will be equipped with multi-megabit connections to the internet.with multi-megabit connections to the internet.
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On-line entertainment (cont)On-line entertainment (cont)
Digital tools Digital tools Music is recorded on digital devices and mixed using digital mixers Music is recorded on digital devices and mixed using digital mixers
before production and distribution. before production and distribution. Composers, arrangers and music educators have widely adopted two Composers, arrangers and music educators have widely adopted two
digital notation programmes – ‘Finale’ and ‘Sibelius’ – to create musical digital notation programmes – ‘Finale’ and ‘Sibelius’ – to create musical scores.scores.
Digital cameras are now used and digital effects play a large role in Digital cameras are now used and digital effects play a large role in lots of films. lots of films.
Digital editing on computer workstations is now the rule – before the Digital editing on computer workstations is now the rule – before the images are returned to 35mm film. images are returned to 35mm film.
In television, editing and production are almost entirely digital.In television, editing and production are almost entirely digital.