Chapter 10
What are the three different business models that newspapers have used to try to adapt to the internet?
Print-centric (1995-2000) Integrated Print/Web (2000-2010) Digital First (2010-present) (most current)
What factors are needed to support successfully charging the consumer for online content?
Content needs to be focused, exclusive, high value, and unique before users are willing to pay for it. Content that is focused attracts a highly intense consumer who is deeply interested in the topic and willing to pay. High-value content generally refers to content that has some financial value but a limited period of utility (old news is no news). High -value content more generally might be thought of as content that can be used to help make a decision in the near term. Unique (exclusive) means the content can only be found at one website and is not generally or freely available elsewhere.
Has the average consumer become more receptive to advertising-supported Internet content? What developments support this?
In general, yes. Consumers are used to television advertising, and Internet advertising is often seen as no worse, or not as annoying, as television ads, which are often raised several decibels from the background television shows. Yet Internet advertising is a source of annoyance insofar as users perceive it as something they cannot control - for instance, video ads that cannot be skipped or animated graphics that cannot be turned off. Internet advertising also generates popular resentment when users believe the ads being shown to them are targeted and in some sense, a violation of their privacy.
How will the Music Modernization Act impact the streaming music industry?
The Music Modernization Act will enable songwriters and artists to receive royalties on older songs recorded before 1972, create legal process for music professionals to obtain unclaimed royalties due to them (previously these were held onto by the streaming services), and create a licensing database paid for by the streaming services but overseen by music publishers and songwriters that should streamline how songwriters are paid, all of which should help ensure that artists are paid more and have an easier time collecting royalties owed to them.
How has the book publishing industry's experience with the Internet difference from the newspaper and magazine industries' experience?
The book publishing industry's experience with the Internet is very different from the newspaper and magazine industries. E-book editions of fiction and non-fiction books (so-called trade books) have been very successful, yet printed book sales have not collapsed and have remained almost entirely printed for a variety of reasons. Book publishing revenues have been stable over the last five years.
What effect is the growth of tablet computing having on online entertainment and content?
The growth of tablet computing has led to an explosion in reading of newspapers, magazines, and books, but digital versions, not the printed versions. The television and movie industry are also in the midst of a transition to a new delivery platform, which includes tablet computers. The number of gamers who play mobile games on their tablet computer is also rapidly increasing.
How are mobile devices transforming the gaming industry?
The rapid growth in the number of people playing mobile games in a sea change for the gaming industry that was previously dominated by closed-platform console games and hardware firms like Microsoft, Nintendo, and Sony, and software firms like Activision and Electronic Arts. The growth of smart[hones, tablets, and mobile games has catapulted Apple's App Store an Google Play store into the leading merchants of digital games, which, of course use Apple and Google Android hardware and software. Apple and Google take 30% of game sales and also benefit from the sales of the hardware and software needed to play the games. Mobile games appeal to a younger demographic, offer lower prices, and initially are often free. You can play mobile games anywhere you can use a phone, which is nearly everywhere. Console games take much longer to develop, have very large budgets, and are expensive to purchase. The mobile platform is a more open platform that allows thousands of developers to create entertaining games on much smaller budgets, as well as new and innovative games on a faster schedule. Although console, PC, and online social games will continue to grow their audience size slowly, the fastest audience growth in the future will be in mobile games that can be played anywhere and anytime, such as Pokemon GO, which has tens of millions of players and has generated hundred of millions of dollars in revenue.
Why did the Justice Department sue major publishing firms and Apple?
In the e-book marketplace, the large publishers started out using a wholesale model of distribution and pricing, in which the retail store pays a wholesale price for the book and then decides at what price to sell it to the consumer. In the past, the wholesale price was 50% of the retail price. With e-books, publishers discovered that some online retailers like Amazon and Apple began to sell books below their cost in order to encourage customers to purchase their e-book reader devices or to sell them other goods. The real value in e-books for Amazon and Apple is selling digital devices. Amazon not only sold millions of Kindles but also sold 90% of all e-book titles on the Web in 2011. Amazon has a de facto monopoly on e-books. In response, the top five publishers, along with Apple, introduced an agency model of distribution in which the distributor is an agent of the publisher and can be directed to sell e-books at a price determined by the publisher, around $14.99 and higher for certain titles. In return for a 30% commission, Apple agreed to support this model, as did Google, neither of whom were comfortable watching as Amazon dominated one of the hottest areas of web content sales. Amazon prices rose to this level, and its market share fell to 60%. As a result, however, the Justice Department sued the five publishers and Apple for price fixing in violation of antitrust laws. The case was settled and Apple paid a fine of $450 million. Today, each publisher (and not an industry consortium) makes an agreement with Amazon about the price of their books (agency model), but the book publishers pay a "listing fee" to Amazon. Today, e-book prices from major publishers are variable, but generally sell for around $15.
Why is the growth of cloud storage services important to the growth of mobile content delivery?
Mobile content delivery is only possible if the content is stored on cloud servers simply because smartphones do not have the storage capacity for movies and TV shows. The only exception to this e-books. Smartphones can store thousands of e-books. But even here cloud storage is important because users may switch among their various devices and have a need for a copy stored on a cloud server that they can access from anywhere on any device.
What techniques do music subscription services use to enforce DRM (digital rights management)?
Most music firms with subscription services use technologies that limit the time that a song can played without re-subscribing. For instance, songs downloaded from Rhapsody, the largest music subscription service, will not play after 20 days unless the user pays the monthly subscription fee. And if you don't pay, you will lose access to all your songs.
Why are apps helping the newspaper and magazine industries where websites failed?
News and magazine apps provide users much faster access to content, and wider variety of effects that improve the user experience such as smartphone features of zooming, list scrolling, and sliding screens. Content publishers like apps because users cannot be distracted by ads or other websites when using an app.
What are the different revenue models that newspapers have used?
Newspapers have used a number of different revenue models. In 1995, when the first newspaper websites appeared, newspapers offered their content for free, with registration. The hope was that advertising would support the website's operation and provide a new revenue stream for the print edition content. But new ad revenue from digital publication did not cover the cost of digital production and was completely unable to replace the drastic fall in print ad revenues that occurred beginning in 2000. Charging for general newspaper content was an obvious answer, but publications that tried this during the 1995-2005 period were punished by an Internet culture that expected online content such as music and news to be free. However, the introduction of the iTunes Store in 2003 and the iPhone in 20037 changed public perception of paid content. Newspapers and online magazine has benefitted from this change in popular culture. A rent survey of 236 U.S. newspapers found that 77% has some sort of charge for online access. Of these, 72% used a metered subscription model (which provides access to a limited number of articles for free, but required payment of a subscription fee one that limit is exceeded), 20% provide most content for free, but charge a subscription fee to access premium content, and only the Wall Street Journal used a hard paywall (not access without a paid subscription) model.
What advantages do pure digital news sites have over print newspapers? What advantages do traditional newspapers have over pure digital sites?
Pure digital news sites have many advantages over print newspapers. They don't have the cost of printing papers; they can create new work flows and business processes that are more efficient and timelier; they have a lower cost structure, often relying on user-generated content and minimal payments to reporters and bloggers, with lower pension costs; and they can take advantage of newer technologies for producing the news. Although the quality of journalism on these pure digital sites is not as good as traditional print newspapers, the situation is changing rapidly as the pure digital sites hire talented journalists and editors from print newspapers that are experiencing financial difficulties. However, traditional newspapers have an advantage over pure digital sites when it comes to credibility and trust. Without trust and quality, online news sites are simply distractions filled with celebrity photos, and there is significant competition for this kind of content.
How has streaming technology impacted the television industry?
Streaming television shows over the Internet poses a direct threat to the cable TV industry, which wants to be the sole source of television shows and sports events. Cable channels like HBO create their ow content and loath to share with their Internet competitors like Netflix, Apple, Google, or Amazon. The streaming companies are, therefore, making costly deals with the television producers to get access to popular TV series. They are also seriously considering creating their own TV shows.
How has the Internet changed the packaging distribution, marketing, and sale of traditional music tracks?
The recorded music industry has suffered more than any other content industry from the onslaught of digital devices and Internet distribution. Since the 1950s, the physical music product was an album - a collection of bundled songs that sold for a much higher price than singles. The Internet changed all that when, in 2000, a music service called Napster began distributing pirated music tracks over the Internet to consumers using their PCs as record players. Despite the collapse of Napster due to legal challenges, hundreds of other illegal sites showed up, resulting in U.S. music industry revenues falling from $14 billion in 1999 to a low of $6.7 billion in 2015. Beginning in 2011, the appearance of powerful mobile media players that could be connected to the Internet, like Apple's iPod, and later the iPhone and iPad, further eroded sales of CD albums. With the growth of cloud computing and cloud-based music services, the very concept of "owning". music has begun to shift instead to "access" to music from any device, anywhere. Today, it's a different industry from what it was, no longer totally dependent on highly profitable physical products, less able to sell bundled music as albums, but with a rapidly growing demand for its high-quality, popular products from a variety of Internet distributors who are competing with one another to buy musical content. The explosive growth in smartphones and tablets has further driven demand for cloud-based streaming music access.
What are the three dimensions in which the term "convergence" has been applied? What does each of these areas of convergence entail?
The three dimensions where the term convergence has been applied are technology platform, content, and industry structure. Technology platform convergence refers to the integration of previously separate platform functionalities into a singular digital device. It refers to the development of hybrid devices that can combine the functionality of many different existing media. Content convergence includes three dimensions: design, production, and distribution. Content design convergence has occurred when the design becomes measurably different due to the new skills that have been learned from fully exploiting the new technological capabilities. Content production convergence drives content design convergence as new tools are developed for economically producing content for delivery to multiple platforms. Content distribution convergence occurs when the distributors and consumers have the new devices needed to receive, store, and experience the product. Industry structure convergence is the merger of various enterprises into powerful synergistic combinations that can cross-market content on many different platforms and create works that use multiple platforms.
What are the basic revenue models for online content, and what is their major challenge?
There are three revenue models for delivering content on the Internet. The two "pay" models are subscriptions (usually all you ca eat) and a la carte (pay for what you use. The third model uses advertising revenue to provide content for free, usually with a "freemium" (higher price) options. The major challenge is that necessarily willing to pay for online content.
What alternatives do magazine publishers have for online distribution channels?
They can create their own newsstands. The magazine industry is highly concentrated, and the publishers have sufficient brand power to open online newsstands that can display all their branded magazines on a single site or single app. On the other hand, the publishers do use third-party newsstands when the economic terms are satisfactory. Third-party newsstands offer additional audiences to the publishers.
What are the two primary e-book business models?
Wholesale model - prices are determined by the retailer Agency model - the retailer is an agent and prices are set by the manufacturer