Business Models In Media Industries. Definitions (1) A business model is an action methodology for...
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Transcript of Business Models In Media Industries. Definitions (1) A business model is an action methodology for...
Business ModelsBusiness ModelsBusiness ModelsBusiness Models
In Media IndustriesIn 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. 25-26)
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
• TechnologyFrom Telephone and Radio, through Vinyl to Cassette and
Compact Disc to Digital DownloadsSymbiotic 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)
• ProductionConglomeration 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 ModelUsed TV screens to convey text (1970s)Allowed publishers to easily updateUsed existing content, and existing distribution
infrastructureGave added value to high end TV setsContent download fairly slowLimited words per page; limited readabilityCustomers insufficiently impressed
Online Content Services (2)
• (2) Paid Internet Model (1980s)Used pre-existing Internet infrastructure Involved charging a fee for web accessComplicated processes to get accessCustomers 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 ModelUsed lists of subscribers and subscriber
details to attract advertsOr found adverts related to the contentSimilar to direct mailAudiences did not like intrusiveness of
ads
Online Content Services (5)
• The Portal and Personal Portal ModelUsers 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 ModelDevelopment 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