E-commerce 2023: Online Content and Media

Learning Objectives

• 10.1: Understand major trends in media and online content consumption, digital content delivery revenue models, digital rights management, and media convergence.
• 10.2: Understand the key factors affecting the online publishing industry.
• 10.3: Understand the key factors affecting the online entertainment industry.
• 10.4: Understand how creators are attempting to monetize user-generated content.

Streaming Wars Discussion Points

• Subscription to online video streaming services: Which ones? Limit to number of services or monthly cap?
• Best overall viewing/entertainment experience: Which services and why?
• Willingness to pay more for ad-free streaming video.
• Prediction for the winner of the “streaming wars” and rationale.

Trends in Online Content

• Streaming wars: slowing growth and a shift to advertising-supported models.
• Mobile platforms are accelerating the transition to digital content.
• Tech companies are becoming significant players in content production.
• Book publishing is stable as e-book sales growth slows.
• Podcasting is becoming increasingly popular.
• Mobile platforms and apps are morphing into content distribution platforms.
• Time spent with digital media vastly exceeds time spent with TV.

Content Audience

• Average American adult spends over 4,800 hours per year consuming various media.
• Digital media accounts for over 60% of total media time spent.
• Desktop and mobile use: 8.25 hours per day.

Cannibalization vs. Complementary Media Consumption

• Cannibalization: Time on the Internet reduces time spent with other media.
• There is a massive shift of audience to Web, tablets, and smartphones.
• Television viewing and music consumption remain strong, and reading has increased.
• Impact of the Internet:
  • Increase in total demand for media, including traditional products like books.
  • Physical products are being replaced by digital ones.

Insight on Society: Gen Z Discussion

• Defining socioeconomic and behavioral patterns of Gen Z.
• How Gen Z differs from previous generations.
• Evidence contradicting stereotypes about Gen Z’s behavior patterns.
• Self-identification as a member of Gen Z and rationale.

Content Market: Entertainment and Media Industry Revenues

• Total U.S. entertainment and media industry revenues were estimated to be about $360$ billion in 2021.
• The entertainment industry comprises almost 80% of the total.
  • Television and movies account for the majority of entertainment industry revenue.
  • The video game industry is rising in importance.
  • Music and radio account for less than 10% each.
  • The podcasting market accounts for less than 1%, but it's growing.
• Print media: About 20% of the total.
  • Including book publishing, magazines, and newspapers.

Online Content: Consumption, Revenue Models, and Revenue

• Online content delivery revenue models:
  • Subscription
  • A la carte
  • Advertising supported (free/freemium)
• Free content can drive users to paid content.
• Users are increasingly paying for high-quality, unique content.

Online Content Evolution

• Early years: Internet audience expected free content but was willing to accept advertising.
  • Early content was low quality.
• With the advent of high-quality content, fee models became successful.
  • iTunes
  • Millions of users buy from legal music sites.
  • YouTube is cooperating with Hollywood and New York film production studios.

Digital Rights Management (DRM)

• Technical and legal means to protect digital content from unlimited reproduction and distribution.
• DRM hardware and software encrypts content.
• Streaming content is difficult to copy due to walled gardens.

Media Industry Structure

• Three separate segments:
  • Print
  • Movies
  • Music
• Each is dominated by a few key players with little crossover.
• Delivery platform firms have tried to become content producers:
  • Comcast's acquisition of a majority interest in NBC Universal.
  • AT&T’s merger with Time Warner (did not succeed).
  • Verizon’s purchase of AOL and Yahoo (did not succeed).

Media Convergence

• Technological convergence:
  • Hybrid devices
• Content convergence:
  • Three aspects: Design, production, and distribution.
  • New tools for digital editing and processing.
• Industry convergence:
  • Merger of media enterprises into firms that create and cross-market content on different platforms.

Online Publishing Industry

• Three segments:
  • Online newspapers
  • E-books
  • Online magazines

Online Newspapers

• The most troubled segment of the publishing industry.
  • Revenues shrunk from $60$ billion in 2002 to an estimated $20$ billion in 2021.
• Four factors in decline:
  • Growth of Web and mobile devices as alternative mediums.
  • Alternative digital sources for news.
  • Failure to develop suitable new business models.
  • Rise of social media and its role in directing traffic to newspaper content.

Online Newspaper Industry: Strengths and Challenges

• Strength: Newspaper audience size and growth.
• Challenge: Generating digital ad revenue.
• Strength: Content is king.
• Challenge: Finding a working revenue model.
• Challenge: The growth of digital-only digital competitors.
• Challenge: Surviving digital disruption.

Insight on Business: Vox: Native Digital News Discussion

• How to read news online? Preferred sites and why? Has anyone visited Vox sites?
• How native digital news sites are changing journalism.
• Is Vox Media the future of digital news publishing? Why or why not?

Magazine Rebound on Digital Platforms

• Physical magazine circulation is falling after 2001, with the exception of special interest magazines.
• Digital magazines:
  • Ad revenue is growing.
  • Total audience size is increasing.
  • Popular websites drive traffic to online magazines (e.g. The New Yorker Today app).
  • Magazine aggregators: Apple News+.

E-books and Online Book Publishing

• After several years of explosive growth, e-book sales have flattened in recent years.
• E-books are a new channel for self-publishing authors.
• Major publishers are still the dominant source of book content.
• While some large bookstore chains have disappeared, the number of small independent bookstores had been growing prior to the Covid-19 pandemic.

Amazon and Apple: The Digital Media Ecosystems

• E-book hardware and software combined with online megastores.
  • Amazon Kindle: Linked to the Amazon store and cloud storage.
  • Apple iPad: Multipurpose tablet, linked to Apple stores.
• Authors are able to bypass traditional agent and publisher channels.

E-book Business Models

• E-book industry composition:
  • Intermediary retailers (booksellers), traditional publishers, technology developers, device makers (e-readers), and vanity presses.
• Wholesale model:
  • Retailers pay a wholesale price and establish retail price.
• Agency model:
  • Distributor as an agent must charge the publisher’s retail price.
• Apple and book publisher price-fixing.

Online Entertainment Industry

• Major players: Television and movies, music, and games.
• The Internet has transformed the industry via:
  • Mobile devices
  • Social networks featuring video streaming
  • Download and streaming services
  • Growth in broadband access
  • Closed streaming platforms reduce the need for DRM
• Emergence of very large-scale, integrated technology media companies like Amazon, Google, Apple, and Netflix.

Home Entertainment: Television and Movies

• Transition to Internet delivery platforms:
  • Streaming and downloading services
  • OTT: Over-the-top (Internet) delivery
  • Mobile platform
• Binge-watching versus linear TV.
• Social network influences.
• Uncertain future for cable TV.
• Hollywood is maintaining control of content creation, delivery, and revenue through:
  • DVDs and rental DVDs
  • Electronic Sell Through (EST) - downloading movies
  • Subscription streaming
  • Video On Demand (VOD)

Challenges in Home Entertainment

• Digital formats produce less revenue than physical formats.
• Pressure to change release windows.
• Growing strength of online movie distributors like Netflix.
• Pirated content.

Audio Entertainment: Music and Podcasts

• The most disrupted of the content industries - the move from physical to digital products.
• It took 20 years until revenue in 2021 finally topped the previous high in 1999.
• Digital revenues accounted for 87% of all revenues in 2021.
• Two types of digital music services:
  • Streaming subscription services (Internet radio)
  • Digital download (download to own)

Podcasts

• Digital audio presentation that can be downloaded from the Internet, stored on a desktop or laptop computer or a mobile device, and listened to at the listener’s convenience.
• Becoming a professional talk content-distribution industry.
• Supported primarily by advertising.

Games

• Online gaming has experienced explosive growth.
• Types of digital gamers:
  • Casual
  • Social
  • Mobile - the fastest-growing market
  • Massively multiplayer online (MMO)
  • Console
• Business models are in flux.
• E-sports, Twitch.

Insight on Technology: Twitch: Game On Discussion

• Have you ever viewed a live-streamed game or other content on Twitch? How about other live-streaming platforms?
• Who are Twitch’s primary competitors?
• What are some of the major issues facing Twitch?

Creators and User-Generated Content

• Types of user-generated content:
  • Print, video, digital audio, games, art, and photography.
• Revenue models:
  • Advertising
  • Sales of digital content (subscription or on a per-piece basis)
  • NFTs
  • “Tips” from fans
  • Events

Platforms for User-Generated Content

• YouTube: Best known.
• Patreon: Membership platform.
• Roblox: Online game platform.
• Social networks: Creator funds (only a small percentage of creators have received more than $5000 from a creator fund).

Careers in E-commerce

• Position: Digital Audience Development Specialist.
• Qualification/Skills.
• Preparing for the Interview.
• Possible Interview Questions.