Ecommerce Essentials first edition Kenneth C Laudon Carol

E-commerce Essentials first edition Kenneth C. Laudon Carol Guercio Traver Copyright © 2014 Pearson Education, Inc.

Chapter 9 Online Content and Media Copyright © 2014 Pearson Education, Inc.

Class Discussion You. Tube and the Emerging Internet Broadcast System (IBS) n What types of online videos have you watched online, and on what devices? n What sites have given you the best overall viewing or entertainment experience, and why? n What advantages does watching traditional television have over watching online TV and films? Copyright © 2014 Pearson Education, Inc. Slide 9 -3

Online Content n Two major categories v Print industries v Online entertainment industries n Generated $15 billion in 2012 Copyright © 2014 Pearson Education, Inc. Slide 9 -4

Content Audience and Market n Average American adult spends 4, 200 hrs/yr consuming various media n 2012 media revenues: $488 billion n Over 77% of the hours spent consuming TV, radio, Internet n 2. 8 hrs/day on Internet usage doesn’t reduce TV viewing Copyright © 2014 Pearson Education, Inc. Slide 9 -5

Media Consumption Figure 9. 1, Page 350 Copyright © 2014 Pearson Education, Inc. SOURCE: Based on data from e. Marketer, Inc. , 2012 a, authors’ estimates Slide 9 -6

Internet and Traditional Media n Cannibalization vs. complementarity Does time on Internet reduce time spent with other media? v Books, newspapers, magazines, phone, radio v n Internet users Spend relatively less time with traditional media v Consume more media of all types than non-Internet users v n Multimedia—reduces cannibalization impact for some visual, aural media Copyright © 2014 Pearson Education, Inc. Slide 9 -7

Media Revenues by Channel Figure 9. 2, Page 352 Copyright © 2014 Pearson Education, Inc. SOURCE: Based on data from industry sources; authors’ estimates. Slide 9 -8

Digital Content Delivery Models n Online content delivery revenue models v Subscription v A la carte v Advertising supported (free/freemium) n Free content can drive users to paid content n Users increasingly paying for highquality, unique content Copyright © 2014 Pearson Education, Inc. Slide 9 -9

Online Content Consumption 2012 Figure 9. 3, Page 353 Copyright © 2014 Pearson Education, Inc. SOURCE: Based on data from industry sources; authors’ estimates. Slide 9 -10

Free or Fee? n Early years: Internet audience expected free content but willing to accept advertising v Early content was low quality n With advent of high-quality content, fee models successful v i. Tunes v 80 million buy from legal music sites v You. Tube cooperating with Hollywood production studios Copyright © 2014 Pearson Education, Inc. Slide 9 -11

Digital Rights Management (DRM) n DRM: Technical and legal means to protect digital content from unlimited reproduction and distribution n Cloud-based/streaming services make traditional DRM software less necessary n Apple and Amazon use “walled garden” to prevent sharing of content from their devices Copyright © 2014 Pearson Education, Inc. Slide 9 -12

Online Publishing Industry n $82 billion based originally in print, moving rapidly to Internet n Three segments v. Online newspapers v. E-books v. Online magazines Copyright © 2014 Pearson Education, Inc. Slide 9 -13

Online Newspapers n Most troubled segment of publishing industry v Failure to protect content from free distribution v 60% have reduced news staff n However: v Online readership growing at over 10% v Mobiles, tablets provide new avenues v More users willing to pay for premium content v Aggregators are recognizing need for high-quality content to distribute and use for advertisements Copyright © 2014 Pearson Education, Inc. Slide 9 -14

Monthly Unique Visitors at Online Newspapers Figure 9. 6, Page 357 Copyright © 2014 Pearson Education, Inc. SOURCE: Based on data from Myers, 2012 Slide 9 -15

Newspaper Business Models n Initially fee-based, then free, and now beginning a return to fee-based n Newspaper headlines are primary content on Google News, Yahoo News n New York Times now charging for premium access n Newspaper efforts to ally with Internet titans n New reader devices with reader apps Copyright © 2014 Pearson Education, Inc. Slide 9 -16

Insight on Society: Class Discussion Can Apps and Videos Save Newspapers? Have you read a newspaper using an app? n Have you paid for any online newspaper or article? How much would you pay for a single article? n Would you prefer to watch online news videos produced by a TV station or by a newspaper such as the New York Times? n What other opportunities could help the industry recover from the decline in print sales? n Copyright © 2014 Pearson Education, Inc. Slide 9 -17

E-books and Online Publishing n E-book sales have exploded in recent years—$4. 2 billion in 2012 n New channel for self-publishing authors v Amanda Hocking’s My Blood Approves (2010) n Evolution v Project Gutenberg (1970 s) v Voyager’s books on CD (1990 s) v Adobe’s PDF format Copyright © 2014 Pearson Education, Inc. Slide 9 -18

New Digital Ecosystems n E-book hardware, software, combined with online megastores v Amazon Kindle: Linked to Amazon store and cloud storage v Apple i. Pad: Multipurpose tablet, linked to Apple stores n Authors able to bypass traditional agent, publisher channels n DRM more effective than for music industry Copyright © 2014 Pearson Education, Inc. Slide 9 -19

Challenges of E-book Platform n Cannibalization v Fewer physical sales v More e-book sales, more purchases of readers n Finding the right business model v Wholesale model n Retailers pay wholesale price and establish retail price v Agency model n Distributor as agent must charge publisher’s retail price n Converging technologies v Interactive books v i. Book Author, i. Book Textbooks Copyright © 2014 Pearson Education, Inc. Slide 9 -20

E-book Sales Figure 9. 7, Page 361 Copyright © 2014 Pearson Education, Inc. SOURCE: Based on data from e. Marketer, 2012 b. Slide 9 -21

Magazines Rebound n Magazine circulation plummets 1980– 2012 v Rise in online video and online news readership, and increases costs of color printing, 2001: 22 million n 2011: 11 million n n 2012: Digital magazine readership doubled to 3. 29 million copies v Tablets a major factor n Magazine aggregators Copyright © 2014 Pearson Education, Inc. Slide 9 -22

Online Entertainment Industry n Four traditional players, one newcomer v. Television v. Radio broadcasting v. Hollywood films v. Music v. Video games (new arrival) Copyright © 2014 Pearson Education, Inc. Slide 9 -23

Online Entertainment Industry n Internet is transforming industry v Platform development n Smartphones, tablets, music platform n Online streaming and cloud storage n Social networks as distributors v Viable business models n Music subscription services n Closed platforms that eliminate need for DRM v Widespread growth of broadband Copyright © 2014 Pearson Education, Inc. Slide 9 -24

Online Entertainment Audience Size n Online “traditional” entertainment v Online video has largest audiences, followed by music, games n User-generated content v Substitutes for and complements traditional commercial entertainment v Two dimensions User focus n User control n v Sites that offer high levels of both will grow Copyright © 2014 Pearson Education, Inc. Slide 9 -25

Projected Growth in Online Entertainment Figure 9. 9, Page 366 Copyright © 2014 Pearson Education, Inc. SOURCES: Based on data from industry sources; authors’ estimates. Slide 9 -26

Television and Premium Video n TV industry transitioning to new delivery platforms n OTT: Over-the-top (Internet) delivery n Three factors in TV industry transformation v Broadband penetration v New mobile platforms v Willing industry with library of high-quality content n Social network influences Copyright © 2014 Pearson Education, Inc. Slide 9 -27

Movies n Mobile and tablet growth fueling demand for online movies n Unlike music industry, no one distributor dominates n Three types of online movie sales Subscription video on demand (SVOD) n Transactional video on demand (TVOD) n Electronic sell-through n n Reduced DVD sales n Release windows system Copyright © 2014 Pearson Education, Inc. Slide 9 -28

Online Movie Business Share of Movie Revenues Figure 9. 11, page 370 Copyright © 2014 Pearson Education, Inc. Slide 9 -29

Insight on Technology: Class Discussion Hollywood and the Internet: Let’s Cut a Deal What challenges has the Internet posed to traditional Hollywood movie distribution? What is the biggest challenge? n Can Internet distribution work with the “release window” strategy? n Do you think Hollywood is doing a better job of protecting its content than the music industry? n What is the most realistic and profitable path forward for the Hollywood film industry? n Copyright © 2014 Pearson Education, Inc. Slide 9 -30

Music n Most changed of content industries v Move from physical to digital product v Unbundling of single songs v Distributor market dominated by Apple n Digital revenues account for majority of all revenues (52%) for first time in 2011 n Streaming services—fastest growth v Variety of revenue models Copyright © 2014 Pearson Education, Inc. Slide 9 -31

Consumer Spending on Digital Music Figure 9. 12, page 373 Copyright © 2014 Pearson Education, Inc. Slide 9 -32

Games n Online gaming has had explosive growth n Types of online gamers n Casual n Social n Mobile—fastest growing market n Console n Business models in flux n Most online/mobile games offered for free Copyright © 2014 Pearson Education, Inc. Slide 9 -33

Online Gaming Audience Figure 9. 13, page 375 Copyright © 2014 Pearson Education, Inc. Slide 9 -34

Copyright © 2014 Pearson Education, Inc. Slide 9 -35