Traditional Media meets digital: Smart TV

We have been discussing about the evolution of media, and with out visit to Intereconomia, we got the chance to even get the point of view from experts in the sector and their bets on what’s next? But could we say that the digital/online TV shift is being forced? For example, with attempts like Google TV and its rocky start, can we conclude that everything is happening faster and more drastically than it should? Are TV Networks prepared for this?

Digital convergence has a big responsibility of this shift, with the triple-play bundles it has aggressively integrated Internet and TV. Nowadays we even add the mobile phone as another main player of this convergence with the quadruple-play bundles offers.

As a consequence of the segmentation of the consumers, and the need for more targeted content and higher ROIs, a high numbers of options and competitors enter the online and digital TV market. Higher interactivity in the similar industries forces TV to make this shift also, putting the industry under dynamic changes and pressures. TV networks are aware of this, they know that the shift has to be done, but still they are holding to the big revenues they can get out of more traditional ways – while they can.

Theories and business studies claim that the change will be driven by two factors, openness of access channels and the level of consumer involvement, both aspects increasing considerably with the new trends. Nevertheless, I still think that we are going to keep having traditional TV at least for some time, giving the Networks time to come up with and implement new business models to support their business. An IBM case study named “The End of TV as we Know it” gives six ways for these enterprises to move fast and shift quickly to the new formats, before it is too late and they get replaced by other alternatives. These areas evolve around segmentation, innovation, trials, mobilization, openness, and restructuration. These aspects are currently being touched by the big players, offerings like IPTV has increased its adoption rates and we can see new proposals for mobile TV out in the market which are expanding massively (see below)

Why is this happening? The industry is realizing how it is getting cheaper and cheaper to  stream and store digital content, so they try to develop new business models so they can be able to exploit this digital advantages, we have discussed examples of these possible revenue models throughout the specialization, in my opinion the dominant ones that can have an impact on new ways of TV are:

• Advertising, skip resistant for free content for those that resist more the charges on online content and less intrusive kind of ads for the users that are paying a fee in a subscription model.
• Charging for Extra Content, i.e. sport games of league or extra cameras for reality shows
• Subscription model, users pay a monthly fee for either all the content of specific channel
• Per episode or per movie.

These alternatives can be offered in any of the three screens mentioned before, and can be mixed in different ways.

Now lets go back to the article, Google TV. Another example on how digital convergence brings new competitors from what before were different areas now to play the same battle. Are consumers ready for such a smart way of TV?.

Even though I love the idea, I am not the regular TV user. In my opinion, this alternative hasn’t died yet due to consumer curiosity, in the picture below we see Google trends result on the people's awareness of Google and Apple TV (blue and red respectively), they peaked last year in their launch, but they have only reached a niche of customers since it launched last years. 

Google was very confident of reaching somewhere by attacking a segment of the market that now evolves around 4 billion users and cherishes an advertisement model reaching $70b in revenues, but the growth has gone slow. A slow growth makes the process even harder, since TV makers won’t have a real incentive to support the early move, and critics say that the only way this alternative will rise is if the Android effect happens again, by Google expanding to more and more TV makers which will make Google TV with Android OS their preferred option. However, we still need more time to develop this market and wait for its further development, let’s just hope it won’t be too late for Google.


See Article:
Why Google TV isn't dead yet?
Also see:
Can Google TV pull it together?
The end of Television as we know it  
Mobile video traffic: Alleviating the capacity crunch

Amazon's Imprints Threatening Publishers

Yes, we are talking about Amazon, the biggest online retailer now shows us that selling more ebooks than printed books is not enough for them. Amazon is also launching imprints to finally complete the largest vertical integration seen in the book industry.

Amazon was founded in 1994 as only a bookstore, but this company has implemented a clear strategy throughout its year which has been based in diversification to drive profits, it was only a matter of months so that it started expanding into other markets like movies, music and electronics, and in a few years it already was covered 16 categories of goods; mastering to accomplish an immense customer base that made it the biggest online retailer. To be honest, the company has diversified so much over the past years that it is not clear to say exactly what they are anymore. 

However, with books they took it far beyond. This e-commerce giant started its integration to the downstream of the value chain of the book industry, implementing distribution, storefront and reader. And currently it started conquering the upstream with the introduction of the imprints, to conquer the editorial pieces. If we study the theories that explain vertical integration, we can find some explanations to this expansion, now in the publishing arena:

·       From the contracting approach, we see how the Property Rights theory resembles Amazon story, and impulses it towards this integration, why? Well for years Amazon has struggled with publishers to implement its vision of the Kindle Ecosystem, which has made them incur on losses when lowering prices and have always barriers in the availability of selections set by publishers.

·       From the organizational point of view, it is only obvious how Amazon can leverage on its already existing resources to expand to this area, the high contact with customers and the experience in analytics allows them to know what are the trends, what is sold, and most importantly, it allows them to push their content to our screens, who is the one giving us the recommendations after all?. Also connected to this point, they already have implemented the Kindle Direct Publishing service which allows authors to upload and sell their content through Amazon’s Kindle platform.

Added to this move, I found in an article that last week Amazon hired former Time Warner Book Group CEO, to help the company boost the imprints. Maybe a lot of power for only one player isn’t it?.

Amazon's Publishing projects

In my opinion, this move is going to affect mainly the other big publishers, which already kind of dislike Amazon for its efforts in lowering prices, but now they are going to see in it an even bigger threat.  With Amazon’s new integrated offer and tempting rise in author royalties, important authors might want to shift to their services, since as we have discussed, authors can get new sources of revenues and new business models by using these type of tools to give recommendations or even communicate with their fans. What this does is that it now pushes the Big houses to also consider these types of integration.

See Article:

Amazon’s E-book Imprints: Another Big Threat to Publishers

Other References:

Amazon Makes Move to Join Book Publishing Big Leagues

Amazon: The Book Industry “In a Box”?

Google Stops the Scanners for old newspapers

A project that started three years ago with the purpose of scanning and digitizing old newspapers was just stopped by Google. Why is the number one Internet search engine not expanding this archive?, don't cut our access to history!

The company that so far had 3.5 million articles of old newspapers gone digital stops expanding its library of news. Challenging the Long Tail due to publisher pressures. During my research about the subject, I ran into an article from 2005, "Pay or free? Newspaper archives not ready for open Web... yet", in this article, NY Times CEO stated basically how stupid it would be for them to give away something that the market place is paying a huge premium for. But as time passed they succumbed to the new booming online advertisement revenues and the online pressures. Does it make sense to back off again now?  

The next image found in an article from the Newspaper Association of America, shows in a very didactic way why the online news revenues will never reach the ones made in the traditional era. It claims that the users have lost their engagement to newspapers and now spend a considerable lower amount of time with a newspaper.

The reality is that publishers could make more money by only the small group or people that will have the access to these physical archives, than what they would make offering them to the world online - again the internet pennies philosophy. Shamefully we have to say that this decision might actually make people don't read them at all. In these times for many people, what is not online doesn't even exist, so the publishers will not be letting all the world read this archives by cutting its universal access. 

In my opinion, publishers are not going to last too long with these initiatives of trying to keep the traditional revenue stream only. A solution for them is as stated before, leverage on "Experience" which is what the customer is looking for nowadays. So why not find a solution?, Harvard Business Review does it well, why not offering an abstract of the articles for free and then full access to the information for a fee?, I understand it wouldn't work for highly  demanded content but, for archives that have expired for years and that will most probably be searched or needed by specific groups of people, I don't see threats from piracy in this case. And the content would be available worldwide. A mixed revenue stream is better than a single one, so why not offer offline in their archives, online for a fee, plus ads revenues?

See Article:

http://www.physorg.com/news/2011-05-google-digitizing-newspapers.html

Also see:

http://www.ojr.org/ojr/stories/050201/

http://blog.scoutanalytics.com/attention-economics/why-online-news-revenue-will-never-equal-newspaper-revenue/

Netflix goes into Production?

Vertical integration in mass media shouldn’t take us by surprise. The DVD-by-mail giant Netflix is showing us how they don’t settle by accounting with more than a fifth of the Internet traffic in the United States by also entering the production arena. Why are they doing this?

The American provider of Video On Demand (VOD), who started as a traditional distributor, and then became leader in Digital Marketing and Digital distribution, is looking to promote their business and ensure financial growth by an upstream integration to production, which in my opinion was triggered by the market specific influences. The digital era lowers barriers for competitors to enter the market and become a threat to the established participants like Netflix, moreover, the Long Tail makes it easier for Netflix as distributors to reach the market and promote their content. But lets analyze more in depth what might be the reasons for this decision.

1.- Leverage in relationships with TV and movie studios.

This is the first possibility we could think of, if they produce a certain show to build stronger relationships with studios, maybe by selling the show to them and converting Internet pennies into traditional dollars. At the same time, these relationships are critical for Netflix show offering.

2.- Original Shows.

The other reason they might be doing this is to increase their barriers by owning an original show that can only be seen through Netflix platform, in that way, differentiating from the rest, and leveraging on their resources -Long Tail, to make the show a success.

From an economical point of view, we would have to study and balance the relationship between the Marginal Economic Benefit vs. the Marginal Bureaucratic Cost incurred by this move, model offered by Jones & Hill, and see up until what point it is good for Netflix to integrate. 

It is true that they are saving a lot of costs due to the sharing of resources used to implement this new activity, but we would need to see how the benefits will outweigh the costs. Maybe in a few days we will find out what is the strategy behind this decision, and if they will follow through this big step.

See article:

http://www.worldtvpc.com/blog/netflix-moves-production-business/

Other references:

http://seekingalpha.com/article/271163-digging-into-netflix-s-cost-of-subscription-part-2

http://www.csmonitor.com/Innovation/Horizons/2011/0316/Netflix-The-next-HBO

http://www.csmonitor.com/Innovation/Latest-News-Wires/2011/0518/Netflix-streaming-makes-up-22-percent-of-Internet-traffic

http://www.fool.com/investing/general/2011/04/25/netflix-byte-my-dust.aspx

http://www.hollywoodtoday.net/2011/05/09/digital-hollywood-2011-net-flicks-talks-about-going-into-tv-production/

How To Make New Money On Old Pop Songs

Nowadays, consumers spend less money on recorded music than they ever did before. Around 40 billion songs are downloaded illegally each year, which counts for around 90% of all music downloads. So what can artists do to add somehow an extra value to their songs and find some new sources of revenues for their songs?

Starting from the fact reported by The International Federation of the Phonographic Industry, saying that the sales of recorded music fell almost $1.5 billion on 2010, mostly because of piracy, made this artist from the band “Alliota Haynes Jeremiah” come up with this ingenious way of offering a special version their hit songs by adding your name on them.

This customized song offering is possible due to the digital format the songs are in, which makes the process an easy “just add another layer of content” in the song, and record again.

This strategic move can be explained by the adapted model of Porter’s five forces, which tells us that Media is being again influenced by General Environmental influences, since they leverage on technology advances and globalization to provide an experience customized to each user.

In my opinion, this new source of revenue (charging $30 for each customized song) is a very innovative way to both provide a little extra cash to the artists and even advertise the band through word of mouth, this band has been doing this for less than a year and has been selling several hundreds of songs. I don’t expect this to change the industry in any way, but it might become a new trend for artists in the future to fight the illegal downloads.

See article:

http://www.wcyb.com/nationalnews/27900537/detail.html

And more references:

http://allaccesslive.us/interesting-facts-about-music/