E-commerce 2021–2022: Business.

Technology. Society.
Seventeenth Edition, Global Edition

Chapter 10
Online Media

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Learning Objectives
10.1 Understand the major trends in the consumption of
media and online content, the major revenue models for
digital content delivery, digital rights management, and the
concept of media convergence.
10.2 Understand the key factors affecting the online
publishing industry.
10.3 Understand the key factors affecting the online
entertainment industry.

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Spotify and Deezer: European Streaming
Music Services Spread Around the Globe

• Class Discussion
– What sites have you used to listen to music
online?
– What sites have given you the best overall
experience, and why?
– What advantages does buying and listening to
CDs have over listening to music online?

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Trends in Online Content
• Covid-19 pandemic increases time spent with media but
challenges online content business models as advertising
revenue falls.
• Mobile platform accelerates the transition to digital content
• Tech companies become significant players in content
production business
• E-book sales growth slows
• Digital music sales top physical sales
• Cloud services serves huge market for mobile content
• Time spent with digital media exceeds time spent with T V
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Content Audience and Market
• Average American adult spends almost 5,000 hours/year
consuming various media
• Time spent with digital media accounts for about 55% of
total media time spent.
• Desktop and mobile use: 7.5 hours/day

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Figure 10.1 Annual Media Consumption in
the United States

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Insight on Society: Is Generation Z Really
All That Different?
• Class discussion:
– What are some of the defining socioeconomic and
behavioral patterns of Generation Z?
– In what ways does the hard evidence about
Generation Z not fit stereotypes about them?
– Why are Generation Z so sought after by advertisers?
– Do students self-identify as Generation Z? Why or
why not?

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Internet and Traditional Media
• Cannibalization versus complementary
– Does time on Internet reduce time spent with other
media?
– Massive shift of audience to Web, tablets, smartphones
• Television viewing, music consumption remains strong,
reading has increased
• Impact of Internet:
– Increase in total demand for media, including traditional
products like books
– Physical products replaced by digital

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Figure 10.2 U.S. Media Revenues by
Channel

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

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Figure 10.3 Online Content Consumption
in the United States

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

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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
– Difficult to copy
– Walled garden

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Media Industry Structure
• Three separate segments
– Print
– Movies
– Music
• Each dominated by few key players with little crossover
• Delivery platform firms now becoming content producers
– Comcast's acquisition of majority interest in NBC
Universal
– AT&T’s merger with Time Warner
– Verizon’s purchase of AOL and Yahoo
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Media Convergence
• Technological convergence
– Hybrid devices
• Content convergence
– Three aspects: Design, production, 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

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Figure 10.5 Convergence and the
Transformation of Content: Books

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Online Publishing Industry
• $80 billion based originally in print, moving rapidly to
Internet
• Three segments
– Online newspapers
– E-books
– Online magazines

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Online Newspapers
• Most troubled segment of publishing industry
– Revenues shrunk from $60 billion in 2002 to about
$26 billion in 2019
• Four factors in decline
– Growth of Web, mobile devices as alternative
medium
– Alternative digital sources for news
– Failure to develop suitable new business models
– Rise of social media and role of directing traffic to
newspaper content

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Figure 10.6 Newspaper Revenues
2000–2019

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Figure 10.7 Online Newspaper Models
1995–2020

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Online Newspaper Industry: Strengths
and Challenges
• Strength: Newspaper audience size and growth
• Challenge: Digital ad revenue
• Strength: Content is king
• Challenge: Finding a revenue model
• Challenge: Growth of pure digital competitors
• Challenge: Can newspapers survive digital disruption

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Insight on Business: Brut: Native Digital
News

• Class discussion:
– How do you read the news online? Which
sites do you prefer, and why? Have you
visited any Brut sites?
– How are all-digital news sites changing
journalism?
– What unique qualities have made Brut being
regarded as the future of digital
entertainment?

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Magazines Rebound
• Physical magazine circulation falls after 2001
– Exception is special interest magazines
• Digital magazines
– Ad revenue growing
– Total audience size increasing
– Popular websites drive traffic to online magazines
– The New Yorker Today app
– Magazine aggregators: Apple News+

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E-books and Online Publishing
• After several years of explosive growth, e-book sales
have flattened in recent years to about $5.9 billion in
2010
• New channel for self-publishing authors
• Major publishers still 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.

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Amazon and Apple: The New Digital
Media Ecosystems
• E-book hardware, software, combined with online
megastores
– Amazon Kindle: Linked to Amazon store and cloud
storage
– Apple iPad: Multipurpose tablet, linked to Apple
stores
• Authors able to bypass traditional agent, publisher
channels

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

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Figure 10.11 E-book Sales in the United
States

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Online Entertainment Industry
• Major players: Television and movies, music, games
• Internet is transforming industry:
– Mobile devices
– Social networks featuring video streaming
– Download and streaming services
– Growth in broadband access
– Closed streaming platforms reduce need for DRM
• Emergence of very large-scale, integrated technology
media companies
– Amazon, Google, Apple, and Netflix.
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Figure 10.13 Projected Growth in U.S.
Online Entertainment Revenue

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Home Entertainment: Television and
Movies
• Transition to new Internet delivery platforms
– Streaming and downloading services
– OTT: Over-the-top (Internet) delivery
– Mobile platform
• Binge watching v s linear TV
ersu

• Social network influences

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Feature-Length Movies
• Hollywood maintaining control of content creation, delivery and
revenue
– DVDs, rental DVDs
– Electronic Sell Through (EST) - downloading movies
– Subscription streaming
– Video On Demand (VOD)
• Challenges
– Digital formats produce less revenue than physical
– Pressure to change release windows
– Growing strength of online movie distributors like Netflix
– Pirated content
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Music
• Most disrupted of content industries
– Move from physical to digital product
• Digital revenues: 88% of all revenues in 2019
• Two types of digital music services
– Streaming subscription services (Internet radio)
– Digital download (download to own)

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Figure 10.15 U.S. Music Revenues:
Digital v s Physical
ersu

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Figure 10.16 U.S. Digital Music Revenues
by Format

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Games
• Online gaming has had explosive growth
– Pokémon Go; Mobile platform
• Types of digital gamers
– Casual
– Social
– Mobile-fastest growing market
– Massively multiplayer online (MMO)
– Console
• Business models in flux
• E-sports, Twitch
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Figure 10.18 U.S. Online Gaming
Audience, 2018

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Insight on Technology: Twitch: Game On
• Class Discussion
– Have you ever viewed a live-streamed game or other
content on Twitch?
– What challenges does Twitch face?
– How has the Covid-19 pandemic impacted Twitch?

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Careers in E-commerce
• Position: Digital Audience Development Specialist
• Qualification/Skills
• Preparing for the Interview
• Possible Interview Questions

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