As we develop into an increasingly virtual world, our lives are definitely moving into a “virtual reality” that is complementary to our physical life. (In philosophy, in fact, would be not so clear which of our existences is the complement, but this is not our topic now).

Virtual goods made 2.1 billion US $ compared to 16.9 billion revenues in advertising in 2007. In other words, virtual goods are worth watching closely since any digital player may get a share of this market in a coming future incorporating new revenue streams.  If online games managed to create virtual objects that are worth real money for their audience, it may be the case that we, online media, may find a similar response. In fact, if I am typing this letters right now is because I am sure that media can create virtual goods within their communities of influence.

Virtual goods (summarized from Lehdonvirta’s excellent work: Virtual item sales as a revenue model: identifying attributes that drive purchase decisions.) are not information goods (a mp3 file) but “simulations” of material objects that sometimes do not have a material counterpart with 3 key characteristics: mutually excluding (their usage by one person excludes the use of a different person), persistency (it has to exist for some length of time) and interconnection (must not exist in isolation).

Virtual purchase drivers are:
1. Functionality: goods that improve performance, new functions or gameplay options.
2. Hedonism: aesthetic attributes
3. Social drivers: like facebook gifts that sometimes got artificial scarcity

“Virtual goods are more suited to creating and maintaining social distinctions and bonds because of their built-in rivalry and scarcity.”

Therefore, virtual goods are, at the end of the day, not that different to “real” goods. As we buy a Gucci bag, or a BMW, we are not just buying the physical object (its functionality) but the social, hedonistic part… how this object differentiate us from the others by its brand, design, etc. We are defining ourselves in society by acquiring some goods are not others.  Physical goods have a great “virtual” load in their attributes.

World of Warcraft, Habbo Hotel or Second Life may appear that have nothing to see with online media, but, there may be rules of their business model we should be watching because they are making money.  Online media will probably be soon a major supplier of “virtual goods”.

In a fresh report from Newspaper Association of America there are a couple of original revenue generation initiatives for newspaper that seems to make sense at least for the shor term:

- St. Petersburg Times is handling 16 to 20 consumers’ shows a year with a great profit margin (45 to 65%). They are trying to lead the market in counsmer events. This is an extra activity of their promotions team. For each show, they have made a dedicated website.

It is a complementary market that can make more complete our service to both, advertisers an audience. Having events is increasingly important as offline newspapers disappear, because through this event is where our audience and advertisers will continue in physical touch with our brand. Community events with audience are a great way to continue building up a newspaper brand.

- Morristown is developing a hyperlocal strategy by launching weekly paper targeting hyperlocal communities. Advertisers want to be seen as par as the community.  They call it the “print version of facebook”. The model is simple: (only good news) of user generated content (40% of the content) and pictures, with hyperlocal ads. People want to see themselves in the paper and their neighbours, the same curiosity that drives social networks may push this kind of content that is entertainment. They may also cover hyperlocal sports events from schools with user generated content.

Similar to the case before, Morristown demonstrates how a printed paper can leverage on an online community to build up brand, entertainment contents, and a further user generated content flow.

Concept of bringing online contents to print is being used in other initiatives and it makes sense as a short term tactic.

These kind of initiatives may not transform a business model, but are a proof of dynamism and reflect a proactive approach to making more things in offline newspapers.

Full report is here.

Mixed models (digital delivery good sold in a physical location) could be a good starting point several years ago to let people connect a cable and bring contents back home, but it seems late for trying it. Interestingly, they are trying to make in countries that are behind pioneers in Internet literacy (to some extent, only).

Maybe, this is an experiment in how technology availability could influence consumers’ behaviour (and demonstrate the theory that piracy won because of its first mover advantage) and that is why this can be interesting. But, with their expensive pricing, it seems unlikely they will do it.

Let’s see!

Contents, before, where written in an newspaper, recorded or broadcast through the radio or the TV, published on a book, etc. Nowadays, contents continue to be that, but they may be stored and shared digitally. It means, whatever content we had, we just convert it into digits, into binary code, and then we are phisically talking about digits. No matter the language, the topic, or the platform for which they were created, contents are digits.
Because contents are digits, and because the final goal of a content business is to spread contents around the world, there is a clear trend towards standarization: we standarize advertising formats (iab), we use a few winner content publishing formats, like PDF, JPG, etc. We clearly assume that inventing a new format to publish images would be nonsense and totally out of our core business. Making this would out of our focus as media. It does not mean that other businesses have a mission to facilitate and improve imaging and endeavour in improving formats to publish images, but this is just peripherical for a media business and we do not compete with each other in this area.
We sell ideas, and they are supported on digits that carry them. Those digits are not the core to our business but the message they bring. Aditionally, the fact that our media essence could be heterogeneus in the past but we all end up flowing to the same river, converging, put us in a situation similar to all of us going to the same wedding, but in a different car, through the same road, so we are all in an unnecessary bottleneck. All of us bought a car, filled it out with petrol, paid our car insurance, and, because we are all going to the same point in our car, we will arrive later than we would arrive if we had all bought a bus, and it will cost us more money. We are media, not techonlogy business.
At the end of the day, we all try to maximize the number of digits we distribute to human, through devices. Out of romanticism, that is a content business. As content sellers we demand time. Everything is transactional, we give you contents, you give us time.
Then, audience may use any device, any language, any moment, to get to our digits. As long as an audience get to our digits and not our competitors we are wining marketshare.
- we buy time
- we sell ideas
- physically, ideas, no matter the language or the topic, nowadays are digits

With the boom of new technologies, the main worry among media businesses was to develop channels to distribute binary code to final customers and so, everyone thought a responsibility of a content business was to become a techonological organization in order to build up the platforms to make our binary reaching earlier. And this approach was probably right for that moment. Getting into the war of developing channels to transfer statements was similar to entering into the business of growing trees just because books are printed on paper; it could work, it could be perfectly fine as vertical integration but it would be very likely that someone else made better paper and we had to print our contents in his paper. Normally, publishing industry did never controled the paper production industry. So what? The same happens with new technologies, that are our new paper, we do not control it and we will never control it. Media should not pay so much attention to controling technology, but to understanding it and bringing it down to the place it gets something useful for their readers. It is an important tool but not our main business.

We are is still in the business of buying time and transferring statements to an audience, and, in fact, with new techonologies, we will exchange statements with our audience better than ever before. Bringing contents down to common physical elements: digits, opens a clear path for global media integration. Digital convergence would have as a natural outcome a global media convergence. Differentiation would be in the statements communicated while digital integration makes it easier than ever to integrate our channels creating huge sinergyes in contents revenue generation.

If technology is not yet a commodity , it will be soon a commodity , and it will get cheaper. You may get some first mover advantaje, but it’s not a key for sustaining your long term media business up and running.

Conclusion: we got the same product, digits, and global media do not compete in the tools to make digits reach their audience. Global media could digitally merge (at least top media groups) in order to get stronger technology with scale economies and concentrate in differentiation through contents.

CC image by tangent

Update: ITV, BBC in talks to share regional sites

This is just a brief note to advance my coming posts that will try to develop my point of view on how, as media businesses, we could improve our efficiency to serve a better (and cheaper) product to final customers through global integration:

(i): Digital convergence should lead us to Media (organizations) convergence

(ii) Currently, cross border media integration is under-developed (exception made of new/pure players online)

(iii) Digital convergence has a logical evolution towards integration (softer or harder integration, depends). If not merging, Media should integrate in information systems and, still, traditional media could contribute creating standards that would put them in a situation of privilege.

CC image by: djwudi

Let’s have a look to what is going on with sports, because it is paralel to media business. Sports teams and players are content creators.

Sport, as a digital content, is mainly one shot. If you miss the final of a world cup and you know the result, your interest for the content is much lower. In the other hand, quality is important, but not critical, so, a decent streaming can perfectly provide you with the service of watching that game you want to see.

In the other hand, sports leagues have grown mainly on TV rights revenues. All others revenues are minor compared with the cash generated by selling content rights.

These two factors combined with the growing speed of Internet access easily provides us with a complex scenario for professional sports and media business exploiting them.

In the USA, the lack of agreement between cable operators and leagues resulted, occasionally on availability for the content online through piracy instead of being available through “legal” means. In fact, it was one of the first mistakes of music industry, it was not just that you would not like to pay for the content; it was mainly that you couldn’t find it. That pushes people to other ways of getting contents they want and once they get used to those alternatives paths, changing this dynamic gets more challenging.

The need for having live sports streaming available as soon as possible is increasingly urgent… but… it won’t stop other ways of getting those contents for free. It won’t be a solution by itself, it is already too late because people got used to enjoying contents for free.

Are we going to see footballers or NBA players, like musicians, campaigning against piracy? Probably not, but we will see audiences fragmented into many different sports and probably much less incredibly highly paid superstars. Will advertisings budgets grow to compensate previously pay per view models?

With journalism moving to citizen journalism + aggregation (according to most radical views), we may well see a similar process in professional sports players. In fact, if you follow the logic and apply to other professions, you may reach the conclusion that we tend to amateurism (to some extent, or, hyper specialization) and copy-pasting or further analyzing by others.

I got no objections to the new model of managing our intellectual property. On the contrary, I think it will speed up human kind knowledge and evolution, but, let’s assume it when making up our business plans for the future.

]]> http://www.mediosenlared.es/2009/01/07/how-piracy-will-also-change-professional-sports-and-media-of-course/feed/ 0 http://www.mediosenlared.es/2009/01/05/an-inspiring-vision-global-different-technology-use-and-a-disruptive-company-culture-hulu-ceo-jason-kilar/ http://www.mediosenlared.es/2009/01/05/an-inspiring-vision-global-different-technology-use-and-a-disruptive-company-culture-hulu-ceo-jason-kilar/#comments Mon, 05 Jan 2009 13:45:01 +0000 LSGalan http://www.onlinemedia.es/?p=285

From a really interesting interview of Hulu CEO, Jason Kilar, 3 remarkable ideas in terms of new media business development:

- global vision

- user behaviour transformation: 1 they may look for advertisers themselves, and 2 they will just be conected, it is unnecessary to continue donwloading information if it is available online.

- business venturing without the weight of a company culture legacy.

1st. Hulu’s global vision. Who will marry them in other countries?

The concept of Hulu is predicated on being a global business. Our mission statement describes us helping people to find and enjoy the world’s premium content wherever and however they want. That will be predicated on finding the right partners and having a business model that enables us to create value for advertisers, content partners and our shareholders.

We are able to measure on a daily basis (mostly geo-filtered access logs) what the latent demand might be for content all over the world for a Hulu service overseas. We are obsessed about it. The majority of our team has worked in global positions; I was global when I worked at Amazon.

2nd. Hope that users search directly for products and advertising themselves. (That would really be a revolution, because that would make the user to be searching for the advertising, contrary to what happened so far).

We have been very fortunate to go from 10 charter advertisers to over 100. I would not be surprised if that number in the fullness of time gets to be over 1,000 advertisers. That’s when you can have a substantial body of advertisers in any one category for users to choose from if they are interested in a product. So, the thing we have to drive is the volume of advertisers.

3rd. downloading contents is nonsense in a 24×7 connected society (I totally agree)

I absolutely believe the streaming business is and will be a bigger business than content downloads.

4th. disruptive venturing culture

The fact that we are a start-up is a very big advantage in that we are not dealing with an existing or legacy culture we are trying to refashion.

The interview is here

The Nieman Journalism Lab found a very interesting internal document from The New York Times that can give us a very quick and complete idea on all issues ar0und their worries and work progress in business sustainability. (I would love to access that document monthly ).

I would firstly like to point out a sentence that is really significant of a view on media sustainability,  and it is just the fact to assume our two sided business:

The end result must be that we serve the high expectations of our customers, both readers and advertisers.

It is a simple but clear statement and reminds us who pays our salaries, that’s all.

The document reviews:

- How they did  capitalized american elections. This part is just an ABC on how they: sold more printed newspaper, increased their online audience, spread their social networking, and empowered their heavier users by an event.

- What is going on with top advertisers

- The New York Times Store will sell grow around 30% to 40% YoY based on: memorabilia, fine arts, and also Obama merchandise. It is very helpful to understand their focus in The NYT Store by having a look to their spot: ( you can get the file here)

It is unusual to find internal documents on business execution in media companies and that is the reason why it is interesting.

There are many blogs on new journalism, web analytics, marketing and advertising, but, when it comes to media business development I am finding it harder to get other people’s views. That is the reason why I am starting my own aggregation.

My main purpose writing this blog is collecting for myself what I find interesting within my area of interest apart from giving a personal point of view, but this blog is opened to everyone. Please, feel free and welcome to input your ideas. On the other hand, this blog is under Creative Commons License and so, all content can be used for non profitable purposes.

Most of my hours are nowadays invested in trying to cooperate building the biggest Spanish language media group into a world class player within Internet. It is both: a professional and a personal goal.

My job is developing businesses around our online audiences in order to generate revenues making our business healthier, and thus, more independent our journalists and collaborators. I have the hope that my efforts will result in a better and more independent journalism, and, as a result, in a more solid democracy in -but not only- Spain and in a wider range of opinions freely expressed and defended. Communication is more than a business; it is a meta-business that goes further than a mere economic transaction.

No audiences will come to our media in search of our code behind our contents, nor our design, nor promotions… none of this will allow us to grow a sustainable online media. It is a shared set of values what makes it possible for a media to succeed. Everything else may be very helpful, but they are just order winners and not qualifiers for a successful media.

Nevertheless, media is not just content because it would be not sustainable on its own. In order to run a media business we do also need, of course, good design, great code, solid information systems and architechture, and a sustainable business model supporting it (apart from many other attributes). This work intends to concentrate on what modern media buinesses can do to be profitable and sustainable from a strategic/commercial side without forgetting any other implications.

We all know that new technologies are a challenge for traditional media. Business development professionals have to actively contribute to find a way to embrace new technologies converting them in an opportunity for incremental growth.

I wish this topic, although quite specific, was for you as interesting as it is for me and I invite you to introduce any contributions you feel may help in this debate.

Luis S. Galán Lozano

www.onlinemedia.es

www.mediosenlared.es

Disclaimer and apologies on my written English

I have decided to write in English for several reasons being the most important of them that English is today’s most established exchange language and I would like to learn from what is being talked about out of Spain.

I would like to apologize for my language not being as accurate as it should be sometimes.

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