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Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
Business Models for Web TV - Research Report
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Business Models for Web TV - Research Report

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The research, final thesis for the MSc in Media Management at Bocconi, aims to define peculiar business models for web TV, still an almost unexplored ground inside the economic theory, despite …

The research, final thesis for the MSc in Media Management at Bocconi, aims to define peculiar business models for web TV, still an almost unexplored ground inside the economic theory, despite technological progress and a steady growing audience made it recently so attractive in terms of investments for both entrepreneurs and advertisers.

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  • 1. Bocconi University Faculty of EconomicsMaster of Science in Economics and Management for Arts, Culture, Media and Entertainment Business models for web TV Supervisor: Paola Dubini Examiner: Massimiliano Nuccio Master thesis by: Alessandro Masi 1286053 A.A. 2008/2009
  • 2. 1
  • 3. To my grandfather“If you’re walking down the right path and you’re willing to keep walking, eventuallyyou’ll make progress” – B. Obama 2
  • 4. AbstractThe thesis aims to define peculiar business models for web TV, still an almostunexplored ground inside the economic theory, despite technological progress and asteady growing audience made it recently so attractive in terms of investments forboth entrepreneurs and advertisers.Even though there is not yet agreement on a definition, it is essentially a video boxcontained into a webpage. The audiovisual content can be live or on demand, andwatched for free or by payment, or the user can subscribe to the service. Themajority of the videos on the web are user-generated.Many players entered this market in the recent past, and the figures show that theoffering is growing steadily, supported by an increasing demand. The path seems totake to the result that every website will have audiovisual content and every user willbe able to watch content that is tailored to his taste, according to the “long tail”theory of the infinite market niches.Advertising in the main source of revenues but, according to the strategicpositioning, it can be mixed with or substituted by others. 3
  • 5. ContentsIntroduction1. What is web TV2. The research 2.1 Methods 2.2 Data analysis 2.3 Findings3. Case studies 3.1 Glomera 3.2 ShareMedia 3.3 Google Video – YouTube 3.4 RCS Digital 3.5 Libero Video 3.6 Relevance of the case studies4. Strategic issues and business models 4.1 Economic framework 4.2 Economic structure 4.3 Business modelsConclusionsAcknowledgements 4
  • 6. ResourcesAppendix AAppendix BAppendix C 5
  • 7. IntroductionThe research question on the basis of the present study is whether exists aneconomic reasons for the growth of web TV or not, and what are the businessmodels that make it sustainable in the long term.It will prove the point that there is a solid economic foundation on the ground ofsuch expansion, besides it will identify the business models assumed according to thestrategic variables.The first chapter seeks to provide a definition of what is web TV, why it is differentfrom IPTV, and why it is so innovative and therefore attractive in terms of businessopportunities.Then, a statistical research over 152 websites brings to actually identify peculiarfeatures that characterize web TV, dominant modalities of revenue enhancement,source and characteristics of the audiovisual content, and finally licensing, uploadingand privacy regimes. The analysis focuses on the variables that determine thebusiness model: type of content, operator and source of revenues.In the third chapter, a case study over five different successful instances of web TVis conducted, in order to analyze reasons of such good performance. Case studiesare organized into four main sections: general information about the company (briefhistory, definition of the business line, primary competitors), business strategy(business framework, key points of the offer, market positioning, critical factors ofsuccess), business model, and future scenarios.As a result, strategic issues and business models for web TV are identified. Theobjective is to better understand the dominant models: it can be used as a guidelineeither by present companies or for future business opportunities in this field. 6
  • 8. 1. What is web TV?What exactly is web TV? There is no agreement on a definition. It comes withdifferent names – web TV, IPTV, enhanced TV, personal TV, and interactive TV, forexample – which signify slightly different things. At the lower end of complexity, it ismerely a narrowband two-way Internet-style individualized (“asynchronous”) channelthat accompanies regular one-way “synchronous” broadband broadcast TV or cable.This internet channel can provide information in conjunction with broadcastprograms, such as details on news and sports, or enable transactions (including e-commerce) in response to TV advertisement. This is known as “enhanced TV”. At theother end of complexity is a full asynchronous two-way TV, with each user receivingand transmitting individualized TV programs, including direct interaction in theprogram plot line. In between is one-way broadband with a narrowband returnchannel that can be used to select video programs on demand (VOD).Every new medium starts as a substitute and then evolves into something quite new.Web TV, too, will first be used to access video servers that store existing programs,making them available for viewing at any time. But soon, going beyond theconvenience of viewer choice and control, web TV will enable and encourage newtypes of entertainment, education, and games that take advantage of the Internet’sinteractive capabilities. This assumes, of course, technical capability and economicviability (Ross, 2008).As asserted in a study by Noll (2004), web TV is many things, or even a combinationof things. In its most obvious implementation, web TV is conventional televisionobtained over the Internet. Rather than watching television programs broadcast overthe air or over cable, television programs are accessed over the Internet and thenwatched in real time, using a technology known as video streaming. Not onlyconventional television, but also movies, cartoons, and video shorts.Web TV is the adoption of an Internet-like interface in accessing and watchingtelevision – a new form of video navigation over the Internet. Web TV is a more 7
  • 9. interactive approach to controlling the television experience with the ability to obtainall sorts of ancillary information while watching television, as promoted by WinkCommunications.Web TV is the use of the home TV set to view Internet sites, as offered by WebTVNetworks, perhaps in conjunction with conventional television viewing, the so calledInternet-enhanced TV, which could evolve into Internet-delivered TV on a wide basis.Web TV is the use of the Internet protocol to store and transmit video, both at theTV studio and also to various locations. Rather than storing and transmitting digitalvideo as a continuous stream of bits, the digital video is packetized into packetsspecified by the Internet protocol (Ross, 2008).It is now useful to go more in depth and define clearly the different forms Web TVactually assumes. Basically, a webcast is a media file distributed over the Internetusing streaming media technology, multimedia that are constantly received by, andnormally presented to, an end-user while being delivered by a streaming provider.Internet television is a commonly streamed medium. It is a television servicedistributed via the Internet. The two forms of viewing web TV are streaming from asingle or multiple websites and downloading in the form of video podcasts orindividual files. The video may be also broadcast with a peer-to-peer network, whichdoesn’t rely on a single website’s streaming. Peer-to-peer software applications aredesigned to redistribute video streams in real time on a P2P network; the distributedvideo streams are typically TV channels from all over the world but may also comefrom other sources. The draw to these applications is significant because they havethe potential to make any TV channel globally available, because it is not a centralserver to broadcast the signal to every single user, so the flow can spread easier andwith lower infrastructure costs for the broadcaster, eventually higher for the user(Blumenthal, 2006).Internet television differs from IPTV in that IPTV offerings, while also based on theIP protocol stacks, are typically offered on discrete service provider networks, highlymanaged to provide guaranteed quality of service and good bandwidth, and usually 8
  • 10. requiring a special IPTV set-top-box. The official definition of IPTV, approved by theInternational Telecommunication Union focus group (2007) on IPTV is as follows:“IPTV is defined as multimedia services delivered over IP based networks managedto provide the required level of quality of service and experience, security,interactivity and reliability.” It is characterized by single or multiple programtransport streams (MPTS) which are sourced by the same network operator thatowns or directly controls the delivery to the consumer.Compared to IPTV, web TV is a quick-to-market and relatively low investmentservice, since it rides on existing infrastructure including broadband, ADSL, Wi-Fi,cable and satellite, which makes it a valuable tool for a wide variety of serviceproviders and content owners looking for new revenue streams. A web TV providerhas no control over the final delivery and so broadcasts on a “best effort” basis.Elementary streams over IP networks and proprietary variants as used by websitessuch as YouTube are now rarely considered to be IPTV services (Vogel, 2007).The relative ease of establishing a web TV service seems at first a threat to IPTVoperators’ huge investment, but both services do not necessarily compete for thesame customers and there are some synergies between the two such as a commontechnology platform in the form of web-based technologies for content storage anddelivery.Broadcast IPTV has two major architecture forms: free and fee-based. The freesector is growing rapidly and major television broadcasters worldwide aretransmitting their broadcast signal over the Internet. Because IPTV uses standardprotocols, it promises lower costs for operators and lower prices for users: using set-top boxes with broadband connections, video can be streamed to households moreefficiently (Harte, 2007).The IP-based platform offers significant advantages, including the ability to integratetelevision with other IP-based services, like high speed Internet access and VoIP. Aswitched IP network also allows for the delivery of significantly more content andfunctionality: content remains in the network and only the content the customer 9
  • 11. selects is sent into the customer’s home. That frees up bandwidth, and thecustomer’s choice is less restricted by the size of the “pipe” into the home. However,this also implies that the customer’s privacy could be compromised to a greaterextent than is possible with traditional TV or satellite networks, since enables theservice provider to accurately track each and every program watched and theduration of watching for each viewer.Internet allows three different distribution modalities, alternatives and bidirectional:unicast, multicast and P2P.The first one is based on the Internet model client/server: the client asks, the servermanages each single request; such modality is typical of the web TV, and every oneuser more corresponds to higher capacity of the server, and therefore to higherinfrastructure managing costs, that is the opposite of the broadcasting model.The second one does not present such problem, since each source can serve avirtually infinite amount of clients, that are differently from the broadcast model,known to the source; however such structure works only inside private IP networks,closed and controlled, and for this reason this is the protocol on which the IPTV isbased: only telecom operators (Telco) can build a network with a multicasttransmission capacity, so that only authorized users can view that contents.The P2P protocol allows overcoming the unicast paradox without the closed logic ofthe multicast. Each single user of the P2P network becomes also a retransmitter, aserver, for other clients.As a result, business models and offerings change. Both web TV and IPTV ensurethrough the Internet protocol the interactivity and the multimedia capacity, butthrough unicast, multicast of P2P (bidirectional) give to the user the possibility tobenefit in asynchronous or non-linear and off-line ways from the audiovisualcontents, with a step towards a multichannel service: advertisement and VOD sellingbecome the principal streams of revenues. VOD is particularly used as a source ofrevenue for IPTV, whereas for the web TV it is usually free, financed throughadvertisement, and it allows personalization and the possibility to create a personal 10
  • 12. programme schedule, usable whenever the user wants. The limitation for the IPTV isgiven by variety and diversification of contents, based on competition amongproviders (Eastman and Ferguson, 2006).At the beginnings, the term web TV was used particularly referring to broadcastersthat used the Internet as an alternative channel for its programming, and therefore atraditional live television signal distributed through webcasting.New possibilities were then given by the evolution of the streaming towards theprogressive download and the P2P, together with the diffusion of the On Demand.However, it was most of all the technological and economical accessibility toproduction and publishing of contents to shift the role of users from passive toactive. Nowadays, everyone is able to create and edit videos, to publish and sharethem on the web. The Web 2.0 era comes with a revolution and with the expansionof the UGC (User Generated Content) world. Nevertheless, videos can be enjoyedthrough cell phones and iPods, through the podcasting.The explosion of Web 2.0 and UGC brings to the success of On line video companies,such as YouTube, that are video sharing websites that allow the user-producer topublish the content usually for free, being such companies financed by advertising.Such companies offer a wide range of services: video uploading in different formats,licensing of the content through copyright or copyleft licenses, syndication,personalization of the player, pay-per-view contents managed through DRM systems,advertising spaces (Sparrow, 2007).Sometimes programming is not left entirely to the user’s uploading activity, so thatthe transmitter manages a very peculiar business model, where contents are mainlyuser generated but responds to a precise editorial choice.All in all, web TV is all of that, and is characterized by a model that is open towardswhoever is a right holder on the content, is highly diversified and dynamic, since ahuge amount of small and medium producers provide contents.Taking into consideration the definition of “value chain” by Michael Porter (1985), itseems that it may be a useful key to analyze the logic of the web TV, seen as 11
  • 13. subsequent activities, with the principal changes from the traditional televisiondistribution system.Figure 1: comparison between traditional TV and web TV value chains.For web TV, network provider and service provider consolidate into the internetservice provider. As far as the content creation, a transmitter on this platform canbuy contents and formats from outside, but can also produce inside ad-hoc for theweb, can digitalize its programming if coming from other platforms, or open to theUGC; packaging and aggregation of programming has to be intended as a managingactivity of the space available on the server for the contents; publication anddistribution is based on the rent of the on-line band necessary; navigation andselection processes are managed in terms of layout, to allow the client to access tothe diverse collateral services, such as on-line guide, forum, chat, payment ofpremium contents; viewing and consumption experiences imply for the transmitter a 12
  • 14. series of activities such as the running of the band, and the management ofinteractivity and contents and services providing requested by the user.In conclusion, web TV is radically different both from traditional and from IPTV:communication with the user is bidirectional (unicast or P2P); accessibility is at themaximum level both from the transmitter (low investments) and the user (mostlyfree) side; fruition is possible almost everywhere, also off-line; contents are also UserGenerated, On Demand, and channels are virtually unlimited; fruition time is decidedby the user; high interactivity; consuming activity is mainly on a singular base; userhas an active attitude towards the medium; satisfaction is connected to the choiceand not seen just as distraction and recreation.2. The researchThis chapter analyses a whole set of features, the business model, and also thecontent licensing, the uploading and the privacy regimes of 152 websites that can beincluded, following the definition given in the first chapter, into the broad category ofweb TV. The aim of the research is to find out peculiarities, common features anddifferences within the sample, in order to move closer to define which strategicvariables determine the type of business model chosen by each web TV. 2.1 MethodsFirst of all, the sample has been selected starting from the top 200 websites, interms of Unique Visitors for online video distribution, either of user generated orprofessionally-produced content., accessible from Italy and whose main language isItalian or English. A third criterion is the presence at least of two on demand or one 13
  • 15. live channel. The tool used is Google AdPlanner, a database that measures websitesperformance.Data have been then organized into a dataset, using the software Excel 2007,composed of 152 websites and 94 variables, so that the total observation was14,288. The sample has been therefore purified from 48 websites, that had notenough dignity to be included in the sample, or they were not in line with one ormore of the criteria, or their domain had been recently cancelled.The final step of the analysis has been the cluster analysis through Self-OrganizingMaps (SOM) and k-means Algorithms. The software used is MATLAB r2007b.Self-Organizing Maps-SOM (Kohonen, 1995) provides a non-parametric model ofdata mining without hypothesis on data distribution: data are not-supervised and nottarget defined a-priori, and spatial organization of data is given through topologicalmaps. SOM helps to classify and visualize clustering and projection, and therefore itgathers data and helps reduce dimensionality. The cluster analysis involves the 152samples and 44 variables, selected as more relevant for the objective of theresearch. The variables of the dataset have been transformed into binary algorithms,in order to allow to the software to process the data.Afterwards, in order to define better the clustering composition, a two-step clusteringis conducted by using SPSS Statistics 17.0, since the two-step clustering is designedfor hierarchical cluster analysis of large samples with categorical data. The clustershave been also categorized by variable importance. 14
  • 16. 2.2 Data analysisTo begin with, the research considers the figures related to Unique Visitors1 andAverage Stay2 for each web TV. The first measure is also, as just said, one of thecriteria to choose the sample.Such figures have been analyzed on a worldwide base and not on a specific countrybase because, in terms of amount of visitors, and therefore creation of communities,this criterion is more relevant then the country-based one. It is clear that, in terms ofadvertising investments, the specific territory would have to be preferred, particularlyif the advertiser wants to target a specific population. However, the most importantmechanism to advertise on the web today is to be part of the Google AdSensenetwork or alternatively to entrust a media center to plan the advertisementcampaign effectively, and both of them are characterized by a worldwide base.As far as the first class of figures, as shown in the table below, YouTube leads with84 million Unique Visitors worldwide. To be noticed that such figure is quite hard tomeasure, especially on a world scale, it is subject to change month by month andfurther it comes from statistic estimation.However, it gives a general idea of the audience for a particular website. Asexpected, YouTube leads, but it was not expected to find an Italian website, Ansa,within the first fifteen. Taking a look to the rest of the table, Flickr and Metacafe, twosocial networks that include a relevant amount of video content, fill the second andthird position, followed by another giant among the pure video-sharing and filmstreaming websites, which is MegaVideo.1 Unique Visitors (users) is the estimated, unduplicated number of people who visit a site over aspecific month; it gives the idea of the percent of the target that is possible to reach.2 Average Stay is the average time a visitor spends on the site; gives the idea of how much the site isable to attract and then retain the visitor, and therefore for how much time he is exposed toadvertisement. 15
  • 17. Among the top 15, we also find two web TV with mainly live content, Justin TV andUStream TV, respectively with 12 and 6.1 million Unique Visitors a month.Figure 2: top 15 Unique Visitors (Users) and Average StayFinally, the German MyVideo is together with Ansa, the only site whose primarylanguage is not English.Figure 3: top 15 Italian web TVs for Unique Visitors (Users) and Average Stay 16
  • 18. Shifting to the Italian websites, that certainly cannot attempt to the worldwide basefor a problem of scarce spread of the Italian language in the world, we find six webTV with news content, such as Ansa, TGCom, Repubblica TV, Corriere TV, GazzettaTV, Sky TG24, within the top 15 for Unique Visitors worldwide.Internet is first of all a huge network, and therefore the presence of many newsservices with video content is not a surprise at all.The second cluster in the chart above is composed by shifting media, which arealready operating on other platforms, like TV and radio. Those sites are RAI TV,ComingSoon, LA7, Deejay, RTL and RadioRadicale: their main strength is a builtreputation and so a customer base of faithful clients that goes to be an addition tonew clients on the web.The third cluster relates to web portals, which are also Internet Service Providers inItaly, which chose to add a relevant amount of video content in order to increaseusers for the many services they provide. They use web TV as a way to createcommunities, diffuse the brand awareness and eventually retain such customers forother services. Those sites are Libero Video, the first video-sharing portal in Italy,and Yalp, web TV part of Telecom Group and relative to Alice, its Internet branch.The last spot is occupied by FilmGratis, a portal for videogames downloading andfilm streaming, a classic example of entertainment content website.The research also considered, as said above, the Average Stay of visitors: this figureis particularly interesting and useful if compared to Unique Visitors. As a generalunderstanding of the matter, it can be argued that news content, such asBloomberg, websites with live content, such as Justin TV, and film streamingwebsites, such as MegaVideo, besides video-sharing websites that combine a widerange of UGC with professionally-produced contents from partners, such as YouTube,lead this chart.On the contrary, social networks with video content characterized by big amount ofUnique Visitors, such as Flickr, tend to retain visitors for approximately 7-8 minutes,that is more or less the time needed to interact with the other members of that 17
  • 19. community, and pure video-sharing website with mainly funny UGC, such as Break,tend to have an Avg Stay of 5-6 minutes, that is more or less the length of one ortwo videos.Figure 4: top 15 web TVs for Average Stay of usersThe table above shows the top 15 web TV ordered by Avg Stay. First of all, thefigure for web TV is above the average of the generic website, for which the AvgStay is approximately 6-7 minutes. This is due to the strategic role of videos, as anretention element for the visitor: he usually looks at the webpage at the least for thetime the video is shown.The table shows a range from 9,40 for RAI TV to 30 minutes for Bloomberg, and isessentially composed by websites with news content, such as Ansa, live streaming,such as Pandora TV, or film streaming through P2P, such as MegaVideo.As a result, the general finding from this analysis is that brand, reputation andcommunity, influence the Unique Visitors figure, but the type of content, its quality,its uniqueness and its relevance, influence the Avg Stay figure.The second part of the research relies on an analysis of 94 variables (see AppendixB) over the sample of 152 websites (see Appendix A). The following part of this 18
  • 20. chapter will go more in depth over the most important, the ones that are consideredas decisive to the definition of the strategic issues and the business models in the onlast chapter.Taking a look at the foundation year and the registrant country, the bar charts belowshow a peak in the year 2006 and a neat prevalence of US and Italy as registrantcountries, even though the latter is due to the fact that the sample has been picked houghout among websites accessible from Italy, otherwise it would have been unlikely tobe so close to US. Seventy websites have been registered in the US, fifty fifty-five in Italy,and seven in the UK, but worthy to be mentioned is the presence of countries asPortugal, Romania, and even Curacao, in the Holland’s Antilles. Registrant country 70 60 50 40 30 20 10 0 Australia Canada France Germany Hong Kong India Ireland Israel Italy Netherlands Portugal Romania South Korea Spain Sweden Switzerland UK USA CuracaoFigure 5: registrant countriesAs far as the creation year, the bar chart shows an upward trend with a sharpincrease from 2003 to 2006, when web TV founded reach the peak at twenty twenty-eight.Then, the trend reverses and drops to just seven in 2008, with a slight recover in2009, when fourteen web TV have been created so far. 19
  • 21. Created year 30 25 20 15 10 5 0Figure 6: year of foundation.The first variable that has been checked over the sample has been called “Contentproduction”. The question was if the web TV content was on professionally onlyproduced, only User Generated, or the web TV had a mix of those two.As the pie chart below shows clearly, the preponderance of web TV with only UGCstands at the 41% of the sample, whereas the remaining 59% is almost equallydivided between only professionally produced and both produced and UG content. Bythe way, this means also that such 59% contains, at least in a part, professionally professionally-produced content.The strategic choice to be done in this case is whether to spend money to involveprofessional partners and enrich the content quality, or otherwise to increase thevalue of the community and push on the viral effect usually provided by UGC. 20
  • 22. Content production FE - both produced and UG content FE - only professionally professionally-produced content FE - only UGC 33% 26% 41%Figure 7: content production source. :As showed in the bar chart below, UGC only web TVs overtook the others in 2005,year of foundation of YouTube, and 2006, but during other years, the amount oftypes of businesses grew almost at the same rate, excepted 2000. To be noticedthat, in the last three years the birth rate for only professionally produced web TV professionally-producedovercomes the others by far: this probably means that strategy is shifting towardshigher quality contents, since clients are more demanding and the Internet is fillingthe gap with TV as the first medium for videos distribution. 16 14 12 FE - both produced and UG content 10 8 FE - only 6 professionally- produced content 4 FE - only UGC 2 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Figure 8: content production source and foundation year. roduction 21
  • 23. As far as the type of operator that is involved directly into the business, the researchidentifies basically four core groups:• The pure players, companies that operates as Internet Service Provider or born with the Internet as core business (Web Editor), or companies that have as core activity the running of a web TV (Online Video Company).• Broadcaster and local TV, companies that have as core business the production and/or distribution through broadcasting, satellite or cable TV, of video contents.• Other media, companies already operating into the media industry, specifically in the publishing industry (News and magazines) or Radio• Public administration (PA) and other companies, which operates a web TV as a public service or as an instrument for internal communication (corporate web TV).The time series below shows the peak in the birth of web TV managed by pureplayers and broadcasters in 2006, that also fluctuate with a similar trend.Despite the few companies coming from other sectors within the sample influencesthe analysis, is worth to mention the slight increase of birth rate between 2008 and2009 for the other groups of companies, especially News and Magazines: this meansthat the barriers to entry for new players are being knocked down, because of thedrop of the costs of infrastructure and the spread of the advertisement among moreactors in order to reach untapped market niches of clients. 22
  • 24. 16 FE - Operator - 14 Broadcaster and Local TV 12 FE - Operator - News and magazines 10 FE - Operator - On-line 8 video company 6 FE - Operator - PA and 4 other companies 2 FE - Operator - Radio 0 FE - Operator - Web 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 editorFigure 9: operator core business industry and foundation year.At this point, crossing the two features, Content production and Operator, through abar chart with the amount of operator on percentage base, we see that about the65% of content is UG only for pure players, whereas the prefer the professionally-produced content at about the same level, that is 65-75%. In particular,broadcasters and radios choose to include in their programming very few UGC, at themost they include a mix of professionally-produced and UG content.This result is could be due either to specific strategies or to the availability, asregards to broadcasters, of content from the traditional television. If the first is true,the most likely reason is the preservation of the brand image, which UGC coulddamage, if not supported by an active community of competent uploaders. 23
  • 25. 100% 90% 80% 70% 60% 50% 40% 30% 20% FE - only UGC 10% 0% FE - only professionally- produced content FE - both produced and UG contentFigure 10: content production and operator. :As far as the flow of the content, it can be divided into Live and On Demand.Technical requirements, costs of infrastructure and, last but not least, availability ofenough programming to fill a programme schedule of live contents, are the reasonsfor the preference for a VOD only web TV. Video on Demand is less expensive to beproduced and distributed, allows the user to watch the video whenever he likes, and ducedUGC can be added to programming.Live content is present in broadcasters’ web TV, because, of course, of availability ofcontents from traditional television, in a small portion in pure players’ web TV, and ata little higher level in radio’s and PA and other companies, the former essentially toattract audience, the latter to provide a better service to the citizen or the employee employee. 24
  • 26. 70 60 50 40 30 20 10 0 only VOD FE - Content - LiveFigure 11: type of content and operator. :On demand content can be added to the portal randomly, or following a preciseeditorial line, and also it can have a high range in terms of themes, for instancefunny, sport, animals, etc. or a low range. The bar chart below shows a prevalence belowof the on demand programming, and the low range category that overcomes thehigh range within the on demand programming, whereas the opposite is true for theon demand random, essentially because of the potential difficulties in man managing ahigh range of content categories and generally of videos following a given editorialline. Usually, when the range of contents is high, the community auto auto-regulates itselfand chooses which content will have success and which one will fail. 25
  • 27. 90 80 70 60 50 40 FE - Content - On 30 Demand - low range 20 10 FE - Content - On 0 Demand - high range FE - Content - On Demand FE - Content - programming On Demand randomFigure 12: on demand content.As regards to the live content, it can be produced for the web or for other medium,and can be characterized by continuous3 or discrete flow from the broadcaster to theuser. Live events that are webcasted on web TV are usually produced for other webcastedmedium, as showed in the bar chart below. Then, the slight prevalence of continuousflow over discrete flow is the consequence of the diffusion of P2P streaming, whichallows watching live events, especially sport events, on the desktop. sport 40 30 20 10 FE - Content - Live - 0 Discrete flow FE - Content - FE - Content - Live - FE - Content - Live - Continuous flow Live - produced for produced for other the web mediumFigure 13: live content.3 Traditional TV has continuous flow because gaps between two programmes are filled out bycommercials. Therefore a web TV with live contents and continuous flow is the perfect transposition oftraditional TV on the desktop. 26
  • 28. As showed in the percentage chart below, production of live events is madeexclusively for the web by News and magazines web TV, almost exclusively for othermedium by Broadcasters, first of all because of contents availability, secondlybecause of different strategies: building reputation through a format that is specificfor the web and pleasant for surfers for the former, enlarging the audience for thelatter. Pure players choose to not produce that much live events for the web because ayersthey exploit UGC and communities, whereas radios make use of contents producedfor broadcasting TV or satellite like music videos, and PA and companies make use ofa relevant portion of live events produced for the web since this kind of production isusually less expensive. 100% 90% 80% 70% 60% 50% 40% 30% 20% FE - Content - Live - 10% produced for the web 0% FE - Content - Live - produced for other mediumFigure 14: live content and operator. :Moreover, content can be generalist or thematic, with the two categories almost thematic,equally distributed within the sample with a 50% each. Therefore, thematic web TVis as much present as generalist web TV, and this is a result of fragmentation of the ,audience and the searching for new niches. 27
  • 29. With the aim to provide some hints about web TV programming strategies, the barchart below crosses the operator, the flow and the thematic content. The mainresults from this analysis are listed in the following directory:• Broadcasters and local TV: live news and sport, and on demand movies.• News and magazines: mainly on demand news and other type of content (usually reports and interviews).• Online video company: on demand movies, entertainment, sport and scientific content, live music.• PA and other companies: live and on demand science and culture, live news.• Radio: music, mostly live.• Web editor: on demand sport, movies and entertainment. FE - Operato ster and magazin compan compan Operato r - Web only VOD ies r - Radio editor FE - FE - Content - Live only VOD FE - Content - Live FE - Operato Operato only VOD video other Operato Operato r - On- r - PA and FE - FE - Content - Live only VOD FE - r - r - News line y FE - Content - Live only VOD Broadca and Local TV es FE - Content - Live only VOD FE - FE - Content - Live 0 1 2 3 4 5 6 7 8 9 FE - Category - thematic video service - Sport FE - Category - thematic video service - Science and Culture FE - Category - thematic video service - Other FE - Category - thematic video service - News FE - Category - thematic video service - MusicFigure 15: operator, type of content and main theme of the channels. 28
  • 30. In addition, the bar chart below aggregates Radio and News into the category “Othermedia” and crosses the operator and the type of content. This figure will be usefulfor the strategic analysis of the last chapter. 45 40 35 30 25 Live orig. 20 Live transp. 15 VOD produced 10 5 VOD UG 0 Online video PA / TV Web editor Other media companyFigure 16: operator and type of content.There is a particular feature, called “embedding”, that was introduced by YouTube in2006 and allows each web TV to diffuse a video among other websites with thesimple copy and paste of the HTML that localizes the video. Such feature allowvideos to be diffused in a viral way especially among social networks. The relevanceof this feature relies on the fact that the video showed on the other website isbranded, so the source is always recognizable. This has the functionality to diffusebrand awareness and at the same time to enhance the creation of the community.The bar chart below shows that, within the sample, such feature is present whateverthe content production model that is adopted is. Clearly, if a website has UG onlycontent, or a mix of UGC and professionally produced, its strategy is more likely totend towards an increase of the community generated by this mechanism of viraldistribution of the contents. On the contrary, a web TV with only professionally-produced content will tend more towards a valorization of the content, which theembedding feature might instead compromise, in favor of its popularization. 29
  • 31. 90 80 70 60 FE - only UGC 50 40 FE - only professionally- 30 produced content 20 10 FE - both produced and UG 0 content FE – embedding no embeddingFigure 17: content production and embedding feature.Concerning business models, and therefore the way web TV generates revenues, asshowed in the pie chart below, the 2/3 of the web TV in the sample are included inthe model free with advertisement, then the 17% adopt the payment model(subscription and pay-per-view), and the same percentage adopt the free model -view),(composed of free with no advertisement and web TV that accept donation) advertisement donation).To be noticed that more than one model can be adopted at the same time: forinstance, many video-sharing websites has a premium section for which a sharingsubscription and usually a monthly fee has to be paid. Even, many s streamingchannels have both free and pay pay-per-view content. 30
  • 32. Business model PA – donation PA - free (no advertisement) PA - free with advertisement PA - PayPerView PA – subscription 66% 5% 14% 12% 3%Figure 18: business models.To deepen the analysis, the research crosses the business model with the operator.The bar chart below shows that: • Broadcasters and local TV adopt all the models except the pay pay-per-view, a relevant presence in the subscription subscription-based model. • News and magazines adopt the free model only, either with or without advertisement. • Pure players spread their business model choice upon all the differen different categories, with an almost homogeneous distribution, even though a relevant , part of them adopts the pay pay-per-view or the subscription model. • PA and other companies adopt in a significant percentage the free model, even though it is worth to be mentioned that more than 20% of them has that pay-per-view content. view • Radio adopts alternatively the subscription-based subscription based or the free (with advertisement model. 31
  • 33. PA – subscription PA - PayPerView PA - free with advertisement PA - free (no advertisement) PA – donation 0% 20% 40% 60% FE - Operator - Broadcaster and Local TV 80% FE - Operator - News and magazines 100% FE - Operator - On-line video company line FE - Operator - PA and other companies FE - Operator - Radio FE - Operator - Web editorFigure 19: operators and business models. :As far as the content production related to the business model, as showed in the barchart below, every business model is adopted independently from the production ,source of the content.To begin with, the free with advertisement model characterizes a bigger portion ofonly UGC web TV, but nearly the 60% of web TV that adopt this model haveprofessionally-produced content, which could also be sold through a pay model.However, both the pay models are adopted also by web TV with UGC only content,even though at the same time respectively around 60% and around the 50% percentof web TV that adopt the pay model have only professionally-produced content. On producedthe other side, the free model is adopted mostly by web TV with UGC only.As a general consideration, it can be argued that if a web TV has professionally professionally-produced only content, it is more likely to adopt a pay model, then the likelihood thatit will be financed by advertising or by donation grows as the amount of UGC. 32
  • 34. PA – subscription PA - PayPerView PA - free with advertisement PA - free (no advertisement) PA – donation FE - both produced and UG 0% content 20% FE - only professionally-produced 40% 60% content 80% FE - only UGC 100%Figure 20: content production and business models.Finally, the operator’s core business sector, the type of content (Live produced forother medium and transposed to the Internet, Live originally produced for the web ly web,VOD user generated, or VOD professionally professionally-produced), and the business modelvariables are crossed into the graph below.As a results, the business models, as arise from the chart, can be described as ,follows:• Donation and free (no advertisement) this model, not a real business model, is advertisement): , typical of some not for profit companies use donation as the principal way for financing, then the free model seems also to be preferred by web editors, PA and news companies when the content is live.• Free (with advertisement): this is the most diffused business mod over the advertisement): model Internet. The analysis shows that it is the almost exclusive business models used by radios and news, and the prevalent for pure players when the content is user generated. 33
  • 35. • Pay-per-view: this business model seems to be associated with produced video on demand, especially by TV and pure players.• Subscription: this business model seems to be spread over different operators and different contents, due to the existence of premium or upgraded sections even in advertisement financed web TVs. However, it seems to be usually associated with live content produced for the web, or with professionally- produced VOD. Web editor VOD UG VOD produced Live transp. Live orig. VOD UG VOD produced TV Live transp. Live orig. VOD produced Radio Live transp. PA – donation Live orig. PA - free (no advertisement) VOD UG Online video company VOD produced PA - free with advertisement PA / Live transp. PA - PayPerView Live orig. VOD UG PA – subscription VOD UG VOD produced Live transp. Live orig. VOD UG News VOD produced Live orig. 0% 20% 40% 60% 80% 100%Figure 21: operators, type of content and business models.The research shows, in its final part, two different methods for cluster analysisThe first one is made using Self Organizing Maps and k-means Algorithms, over 44variables and 152 samples.The 44 matrixes (Appendix C) show the distribution of each variable within thesample, then the u-matrix, redefined through a k-means algorithm, allows visualizingthe clusters. 34
  • 36. The U-matrix, that is the matrix that gives insights into the local distance structuresof the dataset, and therefore should help to visualize clusters.Figure 22: U-matrix clustering.However, it is not possible to visualize any cluster within the matrix, and that meansthat the variables are distributed homogeneously in the sample.The k-means algorithm helps to visualize a given (maximum) number of clusters, onthe base of k centroids. The figure below shows the matrix obtained through the k-means algorithm, and a scatter plot. They both indicate that the sample is composedof 3 main clusters, even though the scatter plot shows: scattered shape; twodifferent cluster regions, and between them an intermediate distribution on mini-clusters that do not allow a precise individuation of clusters; the spectrum is coveredin every part by the sample. On the base of the p index obtained from the k-meansclustering, it is possible to quantify the composition of each cluster.Figure 23: k-means clustering. Figure 24: scatter plot clustering. 35
  • 37. Cluster 1 Cluster 2 Cluster 3 35 48 70 23% 31% 46%As far as characteristics of the sample, the analysis suggests that the distribution ofthe variables is homogeneous, even if is possible to identify three clusters: thismeans that web TV, if analyzed through a relevant amount of variables, coveringdifferent aspects, such as features, business model, uploading regime and privacyregime, did not assumed any peculiar shape yet, and each one attempts to find itsniche market to differentiate from competitors.The two step cluster analysis over three variables, that are business model, operatorand type of content, provides better defined clusters. The result is a clusterdistribution that is similar to the one obtained through k-means.Figure 25: two step clustering pie chart. 36
  • 38. The bar charts below show the distribution of the single variables within each cluster.Figure 26: content distribution within the clusters.Figure 27: operators distribution within the clusters.Figure 28: business models distribution within the clusters. 37
  • 39. Furthermore, the Bonferroni adjustment4 with the classification by variable says thatthe variable “Content” is more significant (is a larger value) in the cluster 2, thevariable “Operator” is more significant in the clusters 1 and 3, and the variable“Business model” is more significant in the cluster 2 but also in the cluster 3.Analyzing this data it is possible to describe the characteristics of each cluster: • Cluster 1: is composed by web TVs operated by an online video companies, whose content is almost exclusively VOD, more user generated than professionally-produced, that adopt the business model free with advertisement, or in some cases they require subscription and they also have pay-per-view content. • Cluster 2: is composed mainly by web TVs operated by broadcasting companies and radios, with a relevant presence of companies from other industries and PA, whose content is live produced for other medium and sometimes professionally-produced VOD, that adopt the free model, mainly with advertising but can be financed by donations, even though they sometimes offer pay-per-view content. • Cluster 3: is composed mainly by web TVs operated by web editors and companies of the publishing industry, whose content is mainly VOD professionally-produced but also user generated, and often offer live content produced for the web, that adopt the free model advertisement-financed but often require subscription for at least some part of their content.4 In statistics, the Bonferroni correction is a method used to address the problem of multiplecomparisons. It is based on the idea that if an experimenter is testing n dependent or independenthypotheses on a set of data, then one way of maintaining the family-wise error rate is to test eachindividual hypothesis at a statistical significance level of 1/n times what it would be if only onehypothesis were tested. So if you want the significance level for the whole family of tests to be (atmost) α, then the Bonferroni correction would be to test each of the individual tests at a significancelevel of (α/n). Statistically significant simply means that a given result is unlikely to have occurred bychance assuming your hypothesis is correct. 38
  • 40. 2.3 FindingsAll in all, the analysis shows that there are basically two primary variables thatdetermine the business strategy of a web TV: • Business model chosen • Type of content of the web TVThose two variables are inter-dependent, and the choice is also related to the corebusiness of the operator.Then, some secondary variables allow the web TV to differentiate from competitors: • The range of VOD channels • The amount of live content • The role of the community • The type of advertisingThe graph below shows the strategic positioning of the players depending on the twoprimary variables. Such distribution of the different operators will be clarified bysome case studies in the next chapter.Figure 29. Strategic positioning of the players on depending on business model and type of content. 39
  • 41. 3. Case studiesIn order to give an empirical approach to the research, some case studies have beenchosen to provide concrete instances about the analysis. Each of them has specificpeculiarities that will be analyzed and clarified more in depth.Such cases have been discussed following face to face semi-structured interviews tomanagers of that companies in the period September and October 2009.The case studies have been organized into four main sections: general informationabout the company (identity card, brief history, definition of the business line,primary competitors), business strategy (business framework, key points of theoffering, positioning, critical factors of success), business model, and futurescenarios. 3.1 GlomeraWebsite address www.glomera.comLanguages Italian, English, French, Spanish, SlovenianCommercial name GlomeraCreated year 2007Registrant name Dynamic Fun S.r.l.Registrant country ItalyDescription Glomera empowers companies and content owners — from independent producers to major broadcast networks — to virally distribute their content. It aims to help them in the creation of dynamic, connected online communities, whilst retaining ownership and branding control.Unique visitors (users) 8,500Average time on site 7:30 40
  • 42. General information about the companyGlomera.tv, managed by the company Dynamic Fun S.r.l, was founded in 2007 andoperates on packaging and distribution of contents, mainly at a b2b level.The initial project has been split into 2 parts: media platform to create the channel,to give a structure to the programming, and to manage it autonomously;transmission platform to distribute using P2P or unicast protocols according to thekind of partner.Then, the company entered to the b2b market with the brand Glomera. The first on-line programme on streaming was TV SMAU, 44th edition of the Information andCommunications Technology international fair, with the possibility to enjoy the use ofadditional contents, such as interviews to exhibitors, recorded conferences andtechnical deepening.Dynamic Fun is a company whose mission is to create and develop any kind ofwireless communication project, particularly in Entertainment and Business sectors.Glomera is a platform that allows to create and manage, in a totally autonomousway, personalized web TV, and offering to companies (corporate), content provider,and video producers (video blogger), a new way to carry the contents and attractusers’ interest. It is also a marketing instrument and a system for companies tointeract with their clients. It allows also integrating the dedicated channels and theinteractive boxes into other websites.Mogulus and Joost, and ShareMedia in Italy, offer similar services: the first webcastslive events through unicast protocol, whereas the second webcasts both through P2Pand unicast, supporting high investments in terms of infrastructure through venturecapital resources.Business strategyThe consumption of online video contents on the web is growing sharply. Thehighest part of portals that carry video contents does not offer linearity in terms ofuse of the service. 41
  • 43. P2P protocol seems to have at least two advantages: the content provider keeps thecontent since the client does not download the videos, and an unlimited opportunityto exploit economies of scale with lower investments in terms of capacity.Glomera’s management believe that without the use of the P2P protocol, no onemodel of web TV could resist to the growth of its audience. P2P is more complicatedtechnologically, but more efficient economically, even though it is currentlydisfavored because of lower resolution compared to the unicast, given low uploadingspeed of actual connections, and the required installation of software or plug-ins.As regard to premium contents, they don’t see them as appropriate for web TV fortwo reasons: P2P can’t ensure a level of the service that is adequate to expectationsof the clients who pay for the showing; premium videos are created to be shown onHD screens, not on a pc screen.Glomera produces and manages web TV, and provides all tools that are necessary tomanage the programming in autonomous way in a wide range of languages. Itstarget is composed either by whoever has a limited amount of videos or by whoeverdesires a dedicated channel to broadcast 24/7. Furthermore, interactive functionssuch as chat, comment boxes and votes to contents, contextually to the webcastedvideos, facilitate the creation of virtual communities and other forms of interactionthat are typical of Web 2.0The innovative technology is the P2P streaming, that allows the rapid distribution ofhigh quality contents to an unlimited number of users, with the possibility to developnew business and communication models, thanks to the considerable reduction ofbandwidth costs. Videos are legal, safe and protected for the content providerbecause they cannot be downloaded and cannot be copied.Private firms, professional video producers and beginners can easily upload theirvideos and manage a personalized streaming channel, and also integrate it on theirwebsite. Nevertheless, Glomera allows to webcast live events and interviews.Moreover, the possibility to integrate the personalized channel into other websitesand portals, allows partners to increase users and be on the web virally. 42
  • 44. Key points of the offer are as follows:• Creation of a personalized channel: a logo, photos and external links can be added to the channel, which can be embedded on client’s own website, and videos are protected because can’t be downloaded.• Contents can be managed directly through simple tools, and a personalized programming can be created.• Personalized interactive functions, such as descriptions, documents downloading, images and external links.• Social interaction tools, such as chat and comments threads.• Reports about the audience, with the possibility to change the programming on the base of it.• Viral functionalities: Glomera gives the possibility to create a network of members who can diffuse contents on their own portals in a viral way, like video sharing and embedding, and alerts sending to know when a programme is webcasted.• Revenues from advertising videos, which can be added to the programming, and from banners and links to sponsors.In order to enhance the success of its clients, Glomera provides supporting servicesto the production and running of web channels, such as consulting service for thecreation and the start-up of the web TV, technical support to the running of thechannel and the programming, organization and conduct of the videos and thechannel, production and post-production of videos related to events, interviews,conferences and reportage.To be noticed that Glomera offers solutions both for internal and external web TV:the former is used by companies for e-learning and know-how sharing of itsemployees mainly through the unicast, whereas the latter is used to reach potentialclients through P2P streaming with a highly branded medium at a low cost.The market positioning of Glomera starts from the objective to create a projectfounded on a highly sustainable business, since it is not financed by any venturecapital fund as some competitors like Mogulus, Joost and Babelgum, and therefore it 43
  • 45. has the objective of differentiating as much as possible from competitors and createpeculiar marks of distinctiveness.Critical factors of success are:• lowering of bandwidth costs;• no limitations to users simultaneously connected;• integration and personalization of the channel on the company’s website and possibility to embed it into other portals;• highly targeted communication campaigns and e-commerce offerings together with videos;• statistics about audience and click rating;• simple tools for the running and the organization of contents of programming;• differentiation and valorization of various levels of interactions: among users and between users and company.Business modelGlomera offers services to companies for a fee. It is a fixed and all inclusive amountthat is between 3,000€ and 5,000€ a month. However it can be lowered by theinsertion of advertising on the portal Glomera.tv, which contains the videos of thedifferent users of the service. A portion of the revenues from advertising goes to thechannel from which videos come, proportionally to the audience of such channel,with the logic to incentivize the production.The company ensures the webcasting of the channel through P2P streaming, andwith an unlimited base of users.Future scenariosAdvertising is growing steadily and rapidly, and it will converge on videos more thanon banners. This kind of market is still partially undeveloped, and this is neitherresponsibility of the agencies, which could reintroduce at a lower cost on web TV thesame campaigns that runs on other media, nor of the companies that don’t have 44
  • 46. clear media plans. It is responsibility of media centers, which manage investmentsand media planning in a portion that is so high that doesn’t allow to other actors toenter into the market with profit, but only with marginal revenues. The only actorthat is currently able to manage video advertising at a world level is Google, which isa kind of media center for the web, as already did with textual advertising withGoogle Ads.As far as the company, the prevalent plan is to stay into the internet business, forthe confidence into its still untapped potential. They plan to focus on:• optimal management of the contents;• easy interface;• no additional software needed (Glomera works with a plug-in);• light and little intrusive platform.Glomera.tv, the portal dedicated to vehicle the partners’ televisions, enhances usersto enter to a bouquet of thematic channels, while partners can spread theirprogramming and reach new potential users. Within Glomera.tv, advertisement willenlarge revenue streams, because thematic channels will become highly branded andtherefore will attract high investments. 3.2 ShareMediaWebsite address www.sharemedia.itLanguages ItalianCommercial name ShareMediaCreated year 2006Registrant name Unicity S.p.a.Registrant country ItalyDescription Corporate TV, interactive VOD service and audiovisuals production.Unique visitors (users) 7,500Average time on site 5:30 45
  • 47. General information about the companyUnicity S.p.a. arose from the entrepreneurship of a group of communication andsoftware development professionals, with the contribution of Eworks, an Italianventure capital. It is one of the most important Italian web agencies, and it providesintegrated services and solutions for the web. Starting from 2005, they implementeda web TV platform, ShareMedia, realized together with Unidata S.p.a.Unicity operates in the Information & Communication Technology industry, andoffers a wide range of services, such as creation of portals and websites, e-learningand media integration solutions. The web TV platform, ShareMedia, allows to createand run television formats on the web and to create corporate TV for private firms,for e-learning companies, and for the Public Administration.ShareMedia proposes a concept that can be assimilated to Glomera in Italy. Anothercompetitor is Narrowstep, a British company. Different realities exist in the Italianmarket, like TXY Polymedia, that comes from the broadcasting industry. It can beassumed that ShareMedia has features that are peculiar of a system of VideoContent Management.Business strategyShareMedia came into existence within a market with high potential of growth. Theidea has been positively welcomed by big companies and institutions, less by smalland medium companies, because of the difficulties to understand the communicativepotential of integrating a web TV into the company’s website.In addition, ShareMedia found difficult to get in touch with film producers, which themanagement considered as an attractive partner because of the difficulties for smallproducers to distribute to theaters. By contrast, such sector saw web TV more as amenace than as an alternative.ShareMedia provides the technological resource for whoever wants to create a webTV. It enhances the creation of thematic channels and audiovisual formats, with high 46
  • 48. personalization features. The objective is not only to serve as support for suchinitiatives, but also to project them directly: they are also evaluating the creation of aweb TV b2b, as a communication strategy for companies.Corporate TV is a form of communication integrated into the website of companiesand institutions, and has diverse finalities: internal communication, promotion,support and motivation to sales networks, events and presentations, informationservices but also selling of entertainment contents.ShareMedia is also present on the contents side. Unicity S.p.a. owns Blueray, acompany that is specialized on ideation, project and realization of videos forcommunication, training, information and corporate image, which produces mainlytelevision and radio commercials, institutional videos, shorts and formats.Despite this kind of strategy doesn’t bring to great advantages, it shows a kind ofdynamicity because the company proposes itself as able to improve the quality ofvideos owned by clients.In this phase ShareMedia strategy is focused on corporate clients, and it gives themthe possibility to create a Corporate TV. The biggest part of clients are institutionsand big companies, whereas among small and medium companies we can find RaiRadiotelevisione Italiana, Monte dei Paschi di Siena, Arma dei Carabinieri, Ministerodella Salute e dell’Ambiente.The collaboration with RAI concerns an experimental project of a format producedfor the web, called “L’Universo della Conoscenza”, in which there is convergenceamong traditional TV, video on demand, a web portal, pay-per-view contents, and anarchive with thousands of hours of programming. The joint venture Rai-Unicityrealized a cultural thematic channel characterized by three elements, such asqualitative and quantitative richness of contents, interactivity and the 80% of videoon demand.However, ShareMedia provides both streaming and downloading services andproducts with different characteristics, inside a unique platform with diverse 47
  • 49. functionalities, as the possibility for the user to choose the way to enjoy thecontents.Business modelThere is not a peculiar business model, since ShareMedia exploits at least three waysto create value and generate revenues:• Premium contents to be downloaded at a price.• On-line training., to be used by companies in addition to traditional training.• Digital advertising: substitution of traditional banners with interactive commercials or other formats that come from traditional broadcasting and are rearranged.The objective is to embed those sources of revenues into the editorial project relatedto corporate communication. However, it has been difficult to monetize in the shortand medium term so far, because clients have mainly institutional, popular orentertainment character.Among his clients, only one is implementing a project financed through banner andinteractive commercials. The scarcity of editorial projects is motivated by theinexistence of clear, defined and sustainable business models.Future scenariosShareMedia management doesn’t believe that web TV can substitute traditional TVbecause of the attitude of people and because of different model proposed by webTV, which is based on the On Demand and is highly “democratic”.The actual scenario is characterized by a transition phase in which also corporatestrategy looks to the Internet as a great opportunity to distribute the contents.As regards to ShareMedia helps companies in this transition to the web, that in thenear future will become a key in terms of marketing. ShareMedia plans to attract, inthe long run, also consumers, in addition to corporate clients. 48
  • 50. In the short and medium term, the attention will focus on b2b, in order to overcomethe actual problems, which are basically cultural and technological, because of lacksof interaction with the new media, and insufficient infrastructure.The biggest challenge is to differentiate from competitors: formats and languageshould change and adapt to the needs of the new platform, a crucial point for webTV to be finally successful. 3.3 Google Video – YouTubeWebsite address www.youtube.comLanguages German, English, Spanish, French, Italian, Norwegian, Dutch, Polish, Russian, Swedish, Portuguese, CzechCommercial name YouTubeCreated year 2005Registrant name YouTube, Inc.Registrant country USADescription Largest video-sharing website in the world.Unique visitors (users) 84,000,000Average time on site 12:00General information about the companyIn September 1998 Larry Page and Sergey Brin founded Google with the objective ofcreating a service to organize online information on Internet.Google is today the main search engine in the world, with a database of over 8billion of URL, and the possibility to find any kind of website, given some keywords,in a fraction of second. 49
  • 51. Google has also bunch of additional services, like Google Ads, Google Earth, etc. andmoreover Google Video, born as video-sharing website and become, after theacquisition of YouTube in 2006, a search engine for videos, for 1.65 million Dollars.YouTube was founded with financing of Sequoia Capital in 2005 and rapidly becamethe most important video-sharing website in the world. After the acquisition fromGoogle, it has been operating as independent subsidiary of Google Corp.Such success increased after the closing of some partnerships with important contentproviders as CBS, BBC, Universal Music Group, Sony BMG, Warner Music Group, NBA,Sundance Channel and many others, in order to diversify its offer to consolidate theleadership and attempt to solve the big problems related to copyright.Within the huge amount of video-sharing websites that allow uploading usergenerated videos, it can be distinguished between horizontal and vertical portals: theformer , such as Yahoo!, Libero and Alice Dailymotion, offer a wide range of servicesin addition to the possibility to upload user generated videos; the latter focus onvideo-sharing only.However, the main competitors for YouTube seem to be horizontal portals thatsucceeded in creating wide communities through the collateral services, but nocompetitors succeeded in attracting so many users just through the video uploading.One of the main competitors was Google Video, which after the acquisition ofYouTube became a search engine for videos.Business strategyYouTube is the market leader vertical and generalist video-sharing portal, and itallows watching videos, interacting with other users, but most of all to uploadcontents: with this kind of platform is possible to create a personal TV channel.The offer is dominated by User generated Contents, but its growing success is due toagreements with majors and TV broadcasters, that enlarged the offer with higherquality and longer videos, through which the portal increased its value and assumeda meaning that is different from the simple logic of video-sharing. Concerning 50
  • 52. technical issues, videos uploaded from standard users are limited to 100MB and 10minutes, whereas an official partner can upload 300MB videos.Everyone can create a channel to upload videos and realize an online personalarchive, after free registration and choosing of an account, that can be: standard,director (user can add a logo and some personal elements), musician or comedian(logo, information about the genre or the style and tour dates, links to buy CDs),guru (logo, genre and some links).Inside the official partners category there are companies operating in media, such asbroadcasters and content owners, but also standard accounts that can be awardedfor creativity and success obtained by videos.The layout of each channel can be customized: there are videos uploaded by theuser, the favorite videos, comments from other users, subscribed channels. Partners’pages are different also in the watch page, with a small banner on the right of theplayer that brings directly to the partner channel, and on the right are showed videosuploaded by the same account.Some factors that initiatives from the partners and determined YouTube as analternative platform of communication: a wide community, and the video ascommunicative form. The more the community is big, the more the message from awebsite is effective. This is the main reason for the success of the social networks,such as Facebook and Flickr, but videos are even more powerful and direct means ofcommunication. For instance, the band Red Hot Chili Peppers and Warner Bros Musicasked fans to upload in YouTube a video based on a song that they had just releasedon Amazon and iTunes, and they received more than 400 videos in 70 days: thewinner’s video has been uploaded on their channel and the person won 5,000 Dollarsand a weekend with the band.From that moment, YouTube has a page dedicated to contests that is similar to thepartner’s one, with an interactive window on the top-right with a video that explainthe contest, the possibility to upload the video to participate and to watch other 51
  • 53. participants’ videos. Each organizer of the contest chooses rules and modalities,whereas YouTube offer the service by fee.Born as a “box” for UGC, the portal gives to users a determinant role because of theimportance of social networks in the web 2.0. However, YouTube fronted from thebeginning the problem of control of uploaded contents, both related to ethics and tocopyright protection. The company has protection systems of the rights that allowrecognizing a content that is under copyright law: if removed after a claim of acontent owner, the same file can’t be uploaded again. After then has been built asystem that recognize the ID given to any video, on the base of a series of frames,so neither the publishing of contents realized through the editing of protected framescan be uploaded.Critical factors for the success of YouTube are:• Ease of use.• Quickness of the enjoyment: the video uploaded can be immediately watched.• Community: possibility to comment, vote and share the videos.• Embedding: first website to give the possibility to embed the video into other websites, just through a simple copy/paste of the HTML code, giving viral success and visibility to the videos.Compared to traditional television, YouTube’s role is complementary more than beinga substitute, because traditional broadcasters can upload contents to catch a largeraudience, that otherwise would be impossible to reach, simply creating their partnerchannel on YouTube.Business modelDespite it is the first video portal with an amount of users that is bigger than anyother video-sharing website, YouTube did not generate as much revenue as it could.However, Google purchased it for 1.65 million Dollars. Audience is enormous, buteconomic results have been poor, so it has been necessary to develop a sustainable 52
  • 54. and profitable business model. First profits from the big investment came in 2008,after some instruments able to monetize the huge audience were introduced.There are four advertisement models that constitute the business model of YouTube:• Active display advertising: it is the classical advertisement format, present in each section of YouTube except the homepage. There is the possibility to choose channels of the video platform and the websites on which advertise, with the only condition that such websites are part of the Google content network, so that target can be segmented and the probability of success of the advertising campaign is higher. The contextualization is also a characteristic of Google Ads, but in this particular case the advertiser chooses websites on which put the ad, and not an algorithm.• Sponsor channel: for companies that are not in the media sector, and therefore are not in the category of official partners, but have the use of a big video archive, YouTube gives the possibility to create, by fee, a channel characterized by the same functionalities that a partner channel can have. It is the case of companies that might want to sell its products, promote initiatives, advertise with much creativity, increase the brand awareness and improve the image. Such sponsor channel has not a fixed cost, on the contrary there is a minimum amount in order to generate sufficient traffic towards the client’s channel, and guarantee the success of the client. The display advertising is showed both on the portal and, if requested on the content network of Google, in a way that increase synergies between the two portals and the benefits are more evident. The initiative lasts three months, then there is a down-grade to standard channel, that differently from sponsor and partner channels, can host third parties ads by concession of YouTube: benefits from revenues coming from this banner go both to Google and to the owner of the channel, according to the revenue-sharing model. As regards to the visualization of the page that contains the video, the mechanism works only with clients that previously accepted to insert ad on their videos. 53
  • 55. • PVA (Participatory Video Ads): it is a click-to-play video format that can be found on the right-top of the home page and is usually used to promote a sponsor channel, or a particular film or product. Besides the video, it is allowed to the user to deepen what is proposed through: a small banner on the top of the player that can bring to the related YouTube channel or to the related website, or two links on the bottom of the player that can bring to the same of the homepage but in the related page or to the channel of the uploader.• Transparent banner on the video: it is the most interesting and recent model, that give the possibility to watch, within the 20% bottom of the video, a transparent banner that is contextual to the topic of the video and appears 15 seconds after the starting of it. It can be: clicked, so the video stops and another player opens up inside the principal player, then the video starts again; closed immediately by the user; neither clicked nor closed, so it disappears after a few time and then appears again at the end of the video. Advertising can be included only on official partners websites, included the standard accounts that have been upgraded for creativity and success. Revenues from the ads are shared and such revenue-sharing applied also to basic users pushes towards higher quality productions. Equally to the sponsor channel, the percentage retained by Google is not fixed but depends on the strategic value of the partner.The last thing to be considered about YouTube business model is the completeabsence of advertisement on videos, because formats such as the pre roll damagethe user experience. Moreover, UGC have been considered as not suitable to besource of revenue because of a matter of ethics and also because of protection ofthe copyright, retained by the users.The most part of companies contact YouTube and Google directly without passingthrough media centers, so Google has created an internal structure dedicated tocustomer base and created built-in specialized competences for the planning and thecreation of the ads. 54
  • 56. Future scenariosThe attitude is towards the improvements to the YouTube service, enhancinginnovation and research. A recent improvement has been the possibility to have abigger player in HD to watch the videos.The current objective tends particularly towards the increase of revenues and thestrengthening of the community. As far as the ad formats, particularly the PVA andthe transparent banners will be implemented. It is unlikely that pay-per-viewcontents will be offered, because this would distort YouTube philosophy, on thecontrary the revenue-sharing model will be extended because the catchment area islarge enough to support creativity and share revenues with the users. 3.4 RCS DigitalWebsite address video.corriere.itLanguages ItalianCommercial name Corriere della Sera TV Gazzetta TVCreated year 2005Registrant name RCS Quotidiani S.p.a.Registrant country ItalyDescription Video on demand service of the newspapers Corriere della Sera and Gazzetta dello SportUnique visitors (users) 1,100,000 + 390,000Average time on site 3:30 + 3:10General information about the companyRCS MediaGroup is a publishing group operating in sectors of newspapers,magazines and books, in the divisions of radio, new media and digital TV, as well asbeing among the most important actors of advertising collection and distribution.RCS Quotidiani is the publisher of the daily headings of the Group, in Italy and 55
  • 57. abroad. The company is the market leader for Italy, where detains a market share of21%. In 2008 revenues from newspapers have been around 1.3 billion Euros.RCS Digital is a company, controlled at 100% by RCS Quotidiani, which runs thewebsites Corriere.it and Gazzetta.it and the development of brands and editorialassets of RCS over digital media. The Mediacenter inside the two websites waslaunched in 2005 and has been conceived to be the video box of the two principalwebsites of the group. The ratio for the set-up of the websites derives from theanalysis of some best practices online, such as New York Times and WashingtonPost. The two multimedia sections have been revised more than one time so far, dueto the increase of contents amount and related layout modifications.Contemporary to the born of the Mediacenter, the company created a neworganizational structure, the multimedia offering, composed of multimedia marketingand video production. There are two editorial units, one for Corriere.it and the otherfor Gazzetta.it, composed of journalists focalized on the online. The value of auto-production is guaranteed by the inner production staff, characterized by highflexibility and readiness.RCS Digital S.p.a. is dedicated to the management and the development of editorialactivities of RCS over digital media: Corriere.it, online magazines and thematicchannels, Gazzetta.it, classified offering, mobile and gaming.Corriere.it, more than including a complete overview over the main facts in Italy andin the world, has an offering that is characterized by thematic channels, such asViviMilano, Salute, Viaggi and Casa.Gazzetta.it, the main website for sport news in Italy and Europe, has among recentinnovations, GazzaSpace, the website section that gives voice to readers, where ispossible to comment the articles, participate to the forum and express opinions aboutsport news.Both Corriere.it and Gazzetta.it put at their surfers disposal a rich TV/Video offering,with image galleries, video contents and deepens ad hoc for the web, besides realonline news and many thematic columns by famous Italian journalists. 56
  • 58. RCS Digital operates in the classified ads with successful initiatives in jobs(TrovoLavoro.it), real estate (TrovoCasa.it) and automotive (Automobili.com) sectors.Thanks to RCS DB Games, RCS MediaGroup is also present in the online gaming withFueps.com, games and online entertainment portal.The leadership positions in the online property makes RCS Digital attractive foradvertisers, because of many different and highly targeted communication forms.In less than three years of activity in the mobile sector, RCS Digital affirmed itself asleader in the infonews segment, thanks to an offering of over 50 information services(SMS, MMS, and mobile Site) and to a rich portfolio of updated multimedia contents.RCS Mobile is the portal that collects and makes available for all the operators mobileservices from five different important brands: Corriere della Sera, La Gazzetta delloSport, Max, Novella 2000 and Astra.The present case study will take into consideration only the two portals Corriere.itand Gazzetta.it, which are information products, with a video section and manyentertainment features.The main competitor in Italy for Corriere.it is Repubblica.it. Both offer services withphotos, audio and videos, within the logic of interactivity with the user. Anothercompetitor inside the information field is TGCOM. A significant distance in terms ofunique visitors separates Corriere.it from the other headlines. However, despite thedifference in terms of contents and objective with the traditional portals, those arecertainly competitors in terms of advertisement collection.In those terms, RCS competitors are also portals that offer only videos as anentertainment and not information, such as YouTube or the Italians Libero Video andAlice Video. Nevertheless, the will is to not compete against those kind of portalsbecause the offering and the strategic positioning are a way different, linked to alogic of editorial headline and contents about current events and other kind of news. 57
  • 59. Business strategyThe big companies of the publishing industry, that in the past were focused ontraditional offerings like newspapers and television, are currently investing a hugeamount of resources for videonews over the Internet. There are examples like NewsCorp. and the acquisition of Dow Jones and the implementation of the Wall StreetJournal website, but also BBC, Mediaset, CBS, New York Times or MTV Networks, orspecifically news agencies like Ansa and Reuters: they are all implementing effectivevideonews over their portals.Internet has high untapped potential and the video sector has high growing rates,but does not cannibalize newspapers readers, because the offering is different.Internet users are not characterized by high fidelity, basically because the use isfree, and this affect the customer retention rate. However, it is the free model thatarises from the web TV context, because the pay content would clash withbroadcasting or satellite television. Relevant for this business model to be sustainableis advertisement investments, considered that Internet is not seen as a residualmedium, saturation rates of advertising are high and the unsold decreases. Further,the IP protocol gives the possibility to obtain a good quality despite investmentsusually lower than required for television.RCS Digital has different channels because, in this way, the advertiser can chooseone or more of that for his investment, the sport area for instance, even not referredto video only.From the point of view of technology, the bandwidth is not considered a problemanymore, since higher potentialities for the user would imply higher expectationsfrom the offering, which would have to adapt to the demand. In addition, podcastshave not been considered as a possibility yet especially for a matter of publicityrights, since an uncontrolled distribution would decrease the value of the signature toa specific article.The offering is almost totally composed of contents produced by the editorial office.The inner production is a specific choice of the editor to guarantee flexibility and 58
  • 60. readiness. A small space is currently dedicated to UGC on the portal Gazzetta.it, inthe section “Your videos” even if it is clear that they are a growth driver that isfundamental for the website. The production is strictly linked to the headline, toinformation and current events, and videos are conceived for an exclusive fruition onthe web, through Video on Demand.Videonews distributed on the base of the sections of Corriere della Sera represent astrength: Italy, world, culture, sport, science and entertainment. The production isnot predetermined but is related to what happens each day, and the typical length isbetween one and three-four minutes. Afterwards, the sections cinema, Milan andfree time have been added.Some contents have characteristics that are similar to TV production planning, suchas TV news, meteorology, reports and meetings. TV news audience is not relevant ascompared to videonews and reports, but it is programmed to be webcasted at11:30am and at 4:30pm every day; it has a specific format that is shaped accordingto the characteristics of the Internet. The two editions of meteorological news, one inthe morning about that day and the other in the evening about the day after, haveunstable reach, because of seasonality or news items. The reports compose theproper programming, with a weekly cadence and an archive with past editions andbig signatures of journalists.The connection between Corriere TV and the principal signatures of the newspapercreates affection among viewers, and that creates a specific target, even thoughother viewers follow more the videonews channels, that reach peaks especially in thesecond part of the day. In addition, viewers are very discretionary about the contentsand they don’t stand programming choice passively.As far as the positioning, the main competitor Repubblica.it for instance created in2005 RadioRepubblica, a web radio channel, but Corriere chose immediately thevideo, then Repubblica was a follower. Nevertheless, Repubblica has a model that ismore similar to television: it has a daily live programme from 10am to 1pm, alsobecause it is present on digital TV and follows a precise programming strategy based 59
  • 61. on synergies. Corriere TV operates only on the Internet and its offering is exclusivelyVOD. Furthermore, differently from Repubblica, emphasizes the link with thesignatures of the newspapers, considering them as a driver for affection and asource of value for the portal. As regards to Gazzetta TV, it is also in competitionwith traditional TV because it is a right holder for highlights of soccer games.Business modelThe business model adopted by RCS is characterized by free contents withadvertisement. A premium section, the Passport area, was created in the portalGazzetta.it, at the cost of 4 Euros a month, but it has been shut down after few timebecause of not much clients. Therefore, revenues come from advertising on thevideos as pre-rolls that lasts about ten seconds, and from few banners.There are not marketing campaigns over other websites because RCS believes hisown brand is strong enough to invest huge resources on his network with flowstowards the other portals of the group.Currently, from 8 to 9 million of users watch videos on the two Mediacenter eachmonth, with Corriere.it that leads at about 5 million, even though Gazzetta.itrecovers during big sport events. Gazzetta.it growth rate depends particularly fromthe UGC area, which will drive the enlargement of the audience in the near future.Figures provided by the company show a +43% of video users for September 2009compared to the same month of 2008.The investments, either for structure or for production, have been huge and thecompany did not reach the break-even point yet, even though it is really hard to becalculated given revenues from so many different activities.Revenues from advertising for the two portals are confidential, but figures show a+2% in advertising revenues from the Internet, despite of a decrease in all the othermedia, in the first half of 2009 compared to the first half of 2008, an upward trendthat characterize the whole advertising market in Italy (+7.9%). 60
  • 62. Figure 30: total advertising market and comparison with RCS. Source: RCS MediaGroup.Future scenarioAS far as short-medium term strategies, RCS plans to exploit at a higher level theUGC, already present on Gazzetta.it, because they pushed the growth of the portal,in a way that can enlarge the existent section and opening a channel also onCorriere.it. The model would imply a manageable amount of video uploading, inorder to enhance customer retention without requiring unaffordable work tomoderate and control the contents.The video offering will be soon broadened with new reports and special editions, inorder to cover the biggest part possible of actual facts and news. It will be soonavailable a new platform for the contents to ensure an interaction with the content,so a bigger window, more quality and amount of channels, with the content that canbe embedded into other websites, but with a visible brand of RCS. Other innovationsas related items, programmed on the base of precise editorial choices, will beintroduced. Finally, new forms of advertising will enhance greater interaction of theinvestors with the UGC area, looking at an increase of the amount of content in orderto segment the target and make the ad more effective. 61
  • 63. The partnership between RCS Digital and Digital Bros, leader in Italy for productionand distribution of videogames, and the following RCS DB Games joint venture tocreate the first Italian portal specialized in videogames and web entertainment,shows the intention of the company to reinforce its presence on the Internet andeventually create more synergies among the different divisions.In the long term, it is a possibility the landing on digital TV or IPTV, which wouldincrease also the potential of the Mediacenter to be effective and gain moreaudience. 3.5 Libero VideoWebsite address video.libero.itLanguages ItalianCommercial name Libero VideoCreated year 2006Registrant name Wind Telecomunicazioni S.p.A.Registrant country ItalyDescription Video section of the portal Libero.it, packaging and distribution of contents, mainly UGUnique visitors (users) 1,800,000Average time on site 7:00General information about the companyWind Telecomunicazioni S.p.A. was founded in 1997 and is one of the few operatorsin Europe that offers integrated telephone and Internet services. Wind is the firstoperator in the phone service industry and among the biggest Italian Internet ServiceProviders, with 1.25 million clients with direct access and about a million Internetbroadband clients. Moreover, the company is the third mobile phone operator, withabout 15 million clients. Wind has been an innovator in terms of services and offering 62
  • 64. in Italy, focusing on new market standards: integration of phone services, evolutionof the Internet, a global answer to clients and companies communication needs. TheWind strategy concerning the broadband was designed to exploit the synergiesbetween connectivity offered by Libero ADSL at 20Mbps, and the contents offered bythe portal Libero.it, currently the first Italian website in terms of page-views.In particular, Libero Video is among the services offered by the portal Libero.it. Theconcept was to realize something completely enjoyable on the web. They began toanalyze the diffusion of the broadband connection and the use of the multimediacontents, in order to understand which way the project should take.Basically, the idea was to not use UGC only, but high quality videos. They tried to getin touch with big production companies, such as Endemol and Magnolia, able toprovide content-driven formats and attract huge amount of viewers. They alsowanted to exploit the main characteristic of the web, which is interaction andinvolvement of the users, through sms, videos and other kinds of contribution.In this first phase the considered business model was the selling of high qualitycontents, both streaming and downloading.In the same period, Google Video was created to give users the double functionalityof uploading and viewing through a proprietary mechanism: users had to download aclient to upload their videos, but the community was not able to know the author ofthe video. Google Program offered also the possibility to be paid for the video,according to a complicated rule.Libero considered such model not appropriate with the internet philosophy becauseof the slowness of the fruition due to the proprietary mechanism of uploading andviewing, and because of missed incentives to the community, since users could notbe recognized as authors of the videos.They found other models that dulled such obstacles: one of them was YouTube,which became the template as guide for technological choices, and prompting of therelationship with the user for generating the community. In particular, two new 63
  • 65. elements made of YouTube a winning model: the adoption of Flash Player and theembedding feature.The YouTube model clarified the ideas about what to do: they had to aim on auto-produced products, so they started to work to technical requirements and in 2006Libero Video was launched. The service was really hard to be managed in the firstperiod. In fact, for a service provider, a video-sharing portal is consuming in terms ofbandwidth because, due to his viral nature and the ease of use, many people watchvideos at the same time. The average time spent on the website started to growsensibly, due also to the community section, in which users communicate, makesnew friends, gives vent to his creativity etc. Human resources for this new projectcame both from marketing and from technical departments.Afterwards, were introduced the automatic charts Top Movers and Top 100, and thenavigation through tags, and then in 2007 the layout was changed, the memory wasenlarged and was given the possibility to the user to choose a thumbnail for thevideo.Wind Group operates into four sectors: Wind is the mobile phone and related brand,Infostrada is the home phone service brand, Libero is the brand for Internet services,and iNet provides services and ad hoc Internet contents for companies.Libero is an Internet service provider, and the main products are: community, searchengine, mail, news, video, and ADSL & Internet. Services are included into the portalLibero.it, the real reference point for the company.Libero Video is one of the main distribution platforms worldwide and the first in Italy.The UGC phenomenon brings to a sharp growth of the amount of portals that offerthis kind of service, so there are many competitors. For its characteristics, though, afirst comer like Libero has some advantages upon new competitors. YouTube offers asimilar service, but Libero Video is part of a service provider company, so it is able toshare resources among different sectors. Another competitor is Alice Video(Dailymotion), which is a follower but could have some advantages in terms of 64
  • 66. content, being part of the same group of a broadcaster as La7. Google Video can bealso considered as a competitor.Business strategyThere are many elements that are relevant to the business, exogenous variables asthe development of the broadband connection, the informatics culture of thepopulation or the diffusion of video standards. The diffusion and penetration of thebroadband favored the growth of these services, even though in Italy this ishappening at a lower rate than in other European countries. Another variable is therecovery of advertisement investments, that provides a valid business model, andthat recalls for increasing attention from professional producers of the contents thatsee videos as a new business opportunity in this sector.People dedicate more time to the navigation on the Internet, clamping down the roleof television as principal mean of entertainment. The time spent online is a crucialfactor for Libero: to increase it, it levers on the viral and the communities.In Italy there is few competition among providers and advertising, despite growingon the Internet, is mainly oriented towards television. There is not a focus, neither aparticular interest, upon this sector yet, and therefore there is still a lack ofinvestments and attention from entrepreneurs and politicians.A technological aspect emerged as relevant in the context of video-sharing, being animportant innovation: the embedding feature. With this mechanism, every websitecan show videos stored on other portals. This means that every HTML page, such asa blog, might become a web TV just exploiting this simple feature with no costs ofinfrastructure on the server side. At the beginning, many operators opposed to thisfeature, which implies losing control over editorial contents and advertisement. Thephenomenon spread so quickly that nowadays a video-sharing portal has moreviewers on other websites through embedded players.Libero Video gives the opportunity to every user, after registration, to upload hisUGC. Afterwards the launch of YouTube, Libero Video added contents of higher 65
  • 67. quality, through supplying partnerships, implementing a diversification strategy. Thismade the portal less homogeneous and polarized on funny contents that wereconceived to generate audience. Videos offered today are 95% UGC and 5%professionally-produced contents. The partners are: Affari Italiani, NationalGeographic Channel, Le Iene, SixRooms, Radio 105, Gossip News, Meetic, FX, LuckyRed, and TjNet. Inside the UGC, there is a section dedicated to independentproducers, called Director, who are able to produce videos of higher quality andmore often. The biggest part of the offer is constituted by the incredible amount ofcontents uploaded by Uploader or simple users.The library of Libero Video is composed of some hundreds of thousands of videos,divided into categories, such as Entertainment, Music and Shorts (35%), News, Sportand Current events (20%), and other categories as Travels and Cars (45%).A characteristic of Libero Video is the objective criteria, based on automaticalgorithms, to decide which video will be showed in the homepage. The messagefrom the company is that everybody is able to become famous within the portal andthis depends just on the uploaded content. For instance, there is a chart for TopMovers, more viewers within less time, or for Top 100, more viewers in the previousday. Charts are updated every two hours, and give an idea of how a video can beviral in the website: an avalanche effect determined by the users that promote avideo and diffuse it on the web. This is a characteristic on which Libero Videoleverages.Given the type of service that transfer the importance to the users, a control systemover the uploading and an effective search method are needed. The control over theuploaded videos is done both by the editors and with the help of the community, andare done every two hours, in the moment in which the charts are composed,exception done for the category Sexy videos, that are checked one by one, with therelated category that is protected by a filter. For what concerns the searchingmechanism, in 2007 has been introduced the navigation through tags, that generateslinks between videos, besides the presence of the similar videos. However, the most 66
  • 68. used techniques are still the play page and the searching using a specific query. Thefirst page is a pre-vision of the video, then the user using tags or similar videos,starts to navigate randomly.Users serve therefore also as censors for the contents. There are affectionate users,called Leaders, which act as a sort of guide for the portal and are trusted by otherusers. They signal inappropriate videos and also inappropriate users, and the resultsare satisfying.To sum up the critical factors of success of Libero Video:• The choice to use the Adobe Flash technology, because allows the user to watch the contents through progressive download with no requirement to install any client software.• The ease of uploading: any type of format is processed automatically.• High integration between community and video: with a nickname is possible to manage both the own video gallery and the profile in the community.Business modelThe business model today is based on advertising only, even though at the beginningthe idea was to sell quality contents. Advertising has different shapes in the portal.The first one is into the Play Videos, which are videos at fee made by producers, towho is guaranteed the exposition in the homepage, from which then is possible to gointo charts and exploit the viral effect of the system. A new format is the VideoCommercial that turns on in the homepage. The second one is the banner sold toadvertisers through Google AdSense.Advertising inside the videos is considered too intrusive towards the user: theobjective is to enlarge the audience and this would decrease it.The portal could have been marketed a way better, but Wind strategy put it at thirdposition after the other brands of the group.Figures are very impressive: about 250,000 unique visitors a day, between 2 and 5downloads a day, 364,000 Euros in the first half of 2009 from ad on video streaming 67
  • 69. between Spot and Video Play, 754,000 Euros on banners, 150,000 Euros fromGoogle AdSense program.Future scenariosThe awareness of the incredible amount of portals oriented to video-sharing of UGCmakes sure that a rapid success as they had in 2005 would not be possible today.Now is the moment to generate revenues from the value and the reputation that hasbeen created and push on them as much as possible. The actual question is whetherto differentiate from the new-comers or not, and if so, how much? The three mainstrengths to rely on are: the big community, the reputation as first video-sharingportal in Italy (and for a few time, direct competitor for YouTube), the innerresources that don’t presume the involvement of external companies (as is for AliceDailymotion, born from an acquisition).The short term strategy is to:• Rely more on high quality contents, with attention more on partners than on directors. New partners will be involved in the short term.• Reorganize the homepage layout, trying to create a sort of editorial line, as a kind of programming based on the most followed categories.• Realize a synergy with the mobile TV platform, simply adding an uploading channel.As far as the long term strategy, the direction is to make more partnerships, toconsolidate the community, to undertake any kind of action with the logic ofenlarging the audience. Further, the company plans to integrate with the mobile alsothe download, allowing watching videos on the cell phone. 3.6 Relevance of the case studiesThe figure below shows the strategic positioning of the companies described in thecase studies. 68
  • 70. Figure 31: strategic positioning of companies in the case studies.The biggest player, which is YouTube, is an online video company, a so-called pure-player, whose core business is the distribution of video content, mainly usergenerated, but some partnerships with professional producers provide also producedcontent, and this improves the quality of the videos. Its business model is entirelybased on advertising, even though there are some premium services, such ascontests. The content is on demand.Libero Video is the closest competitor for YouTube, at least in Italy, since they arenot comparable in terms of worldwide unique visitors (84 million vs. 1.8 million).Libero Video has a smaller portion of professionally-produced content, due to anlower focus on partnership, thus the majority of the content is UG on demand. Theycompete for approximately the same target, even though Libero Video is a differentactor, an Internet Service Provider and part of a communication group. 69
  • 71. RCS Digital operates through a free advertising-based model. The content is mainlyVOD professionally-produced, but some live events are also webcasted, especiallynews and reports. Its main competitor, Repubblica TV, has not been considered inthe case studies. Gazzetta TV has also a section for uploading UGC.Glomera and ShareMedia operate and compete in the b2b market. The first oneprovides a platform to create a web TV to companies (corporate), content provider,and video producers (video blogger) and also shows the contents produced onGlomera.tv. ShareMedia allows to create and run television formats on the web andto create corporate TV for private firms, for e-learning companies, and for the PublicAdministration. They both provide the service by fee, and they both operate at theedge between ad-financed and free (in the case of Public Administration or corporateTV for internal communication), but the first relies more on advertising than thesecond.4. Strategic issues and business models 4.1 Economic frameworkAccording to a recent study by ABI research5 “the consumption of broadband videoboth with fee and financed by advertisement will grow considerably in the nextyears. This growth will bring to the birth of new distribution channels and to thebroadening of the audience base that frequently watch online video contents from5 ABI research (2007). Broadband Video and Internet TV 70
  • 72. the present 300 million to over a billion in 2012. This will contribute to develop newand evolved business models that will bring to a rich industry in the next years”.The first step to define the business models is to quantify the potential of web TV. Agood proxy is the broadband diffusion. Figures provided by AGCOM6 say that in 2008411 million people had access to the broadband, and with an increase by 260 millionin 2005 at a steady rate.Figure 32: broadband worldwide diffusion. Source: AGCOM.Europe has a high concentration of access: at the end of 2008, 132 million clients, ofwhom the 85% in the Western countries, and with a penetration rate that in sevencountries is higher of the 26% for the US. To be noticed that 1/3 of users is localizedin three Asian countries (China, Japan and South Korea), whereas the US have about80 million users. In Italy, the broadband access has been growing in the last years,and today more than 11 million people are potential customers for web TV, eventhough the penetration rate is still low at 14.5%.6 AGCOM (2009). Relazione annuale sull’attività svolta e sui programmi di lavoro. 71
  • 73. Figure 33: broadband access in Italy. Source: AGCOM.Nevertheless, the real question is how broadband users actually watch web TV?The ABI research about broadband TV and internet says that at the end of 2007,around 300 million people watch frequently online videos. The seminar “EmergingTV” organized by IAB (Interactive Advertising Bureau) Italy, says that 45% ofItalians broadband users watch frequently online videos, and the figure is expectedto grow. According to a research by Ofcom7, audience is abandoning traditional TVfor web TV, and currently the 52% of Italians watch frequently music videos online(71% of 18-24 demographics), the 37% watch TV programmes online (51% of 18-24demographics), the 41% watch user-generated content online (67% of 18-24demographics), and the 51% watch news programmes online (54% of 25-44demographics).7 OFCOM (2008). The International Communications Market. 72
  • 74. Figure 34: watching TV programmes online. Source: Ofcom.As far as the contents, the bar chart below shows that at least the 50% of 18-24years old Italians have watched online video content at least once.Figure 35: use of online video content by 18-24 years old. Source: Ofcom.According to the data provided, the customer base for web TV in Italy can bequantified in approximately 4 million people, engrossed in large part in the 18-24demographics, whereas in the US it is approximately 35 million.The increase of the demand has been nourished by the a contextual increase of thesupply. According to Future Exploration Network8, there are about seven billionsvideos on the Internet (the majority are user-generated), whereas the magazine for8 Future Exploration Network (2007). Future of Media Report. 73
  • 75. the magazine Wired9 there are more than five billion online channels, and the video traffic doubles every six months according to Forrester Research10. Advertising is the main financial source for a web TV. In 2007, as showed in the pie chart below, the global advertising spending for the Internet was 31 billion Dollars. Traditional media still dominate global advertising spending, however advertising patterns are rapidly shifting as non-targeted media such as broadcast TV and newspapers lose market share and pricing power, and new media channels increase their share. The fastest growing and largest segments of digital advertising over the next few years are forecast to be paid search, mobile and video, according to Future Explanation Network. The domain of digital advertising will continue to expand, for example newspapers delivered on e-paper with video content will be a new forum for digital, personalized advertisement.Figure 36: global ad spending by Figure 37: growth in digital advertising.medium. Source: Optimedia. Source: IAB. Formerly, in 2007 the marketing manager of Nielsen//NetRatings11, said that “the Web 2.0 and in particular video contents websites, are the main beneficiaries of the 9 Haven B. (2008). Should your brand use video online? . Wired Magazine 10 Forrester Research (2008). The real potential of Internet Video. 11 http://www.nielsen-online.com/pr/pr_070423_IT.pdf 74
  • 76. broadband, because the broadening of the bandwidth allows a new experience, inwhich the user is able to watch the web TV surrounded by the interactivity of theInternet. As a result, the online video offering is growing together with thetechnological improvement. The success of websites of the Web 2.0, not only ofYouTube, the video channels of Libero, Yalp, Google, and other web TVs as videosections of Repubblica and the Mediacenter of Corriere and Gazzetta…”As far as the main source of financing of the web TV, that is advertising, a researchby Forrester Research12 22% of respondents watched banners around videos, the37% as pre-rolls at the start of the video, and the 14% as middle or post-roll at theend of the video. By the way, the same study says that the 52% has never clickedon any ad, and this show that the advertising message does not catch the interest ofthe Internet user yet.A survey by eMarketer13 shows the reaction of American users to ad breaks insidethe video. The click-through rate for online video ads is 0.74% for in-stream ads,0.47% for expandable in-page formats, and 0.40% for standard formats: less than1% may not sound like much, but it is far higher than most display ads (typicallyplain GIF or JPG image ads get about 0.1% click-through rates).In addition, the study shows that interaction with online video ads has beenincreasing more rapidly than the rest of the online, as shown in the line chart below.12 Haven, B. (2008). Should your brand use online video?13 eMarketer (2007). Video ads get the clicks 75
  • 77. Figure 38: interaction rate for online video ads, as compared with online ads. Source: eMarketer.The question now is how much advertising people are willing to endure to watchvideo content for free, and it is unresolved. While many people seem to appreciatethe long-standing concept of free content in exchange for viewing advertising,several factors unique to the Internet turn free content on its head. That includes notonly user-generated video content competing with the professionally created kind,but also the wealth of the web chooses, video or not, that an individual can clickaway to in an instant if ad annoys.Another survey by eMarketer14 says that only the 54% of the respondents think thatadvertising is a fair way for websites to provide free professionally-produced videos,however implied on the flip side of that data is that 46% of respondents do notbelieve that advertising in exchange for free content is a fair deal. A further flip sideimplication in the data is that 48% of respondents would rather pay to see theirfavorite online videos than watch an ad. Also the length of online video ads hasbecome a key pivot in determining how best to use the format. When the surveyedwere asked if they were willing to watch advertising before a free online video, theresponses split nearly equally into three groups: the 30% who are not willing, the31% who said it depends on the content and 39% who are willing (with 25% onlywilling on the length of the ad).14 eMarketer (2007). Online Video Ad sticking point. 76
  • 78. As a result, it is clear that for both online video advertising and content, the debateon how best to use video for Internet remains up in the air.People are shifting to web TV to keep an interactive role, and they tend to not acceptadvertising, at least in the format formerly typical of traditional TV. At this point, inorder to generate revenues, a web TV has to choose first of all whether to useadvertising or to find alternative business models: there are alternatives as thesubscription-based model or to exploit most the pay-per-view and therefore toincrease the quality of the content. Another way may be to develop models of self-financing of the business, particularly in cases where the web TV is mainly a UGCsharing service. The residual way is to find the right way to deliver the advertisementunless losing audience. 4.2 Economic structureThis section analyzes the costs and the sources of revenues for a web TV.The costs for a web TV (Vogel, 2007) are similar to traditional TV, with somedifferences:• Cost of production, acquisition or digitalization of the contents: web TV has no needs to reach minimum levels of audience and the Internet entertainment, where programming schedule is not the scarce resource allows to think to contents not only as hit, because it would be not wise to spend lots of money for small niches of audience. There is no need of reliable formats or famous hosts, because niches look for alternatives. Production costs are therefore lowered, because the only need is to webcast an interesting and alternative content, or even cancelled in case of UGC video-sharing services.• Storage cost: a hardware or a hard-disk is needed to archive all the digital contents, transmit the content to the server and webcast the content to the host. 77
  • 79. • Publishing and distribution cost: this cost is to keep the content online and rent the broadband. It is low because the Internet is not a proprietary system: nobody owns the bandwidth and everybody is able to distribute the content with few or no money. The only fix cost is the cost to create the Web portal and to register the DNS domain. To keep the content online, and distribute an increasing amount of contents, the webcaster needs to rent a bandwidth that is scalar to the number of users that he wants to serve, following the logic of the unicast: more users increase the cost. The ratio is therefore opposite to the fix cost of the traditional broadcasting. However, at a certain level of users, the increase may become relevant, particularly for live streaming. However, the adoption of the P2P protocol instead of the unicast, the costs for the band can be lowered until 90%, and being fixed costs again whatever the dimension of the audience. All in all, Internet lowers also this cost, being both the band and the storage costs actually commodities that can be purchased from many suppliers for a few money. This kind of economy relies on satisfying niches more than enlarging the audience. The amount of contents available and the fragmentation, and also the lowering of production and distribution costs allow overcoming barriers to entry and letting the game to be played by many different actors, from big multinational companies till the young independent video-maker. It also opened to the proliferation of the UGC, through the use of a cell phone or a camera and a cheap video editing software, that are then distributed on the Web by Online video companies, mostly for free. This kind of companies can adopt profitable business models and provide to other users the distribution and sharing service for free, possibly with some premium service. Revenues for a web TV come from:• Pay-per-view for VOD: a web TV, given the low distribution and storage cost, is able to satisfy many different market niches through VOD service, that other platforms, except IPTV, cannot offer. However, a website that sells or rent 78
  • 80. contents, has a defined business model that is however adopted buy few operators that adopt mostly the model free. By the way, the most part of webcasters do not offer premium contents yet, or they add premium contents to free contents, and at the most they choose to sell live programs instead of on demand. The most diffused content is the sport event, the TV series, and the movies, even though on that content the competition from other platforms is strong.• Subscription: subscription is usually seen as a barrier to entry not sustainable for Internet users, since it requires an engagement that is usually avoided. As the analysis of the second chapter showed, it is usually associated with live content produced for the web, or with professionally-produced VOD, and it is mainly used by companies whose core industry is not the Internet, have consolidated brand awareness and a customer base that is willing to pay for a long engagement with the service.• Donation: this is a form of revenue that is borrowed from free logic of the Internet, and is used mostly from open-source software developers, that give the possibility to users to make donations to improve the product performance, and is certainly a marginal logic that is used from few video portals.• Advertising (banner, Google Ads, embedded video): this is the main business model used by web TV operators. The key word for advertising today is targeting, because is better to concentrate the efforts on a restricted audience and address the message more effectively. In the first era of the Web the approach was to distribute the ad in function of the category, mostly as banners around the video (Breakenridge, 2008). The banner ad is one of the most diffused form on the Web. Banners are usually paid on the base of the click-through rate, which is the number of clicks on the number of visualizations. As respect to the classic ad, the banner performance is measurable, so the ad can be effectively addressed to the desired target. However, this advertisement method does not take into account that on the 79
  • 81. Internet the audience changes as a function of the content, and thereforewebsites cannot be categorized a priori.The approach given by AdSense and AdWords by Google completely changed theadvertising market on the Internet, including web TV. With this system, websitesare not categorized a priori: AdSense is addressed to publishers that want togenerate value from the website by adding ad, whereas AdWords in addressed toones that want to invest on an advertising campaign. Through AdSense, apublisher can decide how many campaigns he wants to have on its website andfor each one arrange format, dimension and colors. The innovation relies on thesmartness of the system, because AdSense verifies which contents surround thead and adapt the ad to the content, to which it is always related. Revenues aregenerated only if and when the ad is clicked. This system generated the biggestadvertising network on the Internet, which is managed by Google. Web TV havean additional advantage by this system: the ad has for sure the attention of theviewer, and the click-through rate is usually higher. On the other side, AdWordsallows to address the ad towards a specific territory, increasing the targeting, andto show the message on the base of key words that are decided by theadvertiser. The maximum daily budget is the “cost per click” (CPC) that is decidedby the advertiser. Even the smallest market niche can be reached with a lowinvestment. Those two systems made a revolution for the ad on the Internet, alsofor the web TV operators.The ad on a web TV can be positioned in many ways. The ad can be also addeddirectly to the video, as pre-roll, medium-roll or post-roll, or even in transparencyon the video. It can be positioned also in different places of the video, where itcan catch better the attention of the viewer. The segmentation of the contentsinto many different categories, as well as the thematic channels or the tagsassociated with the contents, have this particular objective, which is to choosethe right video into which put the ad. 80
  • 82. All in all, web TV has advertising as main source of revenue, and the exploitation ofthe innovations brought by the Internet to the advertising industry makes it evenmore attractive as business model. The pay-per-view of the On Demand has stilluntapped potential, but today banners, Google Ad, and roll are the most used sourceof revenues because of their targeting ability. The new concept of the advertisingmakes it an informative vehicle for the viewer, and therefore more effective. Thenew way is a useful advertising that will be more targeted in the next future.The economic dimension of this phenomenon for web TV can be described throughsome figures about advertising on online video provided by a study by eMarketer.15In 2008 for online video in the US the spending has been 1,350 Dollars and isexpected to grow till 4,300 Dollars in 2001. The chart below shows that the onlinevideo ad spending grows at terrific rates, but at 89% the year 2007 shows thegreatest year-over-year growth. Coming from such a small base, however, makesthis high rate relatively easy to attain. More important indicators come over the nexttwo years, at around 38% or higher.Figure 39: US online video ad spending (millions). Source: eMarketerThe study shows also that still, putting these high growth rates into perspective,video will represent only 6.2% of the online ad spend this year. Even in 2011, when15 eMarketer (2009). TV commercials move online 81
  • 83. video ads will be commonplace for the Web, less than 10% of the annually escalatingspend will be devoted to the format.Figure 40: US online video ad spending (% of total online spending). Source: eMarketer.Video’s high engagement factor, combined with the Internet’s tracking and targetingcapabilities, potentially offers brand advertisers a highly accountable method to swaythe hearts and minds of their target audience. For Web publishers, video advertisingrepresents a new and potentially large revenue stream, if the audience will be able toaccept a TV-like advertising on the Internet.According to ItMedia Consulting,16 the European market is a little slower, but willgrow from 178 million in 2006 to more than 2 billion in 2010. A trend that seems abubble, but at the end will bring advertising on web TV to worth from the current3% to the 18% of the total online spending in Europe.A recent study by Understanding & Solutions17says that more than 7 billion Euros willbe the worldwide ad revenues generated by web TV worldwide within the year 2011.Every year the amount of videos available online doubles, and such trend will besteady for some time. With these premises, it is possible to argue that the aggressionof online advertising will continue. The study also forecasts that in 2011 ad on web16 ItMedia Consulting (2009). The creative industry. IPTV, UGC and Social Networks.17 Understanding & Solutions (2008). Internet TV goldroads. 82
  • 84. TV will be the 16.5% of the 41.5 billion Euros of the total online advertisingspending.In addition, according to eMarketer18, revenues generated by UGC in the US will alsogrow to 1.17 million Dollars in 2011, and a relevant amount of revenues will begenerated by the selling of TV programmes through pay-per-view at 3 billion Dollarsworldwide in 2010.Finally, according to a recent study by ITMedia Consulting19the turnover for web TVin Italy was around 28 million Euros in 2008, being the 16% of the total turnover forweb TV in Europe. Compared to the figure provided by Nielses//NetRatings abouttotal online ad spending in Italy in the same year, that is 282 million Euros, andgiven that ad is the main source of revenues for a web TV, it can be assumed thatweb TV collect around the 10% of online advertising investment, that is 7% morethan the European figure. To be noticed that the Italian market, if divided into big,medium and small players, shows a gap of around 18 million Euros between big andsmall players, due to language constraints of the small players, that have no marketoutside Italy. 4.3 Business modelsAccording to David Hallerman, a senior analyst at eMarketer, “Despite the success,web TV is still young, and is not yet clear where do real revenues come frombecause business model is not yet defined. Some rely on advertising, others on pay-per-view, others do both”.The complexity of the phenomenon and its potential make necessary to understandwhat is the economic principle that regulates web TV and which the prevalentbusiness models.18 eMarketer (2008). UGC and on demand19 ITMedia Consulting (2009). Online video in Europe 83
  • 85. Facts and figures analyzed about web TV bring to connect the success of the newbusiness with long tail theory20 applied to entertainment business, that is a is aretailing concept describing the niche strategy of selling a large number of uniqueitems in relatively small quantities – usually in addition to selling fewer popular itemsin large quantities. The distribution and inventory costs of businesses successfullyapplying this strategy allow them to realize significant profit out of selling smallvolumes of hard-to-find items to many customers instead of only selling largevolumes of a reduced number of popular items. The total sales of this large numberof "non-hit items" is called the Long Tail.Figure 41: the long tail. Source: www.wired.comThe concept has been formulated by Cris Anderson in an article on Wired Magazinein 2004 and afterwards in the book “The long tail: why the future of business isselling less of more” (2006). Basically, he says that Internet makes convenient for acompany to sell small volumes of products or services because the unlimited range ofproducts generates infinite demand. Internet knocks down retailing room anddistribution constraints. As a result, niche products becomes successful because of20 Given a large enough availability of choice, a large population of customers, and negligible stockingand distribution costs, the selection and buying pattern of the population results in a power lawdistribution curve, or Pareto distribution. This suggests that a market with a high freedom of choicewill create a certain degree of inequality by favoring the upper 20% of the items ("hits" or "head")against the other 80% ("non-hits" or "long tail"). This is known as the Pareto principle or 80–20 rule. 84
  • 86. the existence of unlimited market niches with untapped potential, with a worldwidemarket available, and with advanced search tools.As a result, the return on investment for a niche product can be equal to a hit, sincemany niche products can be sold easily. In addition, the Internet denies the 80/20Pareto rule that states that only the 20% of products becomes a hit: on the Internet,each and every product has the possibility to become a hit, and it actually happensthat the 99% of the products are sold or consumed at least once.The advent of the Web and then of the Web 2.0, and the diffusion of the UGC, madethe concept of scarcity obsolete, with a huge amount of niche products that, takenaltogether, are equal to hits in terms of revenues.The long tail theory is a solid base to attribute an economic foundation to the webTV, that has no bonds in terms of programming schedule (time), channels (space),and because is mostly founded on VOD (maximum range) ensures the opening ofinfinite micro-niches of contents either from traditional broadcasters or from users,satisfying million of people and diverse tastes that constitute the long tail. And itdoes not matter the dimension of each niche, because even few hundreds of peoplecontribute to create an audience absolutely larger than the traditional one, debasingthe logic of the content produced to attract the maximum audience possible.It is argued that, since costs for a web TV are negligible, business models can bedistributed over a plane whose variables are the two main alternatives for businessfinancing, advertising and payment (pay-per-view and subscription), opportunelymixed with the specific offering. The graph below shows the positioning of the threemodels. 85
  • 87. Figure 42: business models distributionTaking into account the long tail theory, and considering what emerged from theempirical analysis in the chapter 2 and from the case studies, it is possible to arguethat there are basically four business models.• B2c premium model. Web TV whose revenues are generated by the sale of the contents (pay-per-view or with subscription), with marginal revenues from advertising. The key for the success is based on a wide range of premium contents that even marginally one by one, satisfy niches, and contribute to the total revenues altogether, from 30% to 60% (Anderson, 2006). The sale is related not only to VOD, but also to live events: in this way web TV operates as a horizontal competitor for pay-tv and pay-per-view on other platforms, thus it seems that the characteristics of the platform are not valorized (in fact there are very few actors operating in this way). The real problem in this case is the fight for the rights on the event, which are usually very expensive and not suitable for the majority of the companies. Therefore, this model applies more for exclusive contents that do not compete with other platforms as broadcasting TV, satellite and IPTV.• B2c advertising-based model. This is the most diffused model. There are many alternatives to associate the ad with the content, basically outside or inside the 86
  • 88. video: in the first case, the format is the banner, in the second both pre-rolls (foron demand and for some live channels, today also with the click-to-play formatthat brings the user directly to the advertiser website), and inside the video (forlive channels). The trade-off between effectiveness and intrusiveness: pre-rollscatch better the attention but are more intrusive. Among the newest formats, theoverlay is a good compromise between effectiveness and intrusiveness, eventhough it is not so diffused because of the technological complexity andsometimes for the limited creativity (Breakenridge, 2008).An alternative is represented by the ad-funded contents, which represent a newconcept for advertising, based on the production of funny, attractive andinstructive video ads that promote indirectly the product or the company, and arespread over the Web because of the viral content or through thematic channels(Moriarty et al., 2009).In this business model, VOD guarantees the satisfaction of myriads of niches,thus even the smallest webcaster is able to target effectively the new forms ofadvertising that characterize the Internet.In addition, the high segmentation of channels makes possible the developmentof new formats, as well as particular topics, that the traditional TV cannotconsider because too much focused on retaining and broadening the audienceand gain share. Also broadcasters from TV or satellite have been attracted fromthe new opportunity of produce specific formats for the web (e.g. Class, asatellite network).The typical type of content that is offered in this business model is the UGC, andthe main actor is the online video company. The typical example is YouTube, avideo-sharing ad-based website, which is nowadays one of the most “crowded”places in the world, and therefore an incredible attraction for advertisers. Theonly risks for a business like YouTube derives from copyright and from theuploading of dirty videos. 87
  • 89. • B2c mixed. Sometimes free and premium contents are mixed. Typically, contents are not surrounded by ads, there are special contents, HD videos, better audio and the possibility of podcasting. The risk, by the way, is to move away from the main strength of the Internet, that is the free fruition. Therefore, it may be suggestible to look for another kind of mix, for instance by sharing advertising revenues. A sub-model can be created when volumes and pricing of advertising are increased due to the addition of higher quality contents produced by independent producers, and revenues are shared with contents creators. This is done by Blip.tv and Brightcove, that use in this way more than one center of revenue: this model allows to reach the critical mass of audience and attract advertisers, besides generates win-win situations, since every producer can choose if retain all the revenues from advertising on his video, or pay for the service and share revenues with the content aggregator. Every user can also create premium catalogues and sell the contents. Another interesting alternative sub-model is provided by Current, a traditional TV broadcaster that oriented the business towards the integration with UGC. Basically, Current incentives the production of the contents with tutorials and with rewards and payments, and then makes the programming schedule on the base of such UGC, chosen according to editorial strategies and also to the votes of the community. This model overcomes the problem of the copyright, incentives the affection of the community, is again a win-win game, and satisfies even the smallest market niche.In addition to these three models, there are still residual possibilities to generaterevenues with different strategies like customer relationship and b2b.• CRM-based model. This model falls within a precise marketing and CRM strategy, whose objective is to empower communication and interaction with clients. Companies and PA recognizes the importance of web TV as a communication tool, either inside or outside the company. 88
  • 90. • B2b model. Some pure players choose to leave the b2c market and act as service, solutions, and contents providers for other companies or PA, as showed by the cases of Glomera and ShareMedia, which provide the know-how and the resources to implement the creation of a web TV for other actors.Business model and content is chosen by every actor according to its strategicobjectives. The figure below shows the strategic clustering of the actors independency of the content.Figure 43: strategic clustering (see figure 16 for comparison)There are basically five possible strategies that depend on the type of content, eachone relative to an operator:• Pure strategies. The pure players, whose core business field is the Internet, offer on demand channels, either UGC or editorials, and live programming produced for the Web. The initiatives are heterogeneous, from online video companies (e.g. YouTube) to others supported by important investors (e.g. Current), to start-up of small businesses with innovative solutions (e.g. ShareMedia), programmes or modalities of content production. The majority started with ad-based business 89
  • 91. models, then moved towards the integration of premium contents, or towards the b2b market (e.g. Glomera).• Portfolio strategies. The web editors, that offer mainly on demand channels, either editorials or UGC. The logic is oriented towards enlarging the comprehensive portfolio of the offering as contents, service and features. Web editors (e.g. Libero) are increasingly enclosing videos into the portals, due also to the use of the embedding feature. The most diffused business models is the ad- based, but many also have premium channels.• Multichannel strategies. The broadcasters offer mainly live contents transposed or on demand programming, as a completion of the rest of their offer by nature. The presence of live contents produced for the web and the increase of on demand programming shows a rise of the attention for the new platform and of the potential of the Web, not only as a competitor, but also as a possibility for synergies and enrichment of the offering. Some chose the ad-based model (e.g. RAI and Sky) both as pre-roll and as banner, others (e.g. Mediaset) the pay-per- view, thus the premium model.• Multichannel & portfolio strategies. For traditional publishing companies and radios, web TV is reasoned by a precise strategy to enter into the Web channel and extend the portfolio of the offering. Among the most interesting cases, the big publishing companies (e.g. RCS) and some radios (e.g. Radio Deejay). Business models is mainly ad-based and rarely premium.• CRM strategies. Public Administrations and companies, with the objective to consolidate the relationship with the citizen/client and the diffusion of the brand awareness. Content is mainly on demand produced for the web.In order to define a good strategy, strengths and weaknesses of web TV, concerningthe contents and the economics, should be evaluated carefully. They are summarizedin the table below. 90
  • 92. Strengths WeaknessesContent • Multi-channel (niches) • Loss of control over • Ad-hoc contents contents • UGC • DRM systems • Personalization • Lack of visibility • InteractivityEconomics • Accessibility • The “logic of the free” • Targeted advertising • Ad skipping • Undefined business modelAs far as the content is concerned, web TV is a multi-channel business, becausethere are not frequencies to be bought as is for traditional TV. The unlimited tail ofthe offering is an opportunity for revenues from the niches that the other platforms,because of advertising slavery and run-after audience, cannot take.VOD creates the chance to produce ad-hoc contents that satisfy the users andgenerate streams of revenue from sources that are an alternative to advertising,such as the pay-per-view.Furthermore, users can shape the channels according to their taste thanks to theUGC, and this creates infinite micro-niches that can be attractive to advertisersbecause of the clear definition of the target. Online video companies are the drivingforce for the market of the web TV, and due to the success of the Web 2.0 it candampen production costs, with an outsourcing of the production activity. The userhas an active role, since he can decide when, what and where to watch anaudiovisual content, without the bonds imposed by a programming schedule. Itbrings to the total satisfaction linked to the personalization of the consumptionexperience.The new platform makes of interactivity with the user a core value, and therefore ithas to be enhanced in every way possible, even concerning advertising. 91
  • 93. By contrast, there are some weaknesses. First of all, the diffusion of UGC brings tothe loss of the control over the content, thus it happens that the quality is very low,or even to copyright infringements, so the operator has to choose whether to actdirectly to avoid that content protected by copyright is shown on the portal or not(e.g. YouTube recently changed from passive to actively involved to protectcopyrighted content), or alternatively to entrust the community to filter unlawfulmaterial or to create partnerships with content providers (Sparrow, 2007). Anotherweakness is the need to adopt DRM systems for premium contents (Harte, 2007):they are proprietary systems and so customers are usually forced to buy a particulardevice to watch the content, and this can bring them towards other contents. Inaddition, contents on the internet suffer of a lack of visibility, which is resolved onlyby search engines that address the user to their video websites (e.g. Google andYouTube).From an economic point of view, the accessibility to the service by the user and mostof all by the suppliers is a node for the rise of web TV. The free model dominates theInternet and web TV perfectly grabbed the secret, generating business models thatare alternatives to the payment for the content. On the side of suppliers, accessibilityis enhanced by the low production costs, or zero in the case of UGC. Also the storageand publishing costs are lowered as respect to traditional broadcasting. Secondly, themain source of revenues for many web TVs, which is advertising, can becontextualized through systems as Google AdSense/AdWords, or the classification ofvideos by tags for the subsequent insertion of an embedded ad, so the message canbe directed to the specific target. The user that looks for a content that perfectlyexpress his taste is exposed to an ad that he may find funny, interesting, or useful.The ad is less annoying on the Web, whereas the webcaster can be remuneratedaccording to the clicks on the banners and a double good ratio revenues / user,whereas the advertiser can performance much better than on traditional media,where the message sometimes reaches the wrong target. 92
  • 94. On the other side, web TV economics has weaknesses. To begin with, it reduces thepossibility to exploit pay-per-view and subscription-based models because of the“logic of the free” that dominates the Internet. Despite the offering is mostly VODand satisfies the micro-niches, the users are usually unwilling to pay for the content:they can easily find free substitutes due to the unlimited offering of the Web. It isvery hard today to rely on business models that leave aside the advertising (thedonation is used mostly by open source software developers or by some no-profitfirms). Moreover, ad skipping is a common practice among Internet users, so the adneeds to be interesting, not intrusive and immediate to be effective.Finally, a further obstacle is the lack of a settled business models, or better, thepresence of many undefined and heterogeneous business models, that makesimpossible, or very hard, the benchmarking for new potential entrants. As mattersstand, there two recognizable business models, the ad-based and the premium,surrounded by many experiments.The uncertainty on the possibility to create a value sustainable in the long term maydiscourage, however the potential of web TV is very high and more players will gothrough the long tail in the next future. 93
  • 95. ConclusionsFrom the analysis of the strategies and the business models, it emerges that thepotential of web TV, not only on the basis of figures that show a steady growth, butalso according to an economic theory, is huge.“Forget squeezing millions from a few megahits at the top of the charts. The futureof entertainment is in the millions of niche markets at the shallow end of thebitstream.” This sentence is impressed on the pages of the blog Wired.com by CrisAnderson, who applied the long tail theory to the entartainement industry,particularly to the consumption of audiovisual products on the Web.According to the theory, Internet overcomes distribution constraints and limitedoffering and makes possible even to the smallest business to generate revenuesreaching the market niches.The current context is highly scattered, given the high accessibility to the market:webcasters shape the business model according to different strategic objectives,which are basically related to the operator and to the type of content.The majority of money for web TV today comes from advertising, therefore the ad-based model is the most diffused. However, many also choose premium models(subscription and pay-per-view), or at least to include premium services into theoffering.Web TV is a growing business, therefore there is still room for new entrants,however those should evaluate carefully which are the resources to rely on, and howto overcome the weaknesses either concerning content or economics. 94
  • 96. AcknowledgementsFirst of all, I gratefully acknowledge my family. As I said the last time, without yoursupport I would not have been here now. Thanks!I wish to thank my grandfather, to have been such a great man. I wish you werehere.I want to thank my old and dear friends from Potenza, my hometown, to be so crazybut so close to me even when I am far away. Special thanks to my buddy, GiovanniRosiello. He knows why.Big thanks to people who were with me during the fantastic experience in the US lastyear, they became my second family. Many thanks also to all my friends around theworld, I hope to see you soon!I want to thank my colleagues and friends, Teo and Lalla.I am also greatly indebted to professors at Bocconi, particularly to Prof. Dubini andProf. Nuccio, who gave me support for this thesis.Most of all, I need to thank all the people I loved and who loved me during thesetwo years. Thank you! ;) 95
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  • 100. Websiteswww.ofcom.org.ukwww.google.com/adplannerwww.agcom.itwww.emarketer.comwww.nielsen-online.comwww.alexa.comwww.compete.comwww.quantcast.comwww.wired.comwww.univideo.org 99
  • 101. Appendix Ahttp://tg24.sky.ithttp://tv.oneworld.net/http://tv.repubblica.it/homehttp://video.berecruited.com/http://video.corriere.it/http://video.gazzetta.it/http://video.google.com/http://video.libero.ithttp://video.msn.comhttp://video.sky.it/http://videos.streetfire.net/http://webtv.camera.it/http://www.5min.com/http://www.99dollarmusicvideos.com/http://www.aajkatv.com/http://www.agus.ithttp://www.allmusic.tvhttp://www.ambiente.tvhttp://www.aniboom.com/http://www.antenna6.tvhttp://www.arcoiris.tvhttp://www.atom.com/http://www.bellvideostore.ca/http://www.blastbeat.tv/http://www.blip.tv/http://www.blockbuster.com/downloadhttp://www.bloomberg.comhttp://www.bluchannel.tvhttp://www.bocconitv.unibocconi.it/http://www.booksweb.tv/http://www.break.com/http://www.breaktaker.com/http://www.brightcove.comhttp://www.broadbandsports.com/http://www.buzznet.com/http://www.carspace.com/videoshttp://www.channel101.com/http://www.cinemanow.com/http://www.classcity.ithttp://www.clevver.com/user-videoshttp://www.clipfish.de/http://www.clipshack.com/http://www.comingsoon.ithttp://www.crackle.com/ 100
  • 102. http://www.crossingtv.it/http://www.current.comhttp://www.dailycomedy.com/videos/http://www.dailymotion.comhttp://www.dance-tech.net/http://www.deviantart.com/http://www.dogster.com/video/http://www.dotsub.com/http://www.ebaumsworld.com/video/featured/http://www.engagemedia.org/http://www.esnips.com/community/videohttp://www.exeform.it/http://www.expotv.com/makehttp://www.filmgratis.tv/http://www.firststoke.com/http://www.flickr.com/http://www.flixya.com/http://www.funnyordie.com/http://www.ganges.com/http://www.gawkk.com/http://www.glomera.comhttp://www.glumbert.com/http://www.graboid.com/http://www.grindtv.com/upload/http://www.guardatv.ithttp://www.guba.com/http://www.heavy.com/guide/videos/featuredhttp://www.helpfulvideo.com/http://www.hook.tv/http://www.incucina.tvhttp://www.italiatv.it/http://www.joost.com/http://www.jumpcut.com/http://www.justin.tvhttp://www.kewego.com/http://www.la7.ithttp://www.liveleak.com/http://www.livevideo.com/http://www.lonelyplanet.tv/http://www.lustich.de/videos/http://www.medicinefilms.com/http://www.mediterraneonews.it/http://www.megavideo.com/http://www.metacafe.com/http://www.motionbox.com/http://www.mydeejay.deejay.ithttp://www.myvideo.de/ 101
  • 103. http://www.ngvision.org/http://www.ondatv.ithttp://www.ourmedia.org/http://www.ourstage.com/http://www.pandora.tv/http://www.panjea.com/http://www.photobucket.com/http://www.primocanale.ithttp://www.radioitalia.ithttp://www.radioradicale.ithttp://www.radiostar.tv/http://www.rai.tvhttp://www.rajshri.com/http://www.reeltime.com/http://www.revver.com/http://www.rocketboom.comhttp://www.romatv.it/http://www.romauno.tvhttp://www.rtl.ithttp://www.sat2000.ithttp://www.sclipo.com/http://www.selfcasttv.com/http://www.sharemedia.ithttp://www.siciliatv.orghttp://www.smartvideochannel.com/http://www.spike.com/http://www.sportitalia.comhttp://www.stickam.com/http://www.streamerone.ithttp://www.sumo.tv/http://www.sutree.com/http://www.teachertube.com/http://www.tefchannel.ithttp://www.tele90.ithttp://www.telecaprisport.ithttp://www.telecolor.ithttp://www.teleiride.tvhttp://www.teleliguriasud.ithttp://www.telemolise.comhttp://www.televisionet.tvhttp://www.tgcom.mediaset.it/http://www.trooptube.tv/http://www.tvbook.it/http://www.tvdigit.it/http://www.tvparma.ithttp://www.ugoto.com/videos.htmlhttp://www.unotv.net 102
  • 104. http://www.ustream.tvhttp://www.videosift.com/http://www.vidiac.com/http://www.vidilife.com/http://www.vidipedia.org/http://www.vidivodo.com/http://www.viewdo.com/http://www.vimeo.com/http://www.vsocial.com/video/http://www.vuze.com/http://www.yalp.alice.ithttp://www.yourdailymedia.com/http://www.youtube.com/http://www.zml2.com/Appendix BGE - website address (web TV directory)GE – languageGE - commercial nameGE - created yearGE - registrant nameGE - registrant countryGE- website descriptionFE - Content productionFE - Content - LiveFE - Content - Live - Continuous/Discrete flowFE - Content - Live - produced for other medium/for the webFE - Content - On DemandFE - Content - On Demand random/programmingFE - Content - On Demand - low/high rangeFE - Category - generalist/thematic video serviceFE - Category - thematic video service - specificFE - Adverstisement bannersFE – downloadingFE - restrictions on downloadingFE – embeddingFE - podcastingFE - Operator - Web editorPA – subscriptionPA - PayPerViewPA - free with advertisement 103
  • 105. PA - prerolls / postrolls / overlaysPA - free (no advertisement)PA – donationLR - all rights reservedLR - Creative Commons / GPLLR - CC / GPL lincense on websiteLR - all rights reserved on websiteLR – otherLR - not foundLR - CC / GPL license on videosLR - all rights reserved on videosLR - DRM / TPMs apply to all or some contentLR - circumvention of TPMs not allowedLR - Modifications not allowedLR - other conditionsLR - no licensing regime specifiedUP - Uploading allowedUP - registration required to submitUP - only specific content can be submittedUP – detailUP - restrictions are imposed on submissionsUP - sexual content / bad language / unlawful content excludedUP - content violating third parties IPRs excludedUP - unauthorized advertisement excludedUP - possibility to file copyright infringement noticeUP - Claim of ownershipUP - Non-exclusive licenseUP - license is irrevocableUP - License allows derivative worksUP - non-exclusive license must be granted to each user of thewebsiteUP - CC / GPL to third parties must / may be usedUP - submissions are remuneratedUP - remuneration subject to conditionsUP - remuneration subject to conditions (specify)UP - lump sumUP - lump sum (specify)UP - advertising revenue sharingUP - advertising revenue sharing (specify)UP - advertising revenue sharing (specify on what)UP - other conditionsUP - prizes / awardsUP - prizes / awards (specify:)PR - Registration requiredPR – emailPR - name / surnamePR - post code (or equivalent) 104
  • 106. PR – telephonePR - age / date of birthPR – genderPR - profiling / marketing / sending infoPR - consent requiredPR - consent voluntaryPR - consent required to have accessPR - no privacy policyFE - other digital media products availableFE – audioFE - video gamesFE – picturesFE - wall papersFE - forum / community / blog / chatFE - web radioFE - demo versionsFE – othersFE - link to other social networking websitesFE - link to MySpaceFE - link to FacebookFE - link to FriendsterFE - link to TwitterFE - link to othersAppendix C 105
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