Seth Shapiro @ Media Future Week

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Seth Shapiro's presentation on the Future of Media Business Models during the Media Future Week (MFW12) in Almere.

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Seth Shapiro @ Media Future Week

  1. 1. Media Future Week: The Future of Media Business Models 9 May 2012 seth@sethshapiro.com | @sethrshapiro Los Angeles | New York | Amsterdam
  2. 2. Business Models... a business model is the method of doing business bywhich a company can sustain itself... The business modelspells out how a company makes money. – http://digitalenterprise.org
  3. 3. seth@sethshapiro.com | @sethrshapiro
  4. 4. Agenda Brief History of 20th Century Media Media Business Models Made Simple TV and the Beginning of Future Media The Future of Media: The Content Brand Conversation Conclusion2010 New Amsterdam Media LLC
  5. 5. Agenda Brief History of 20th Century Media Media Business Models Made Simple TV and the Beginning of Future Media The Future of Media: The Content Brand Conversation Conclusion2010 New Amsterdam Media LLC
  6. 6. Publishing Content: News, magazines, books, trade pub Distribution: Presses, delivery Film Content: Motion Picture Production Distribution: Exhibition, regional/platform windows Music Content: Programming Distribution: Broadcast, cable, satellite Television Content: Recordings and performances Distribution: Replication, delivery2010 New Amsterdam Media LLC
  7. 7. Publishing
  8. 8. “Many of his writings were originally published serially, in monthlyinstallments or parts, a format of publication which Dickens himself helpedpopularise at that time.Unlike other authors who completed entire novels before serialisation, Dickensoften created the episodes as they were being serialised. The practice lent hisstories a particular rhythm, punctuated by cliffhangers, to keep the publiclooking forward to the next installment.” – Wikipedia
  9. 9. + =?
  10. 10. The Secret Business Model of Early 20th Century Media
  11. 11. The Secret Business Model of Early 20th Century Media
  12. 12. “Dickens fought with his variouspublishers and, at different points inhis career cut a deal with a printer,pushing the printer towards apublishing role and cutting out hispublisher altogether; self-published his work by paying forcopies of his books to be printed;and self-published his work by settingup and part-owning periodicalswhose main attraction was that theycarried his work.He even, towards the end of his life,read his books aloud to payingaudiences – an entirely new businessmodel.”– http://nosycrow.com
  13. 13. Film
  14. 14. “In 1893, Thomas Edison patented the first efficient motion picture viewer, thekinetoscope. A customer could drop a penny into the kinetoscope... and enjoy ashort movie loop. In the 1890sand 1900s, kinetoscope parlors spread like crazy across the country... ”
  15. 15. Edison misjudges the market“As he had with the phonograph,Edison misjudged how themarket was to develop. Hethought the money was in thekinetograph and thekinetoscope; he didn’t thinkpeople would want to sit inaudiences...– Edward Samuels
  16. 16. Edison misjudges the market“As he had with the phonograph,Edison misjudged how themarket was to develop. Hethought the money was in thekinetograph and thekinetoscope; he didn’t thinkpeople would want to sit inaudiences...– Edward Samuels
  17. 17. The biggest misconception of thetransition to sound [is] that it was rapidand completely disrupted the moviemaking process.  Nothing could befurther from the truth. The transition tookyears to take effect and was a much slower processthan many film historians have suggested.”– Francesca Miller
  18. 18. Music
  19. 19. “These talking machines are going to ruin theartistic development of music in this country.Today you hear these infernal machines going night and day.We will not have a vocal cord left. The vocal cord will beeliminated by a process of evolution, as was the tailof man when he came from the ape.”
  20. 20. “These talking machines are going to ruin theartistic development of music in this country.Today you hear these infernal machines going night and day.We will not have a vocal cord left. The vocal cord will beeliminated by a process of evolution, as was the tailof man when he came from the ape.”
  21. 21. Over time...
  22. 22. PublishingBooks • A la carte sale of “permanent” printed workNewspapers and Magazines • A la carte (news stands) • Subscription • Advertising (Brand, Help Wanted, Real Estate et al)
  23. 23. Publishing Business ModelsBooks • A la carteNewspapers and Magazines • A la carte • Subscription • Advertising
  24. 24. Film Business ModelsTicket salesAla carte salesIntellectual Property(No subscription or advertising)
  25. 25. Music Business Models• A la carte (major focus)• Ticket sales• Intellectual Property• No Subscription• No Advertising
  26. 26. The Big SixWalt Disney CompanyDisney Pictures Buena Vista Pictures Touchstone ESPN ABC WDInternet Group Disney ParksTime WarnerHBO Warner Bros Turner Networks Warner Music New Line (formerly) AOLViacomCBS Paramount MTV Networks Showtime Nickelodeon BET CMT Comedy CentralNews CorporationFOX Companies FX Networks FOX News Foxtel Wall Street Journal NY Post London TimesComcast/NBC UniversalComcast Cable, NBC, MSNBC, CNBC, Universal Parks Telemundo, USA Networks, BravoSonyColumbia Tri Star Sony Pictures Sony Music Sony Computer Sony Electronics
  27. 27. Agenda Brief History of 20th Century Media Media Business Models Made Simple TV and the Beginning of Future Media The Future of Media: The Content Brand Conversation Conclusion2010 New Amsterdam Media LLC
  28. 28. Media Business Models1 Advertising2 A la carte purchase3 Subscription4 Intellectual Property5 Enterprise Value6 Ticket Sales
  29. 29. Media Business Models1 Advertising (TV Spots, ads, auction)2 A la carte purchase (DVD, Download to Own)3 Subscription (magazines/news, cable, Over The Top)4 Intellectual Property (Licensing Star Wars toys)5 Enterprise Value (being acquired or going public)6 Ticket Sales (Movies, concerts)
  30. 30. Agenda Brief History of 20th Century Media Media Business Models Made Simple TV and the Beginning of Future Media The Future of Media: The Content Brand Conversation Conclusion2010 New Amsterdam Media LLC
  31. 31. What is television?
  32. 32. What is television? [1950-1995] Terrestrial Cable Satellite Telco3 Networks 4 Networks 6 Networks 100s of Networks Household Appliance
  33. 33. What is television? [1995-2005]Big screen in your living roomA community experienceDelivered by a big provider (cable etc.)Professionally produced entertainment
  34. 34. What is Television?
  35. 35. What is Television? An ecosystem
  36. 36. What is Television? An ecosystemthat allows for evolving business models
  37. 37. Brief History of Televisionc. 1927: Philo Farnsworth invents his prototypec. 1941: FCC adopts NTSCc. 1948: CBS and NBC begin regularly scheduled broadcastsc. 70s: Satellite (B2B) – Birth of Basic Cable Network Industryc. 70-80s: Niche High-End satellite (MDS/MMDS/SMATV/TVRO)c. 94: DBS – Birth of MSO Competitionc. 99: Internet as a platformc. 00s: Increased bandwidth, iTunes video, IPTV, Torrents
  38. 38. TV 1.0: Broadcast Television• Very limited choice• Very broad audience• Free to User• Primary Business Model: Advertising
  39. 39. Broadcast Business Model How is success measured?• Massive volume• Ratings driven• Advertisers pay per spot• Ratings point = 1% of HH (1,159,000 HH for 2010–11)• Share = % of TVs in use that are tuned in
  40. 40. The Grey Flannel Golden Age Ratings point = 1% of HH (1,159,000 HH for 2010–11) Share = % of TVs in use that are tuned in1952-53 I Love Lucy 67.3r1980-81 Dallas: 34.5r2005-06 American Idol : 11rArguably, the Broadcast TV Era peaks w ‘83 M*A*S*H Finale:60r/77s (28 year record)
  41. 41. TV 2.0: The Cable Era
  42. 42. TV 2.0: The Cable EraBroadcast Cable• Very limited choice (4) • Greatly expanded choice (100s)• Very broad audience • Smaller audiences: Power of Niche• Free to User • Expensive to user• Primary rev: Advertising • Primary rev: Subscription fees• Secondary $: Device sales • Secondary $: Advertising
  43. 43. Cable Business Models• Subscription• Advertising• A la carte• Enterprise Value• Intellectual Property Cable Creative Models• Broadcasting ---> Narrowcasting• Monthly fees = funding for LOTS of programs• Allows for mass and niche audiences
  44. 44. 2002 2009 Text
  45. 45. TV Economics $.13 sub/m x 12 x 99,700,000 HH $155,532,000Conservatively, a low-price cable network yields over $155 million in subscription revenue per year 15 cable networks x avg $.20 per month = $3.6 billion. Top price network ($5) = $6 billion.
  46. 46. MEDIA ECONOMICSBy far, the most valuable assets in media are cable networks. US MSO Subscriber Revenues = app. $135 billion per year. (GOOG 2010 = $28B)
  47. 47. Agenda Brief History of 20th Century Media Media Business Models Made Simple TV and the Beginning of Future Media The Future of Media: The Content Brand Conversation Conclusion2010 New Amsterdam Media LLC
  48. 48. The Future of Media: The Content Brand Conversation Case Study 1: Harnessing Business Models for Art Case Study 2: How Old Media Morphs Online Case Study 3: New Platforms Change the World Case Study 4: New Art Creates New Models2010 New Amsterdam Media LLC
  49. 49. American Movie ClassicsAMC is a cable television channel that primarily airs movies, along with a limited amount of originalprogramming. The letters originally stood for American Movie Classics; howeversince 2002, the full name has been deemphasized as a result of a major shift inprogramming. AMC is owned by Rainbow Media Holdings ... AMC was originally a premium cablechannel that aired classic movies...It was not uncommon for the channel to host a Marx Brothers marathon, or showsuch classics such as the original Phantom of the Opera. -­‐-­‐  Wikipedia
  50. 50. Source: Kagan
  51. 51. AMC is in app 88 million US households $.23 sub/m x 12 x 88,000,000 HH app. $155 million
  52. 52. 1. Pro Producer X has $30 million show idea.
  53. 53. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys
  54. 54. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys3. “I need $30 to make a great show”
  55. 55. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys3. “I need $30 to make a great show” [US$2.3M x13 episodes = $30M]
  56. 56. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys3. “I need $30 to make a great show” [US$2.3M x13 episodes = $30M]4. Network: “Who are the stars?Is there sex? Does itappeal to 18-24?”
  57. 57. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys3. “I need $30 to make a great show” [US$2.3M x13 episodes = $30M]4. Network: “Who are the stars?Is there sex? Does itappeal to 18-24?”5. Producer: “Not really - it’s a period drama.”
  58. 58. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys3. “I need $30 to make a great show” [US$2.3M x13 episodes = $30M]4. Network: “Who are the stars?Is there sex? Does itappeal to 18-24?”5. Producer: “Not really - it’s a period drama.”6. Network: “Get out of my office.”
  59. 59. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys3. “I need $30 to make a great show” [US$2.3M x13 episodes = $30M]4. Network: “Who are the stars?Is there sex? Does itappeal to 18-24?”5. Producer: “Not really - it’s a period drama.”6. Network: “Get out of my office.”
  60. 60. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys3. “I need $30 to make a great show” [US$2.3M x13 episodes = $30M]4. Network: “Who are the stars?Is there sex? Does itappeal to 18-24?”5. Producer: “Not really - it’s a period drama.”6. Network: “Get out of my office.”
  61. 61. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys3. “I need $30 to make a great show” [US$2.3M x13 episodes = $30M]4. Network: “Who are the stars?Is there sex? Does itappeal to 18-24?”5. Producer: “Not really - it’s a period drama.”6. Network: “Get out of my office.”
  62. 62. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys3. “I need $30 to make a great show” [US$2.3M x13 episodes = $30M]4. Network: “Who are the stars?Is there sex? Does itappeal to 18-24?”5. Producer: “Not really - it’s a period drama.”6. Network: “Get out of my office.”
  63. 63. 1. Pro Producer X has $30 million show idea.2. He goes to HBO, SHO, NBC, CBS... all the big guys3. “I need $30 to make a great show” [US$2.3M x13 episodes = $30M]4. Network: “Who are the stars?Is there sex? Does itappeal to 18-24?”5. Producer: “Not really - it’s a period drama.”6. Network: “Get out of my office.”
  64. 64. Broadcast model re narrowcast modelGoes to AMC: "You get .23 cents a house..." "... what if we can double that?" I will build you: - Higher Subscription Fees - Higher Advertising Fees - Intellectual Property... "Small rating.... but will build you a brand!"
  65. 65. Broadcast model re narrowcast model US $2.3 million x 13 episodes US$30,000,000 (est.) "period drama" 1.9 rating = No Way
  66. 66. Broadcast model re narrowcast model US $2.3 million x 13 episodes US$30,000,000 (est.) "period drama" Build brand to increase license fee = "OK"
  67. 67. Playing Old Game vs. harnessing New US $2.3 million x 13 episodes US$30,000,000 1.9 rating = “No Way” Build You a Content Brand = “OK”
  68. 68. Rainbows Sapan: Streaming Cable Shows Devalues Product... "We dont think its wise for the industry to Napster-ize itself," said Rainbow CEO Josh Sapan,referring to the site that famously became a popular hub of free music.Sapan said Rainbow is angling for AMC to receive 50 cents a subscriberper month from distributors in its next round of negotiations.
  69. 69. Rainbows Sapan: Streaming Cable Shows Devalues Product... "We dont think its wise for the industry to Napster-ize itself," said Rainbow CEO Josh Sapan,referring to the site that famously became a popular hub of free music.Sapan said Rainbow is angling for AMC to receive 50 cents a subscriberper month from distributors in its next round of negotiations. On $3M business model change: $.23 to $.50 $155M to $310M
  70. 70. Matthew Weiner is the creator, executive producer, head writer, andshow runner of the AMC television series Mad Men. Weiner has receivedeight Emmy Awards and three Golden Globe Awards for Mad Men. MadMen has won the Emmy Award for Outstanding Drama Series threeconsecutive years (2008, 2009, 2010). Weiner was named one of the2011 Time 100 Most Influential People In The World. -- Wikipedia
  71. 71. Mad Men
  72. 72. The Future of Media: The Content Brand Conversation Case Study 1: Harnessing Business Models for Art Case Study 2: How Old Media Morphs Online Case Study 3: New Platforms Change the World Case Study 4: New Art Creates New Models2010 New Amsterdam Media LLC
  73. 73. Subscription 3.0
  74. 74. Website and subscription service offering ad-supported on-demand streaming video of TV shows, movies, etc.  Owned By: Competitors: Advertising Subscription
  75. 75. The Future of Advertising = Data• Are you buying diapers in the morning, or your third BMW?• Advertising moves from Broadcast to Narrowcast• Advertising metric changes from audience size to a measure of customer value• Know your customer like never before• Target your customer like never before
  76. 76. Hulu
  77. 77. • Advertising• Subscription• Intellectual Property• Enterprise Value• Precise Customer Data• Intellectual Property (originals)• Economics of Community Media Business Models 1 Advertising 2 A la carte purchase 3 Subscription 4 Intellectual Property 5 Enterprise Value 6 Ticket Sales
  78. 78. The Future of Media: The Content Brand Conversation Case Study 1: Harnessing Business Models for Art Case Study 2: How Old Media Morphs Online Case Study 3: New Platforms Change the World Case Study 4: New Art Creates New Models2010 New Amsterdam Media LLC
  79. 79. … viewership on [tablets, mobile and CTV] doubled from Q3 11 to Q4 11.Tablets led with 22% growth in quarter-over-quarter growth in time watched per play.
  80. 80. Seventy percent of tablet owners and 68 percent ofsmartphone owners said they use their devices while watching television. CONNECTED TV AND CONSUMERS – HILVERSUM, NETHERLANDS – FEBRUARY 7, 2012
  81. 81. The Future of Data: • Since  last  year: • Sharing  via  mobile  was  up  500% • Overall  sharing  up  143% • Shares  to  and  from  TwiAer  up  116%
  82. 82. The Future of Data: Audiences Talks Back
  83. 83. The Future of Data: Audiences Talks Back
  84. 84. “Turner  is  looking  to  establish  itself  as  a  leader   in  adopEng  smart  TV  technology”  –  Ad  Age “We  are  trying  to  understand  the  consumer   marketplace  “People  react  to  adver8sing   differently  on  different  screens,  and  we’re  trying   to  figure  out,  ‘What  is  the  next  evolu8on  of  TV?’   David  Levy,  TBS  President  Sales,  DistribuEon  and  Sports Turner Embraces Social TV, Interactive Ads via Conan AppBy Mike Shields on February 8, 2012... As part of a major push by Turner’s entertainment networks to embrace second-screenviewing...... users of the new Conan app (which is being sponsored byAT&T) will be periodically greetedwith pop-ups within the app featuring information relevant to the show, such as facts about aguest’s movie career. And soon enough, viewers will be able to buy tickets to those guests’movies via the app.
  85. 85. CONAN
  86. 86. The Second Screen... 102
  87. 87. The Second Screenpoints to the future of media business • Hypertargeted advertising • New subscription products • More items for purchase • Intellectual Property • Enterprise Value • Customer Data and Preferences 103
  88. 88. The Future of Media: The Content Brand Conversation Case Study 1: Harnessing Business Models for Art Case Study 2: How Old Media Morphs Online Case Study 3: New Platforms Change the World Case Study 4: New Art Creates New Models2010 New Amsterdam Media LLC
  89. 89. Jenna Marbles
  90. 90. Jenna Marbles
  91. 91. Epic Meal Time is a YouTube cooking show known for creating extremelyhigh-calorie meals from meat (with emphasis on bacon)and alcohol (especially Jack Daniels). It is... represented by Brillstein-GreyEntertainment, and... Internet television network Revision3.
  92. 92. Jenna Marbles
  93. 93. Agenda Brief History of 20th Century Media Media Business Models Made Simple TV and the Beginning of Future Media The Future of Media: The Content Brand Conversation Conclusion2010 New Amsterdam Media LLC
  94. 94. Conclusions: Future of Media Business • Community is the new network • Customer data is the new currency • “If you’re not paying, you are the product being sold.” • Media moves from a monologue to a dialogue
  95. 95. Media Business Models Current Future1 Ticket Sales2 Advertising 2 Customer Preference Data3 A la carte purchase 3 Always On: Power of the Cloud4 Subscription 4 Digital Delivery, cross device5 Intellectual Property 5 Economics of Community6 Enterprise Value 6 Self-sustainable small businesses
  96. 96. Media Business Models Current Future1 Ticket Sales 1 “Live” Digital Events2 Advertising 2 Hypertargeted3 A la carte purchase 3 The Cloud = Always On4 Subscription 4 Digital Delivery, cross device5 Intellectual Property 5 Economics of Community6 Enterprise Value 6 Self-sustainable small businesses
  97. 97. “Nobody knows anything.” - William Goldman2010 New Amsterdam Media LLC
  98. 98. "Anything new, anything worth doing, cant be recognized." - Picasso2010 New Amsterdam Media LLC
  99. 99. Thank You seth@sethshapiro.com | @sethrshapiro Los Angeles | New York | Amsterdam

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