Business Models and new media concepts in the Digital Ecosystem: Media Management at Stockholm School of Economics


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Guest lecture in Media Management at Stockholm School of Economics on November 20, 2013. Updated to-do-list for media firms 2013/12/30.

Change in Consumer Behavior: look at the change in the Music Industry and Retail vs. eCommerce. The same change is accelerating in the Media Industries including newspapers, magazines and traditional TV. Business Models and new media concepts - updated case studies. Conclusions based on my research and a to-do-list for media companies. The SlideShare includes two Video clips of new media concepts i.e. 'Reveal' - a Media Mirror by The New York Times R&D Lab; and NowThis News - a new mobile video news service also available on Instagram.

Business Models and new media concepts in the Digital Ecosystem: Media Management at Stockholm School of Economics

  1. 1. Business Models and new media concepts in the Digital Ecosystem Masters in Media Management at Stockholm School of Economics Timo Ketonen 20th November, 2013
  2. 2. Content of presentation 3.  Conclusions   1.  Change  in   Consumer   Behavior   2.     Strategic  Choices  and   Business  Models  
  3. 3. Three trends driving change I II DIGITAL ECOSYSTEM CONSUMER BEHAVIOR III MEDIA – what is it today?
  4. 4. The rise of Social Media o  "The Internet has turned the news industry upside down, making it more participatory, social, diverse and partisan as it used to be before the arrival of mass media.” •  Ref. Tom Sandage, in The Economist, Special Report: the News Industry, July 2011 4  
  5. 5. Digital  Ecosystem:   Devices,  OS,  services  &  applicaCons   Tech  companies  build  their  own   ecosystems  and  want  to  sell  content   The  rise  of  mobile  has  nearly  doubled   the  6me  we  spend  online  since  2010   5  
  6. 6. Consumer Behavior 6  
  7. 7. The use of applications and tech services is rising o  Consumers appear to like subscription services offering real value for money •  e.g. Amazon Prime, Dropbox Pro, Hulu Plus, Netflix, Pandora, Spotify etc. ”Once  locked  in,  consumpCon  becomes  painless”     7  
  8. 8. Generation Y & Z Gen X ~ Boomers Young Elderly + Generation Y Generation X Young Elderly (born 1977 - 1994) (born 1966 - 1976) (65-74 years) Generation Z Baby Boomers Senior Citizens (born 1946 - 1964) (75+) Individual Copying ”the real world” (born 1995-2012) Social ”Diginatives” ”Immigrants” ”Tourists” 8  
  9. 9. Generation Y & Z Spotify Gen X ~ Boomers Young Elderly + iPod & iTunes CD’s / Vinyl Ownership Sharing &   + /     9  
  10. 10. Age is not the only criteria for consumer behavior: Attitude, personality and social networks play in 10  
  11. 11. Background to the change in the media landscape Consumers & Advertising 11  
  12. 12. Newspaper  Ad  Revenue  in  decline   History       o  Old  Business  Model  in   Publishing  dates  back  to   1833,  when  ”The  Sun”  went   on  sale  on  the  streets  of   New  York   o  Business  Model  originally   based  on  adverCsing  to   keep  the  price  of  the   newspaper  down  and   circulaCon  up   Adver6sing  revenue  (USA)   12  
  13. 13. Google is now bigger than all newspapers in Ad Revenue 13  
  14. 14. Newspapers  now  focus  on     digital  subscribers   Focus  on  digital  subscrip6ons   Top  US  newspapers  Q1/2013   o  Print  subscripCons  have   been  in  decline  since  the   1990’s   o  Digital  ediCons  now  account   for  approx.  20%  of   subscripCons   14  
  15. 15. Survey: ”Paywalls and apps are increasingly part of everyday life” o  49% of 18- to 24-yearolds read a digital newspaper – the highest reach of any age group o  The survey of 11,000 internet users in nine countries found that 25to 34-year-olds are twice as likely to part with their cash for digital news than older readers Source:  Digital  News  Report,  Reuter’s  InsCtute  for  the   Study  of  Journalism.  
  16. 16. Paid-for digital news services grow Source:  Digital  News  Report,  Reuter’s  InsCtute  for  the  Study  of  Journalism.   Finland  will  be  included  in  the  longitudinal  study  in  2014-­‐2016     among  10  countries.   16  
  17. 17. Retail vs. eCommerce Consumers’ purchase behavior has changed 17  
  18. 18. Digitaliza6on  of  retail  is  radical  and  fast.  Apart  from   online  shopping  digital  services  have  entered  the   physical  stores  as  well.     Flickr  @delosj  
  19. 19. Online  shopping  is  not  growing  so  fast.  True  compe66on   is  about  buying  decisions  that  are  dominantly  digital.   Source:  Forrester  Research  projec6ons  2012  
  20. 20. Web shops DECISION SELECTION Commission PURCHASE Search engines Customer Loyalty Click BROWSING CONSUMER RECOMMENDATION PROFILE: Attitude, interests, consumption patterns, demographics etc. IDEA Trad. Media “Eyeballs” MEDIA CONTENT: News, games, videos etc. Content Marketing, loyalty programs etc. Lead
  21. 21. Case: Scandinavian Outdoor Background: Retail stores owned by Scouts in SW Finland Web shop is now the biggest store of Scandinavian Outdoor: More than 1 million customers per year First web shop in the 1990’s - SOS est. 2008 More than 10,000 Outdoor products
  22. 22. Case:  Scandinavian  Outdoor   ”Fans” all over the world In 2013 packages have been delivered to 57 countries
  23. 23. Strategic choices by Publishers Business Models and new media concepts – a few case studies 23  
  24. 24. Research Topic o  Newspaper Publishers’ approach to find new sources of revenue in the rapidly changing digital ecosystem. 24  
  25. 25. Research Project ’MEDIANOMICS’ o  80 interviews conducted with Media Executives in Finland, Sweden, U.K. & USA o  Interviews with internationally acknowledged researchers in Media o  40 keynotes, seminars and work shops o  EDGE Media seminars ’The  Sense  of  Urgency’  is   defining  how   aggressively  Media  firms   are  building  new   Business  Models.   Jonas  Bonnier,  CEO   25  
  26. 26. Strategic  choices  in  Publishing   New   PRINT  &  CONSOLIDATE   resource  dependence   ALMA  ALUEMEDIA   DIGITAL  FIRST   +   Print   technological  focus   STRATEGIC   C H O I C E S   technological  focus   Digital   resource  dependence   PRINT  FOCUS  +  ePaper   Current   DIGITAL  TRANSFORMATION  
  27. 27. Strategic  choices  in  Publishing   Efficiency-­‐centered  vs.  Novelty-­‐centered  Business  Models   NEW   PRINT  &  CONSOLIDATE   Print   Technological  focus   Resource  dependence   Some  publishers  look  at  even  a  greater   degree  of  efficiency  through  industry   consolida6on,  which  required   ALMA  ALUEMEDIA   investments  into  corporate  acquisi6on   and  competencies  in  finding  synergies   within  the  acquired  framework  of   +   newspapers.     DIGITAL  FIRST   STRATEGIC Resource  dependence   C The  interviews  reveal  that  some  firms  have   H O I C E S   chosen  to  s6ck  to  the  old  business  model   with  a  technological  focus  on  the  print   based  business  model  for  as  long  as   possible.  These  companies  are  efficiency   centered  and  the  main  part  of  revenue  is   derived  from  the  old  print  based  business   model.  Some  forms  of  e-­‐Publishing  is   applied  at    moderate  cost.   PRINT  FOCUS  +  ePublishing   Current   “Digital  First”  publishers  have  applied  a   novelty  centered  business  model  and  a   more  aggressive  approach  to  crea6ng  the   future.  These  firms  have  invested  both  in   the  crea6on  of  digital  publishing  pla^orms   and  the  analysis  of  reader  engagement   (collec6on  of  data  related  to  the  behavior   of  the  subscriber  base).  These  companies   are  most  o_en  “global  brands”.   Technological  focus   Digital   Several  publishers  have  invested  into  digital   transforma6on  with  a  certain  degree  of   incremental  improvement  of  the  printed   products.  Digital  transforma6on  means   investment  into  new  products  and  services   in  the  digital  ecosystem,  including  mobile   applica6ons.  Is  this  s6ll  a  defensive   strategy?     DIGITAL  TRANSFORMATION  
  28. 28. The Economist o  Established in 1843 o  Focus on international affairs and trade o  160 years to 1 million subscribers, 9 more years to 1.5 million o  Bundled subscriptions until recently, now unbundled –  New price points introduced as of April across the world o  Focus on developing mobile platforms, including audio o  39% of revenue from digital sources o  Operating profit 2013/03/31 a record £68m
  29. 29. The Financial Times o  125-year old Financial Times has its largest readership ever o  Transforming the Business Model, driving digital content and subscription revenues o  Mobile readership grows sharply –  Over half of content consumption and more than 1/3 of total traffic –  App usage is growing particularly fast in the age group 25-34 o  Measurement of audience behavior with regard to what you read –  My FT – more personalization features –  Analytics tool 'Deep View’ offers data into advertising campaigns 29  
  30. 30. The New York Times o  ”Print is Dead: Long Live the New York Times” * o  Digital Business Model has worked: $150 million in new digital reader revenue –  ’Paywall’ since March, 2011 –  Already 727,000 paid digital subscriptions (+28%) –  Revenue from total subscriptions now at 56 % of all revenue –  90% of print subscribers have signed up for digital o  Back in Black: operating profit up 35% in Q3/2013 *  Reporter  David  Carr  in  ”Page  One:  Inside  the   New  York  Times  and  the  Future  of  Journalism”   30  
  31. 31. The New York Times o  Focus on R&D, new innovations •  new media platforms like Google Glass •  The Scoop: guide to New York City o  Three new digital services to be launched in 2014 •  Looking for more ’price points’ in niche topics like ”Food & Dining”, ”Need to Know” and ”Opinion” •  New ’Premium’ tier for subscribers “Reveal”  and   Google  Glass     31  
  32. 32. The  Washington  Post  –  what’s  next?   Change  of  ownership:   “Our  strategy  had  been  to  innovate  like  hell  in  digital   and  other  businesses  and  offset  the  declines  in  print   revenues.”  CEO  &  Chairman  Donald  E.  Graham.   New  Disruptor  takes  over:   Amazon  has  more  than  200  million  customer   accounts  –  customer  data  is  key  to  success!   ”Culture  eats  strategy  for  breakfast”,  Peter  Drucker.   32  
  33. 33. News  Services  for  Digital  NaCves   BuzzFeed:  85  million  users,  one  of  the   most  popular  and  shared  websites.   NowThis  News:  Mobile  video  news  service,   available  as  an  App  and  on  Instagram.   33  
  34. 34. Schibsted in Sweden o  Schibsted has been leading the way – change of culture and ”cannibalizing its own business” o introduced in 2002 and in 2003 o  Digital services now account for more than 50% of revenue o  Aftonbladet has developed many mobile and tablet apps –  Mobile usage is skyrocketing o  Svenska Dagbladet is putting more focus on its digital services –  Paywall and mobile services 34  
  35. 35. New  media  concepts  in  Finland   o  Introduced  in  2010  on  the  tablet     +  MTV3  program   o  Freemium-­‐model  based  on   adverCsing   o  Tested  different  forms  for  paid   content  in  2013  –  no  success   o  Launched  in  January  2013   o  New  Business  Model  for   long  form  invesCgaCve   journalism   o  Sold  as  ´singles´priced  at   €3.90  per  issue   o  Won  the  ’UuCsraivaaja’   innovaCon  contest  in  2013   o  250,000  prize  money   invested  into  a  new   publishing  planorm  
  36. 36. SUMMA by Talentum Read-all-you-can at a fixed monthly price 36  
  37. 37. Conclusions o  Change in the media landscape is expected to accelerate as consumers´ information and purchase behavior continues to change o  New concepts and platforms for news are being introduced o  The interviews reveal that the Publishers feel an urgency in deciding which path to choose and where to invest o  The results show how different companies have chosen different approaches to meet the digital demand for news o  Printed newspapers may become a luxury product o  Publishers that invest only in printed newspapers will not be successful
  38. 38. 1.  2.  3.  4.  5.  6.  7.  8.  9.  10.  Collect, analyze and utilize customer data. The more you do, the more it adds value. Test and try-out different products and services based on customer insight. Offer valuable content to the consumer in different contexts, on different platforms. The key is to recognize the various phases of the consumers’ purchase path and to offer the right kind of content for each phase including advertising solutions. Make digital payments smooth and easy. This is one key to success, as shown by several succesful companies e.g. Amazon and Apple. An agile organization is a prerequisite for innovation; develop, test and learn. Emphasize the value of customer insight in developing new services. Nurture a corporate culture that supports ideas, development and prototyping. Shorten the innovation process for new products and services. From years to months or cycles of a few weeks. Trial and error can be the right way to success. Remember that ”no service concept survives its first contact with customers.” Don’t be afraid of cannibalizing your old business. The print based business model has served you well long enough. Think of advertising as a service. Combine relevant content from your advertiser with journalistic content and add value targeted to the individual consumer. Build networks and partnerships in e.g. customer analytics and content marketing services. ✓ ☐   To-do-list for media firms ☐   ☐   ☐   ☐   ☐   ☐   ☐   ☐   ☐  
  39. 39. Media and Service Design User  experience  alone  really  does  not  maoer.     What  maoers  is  the  combinaCon  of  relevant  content,     user  experience  and  business  value  =  Customer  value   Customer  value  defines:   1.  How  much  the  customer  is  ready  to  pay   2.  How  o:en  he  is  willing  to  buy   3.  Does  he  recommend  the  product  or  service  in  quesBon.   Source:  PALMU  Service  Design  agency  
  40. 40. Thank you. Q´s & A’s? Blogger: Email: Twitter: @timoketonen EDGE research group: 40