Making, Marketing, and Moving Digital Content
Introduction and Acknowledgments
For almost 15 years, I wrote for the Special Issues section of the Hollywood Reporter ,writingabouttheeffectsofdigitaltechnologiesonthemediaindus- tries.Inthecourseofthatreporting,Iinterviewedvirtuallyalloftheexecutives whowereguidingthemajormediaandentertainmentcompaniesthroughthe choppywatersofanewmedialandscape.Theywerecalledupontoaddress the changes brought about by the introduction of digital content creation technologies – cameras, nonlinear editing, computer-generated imagery for animationandspecialeffects,theInternetandpeer-to-peernetworks,andthe proliferationofchannelsandmediaplayers,suchasmobile,gameconsoles, DVRs,HDTV,Blu-ray,andalltheotherrapidlychangingconsumerelectronics devices.
Notsurprisingly,theripplesofchangesintechnologysoonreachedthepublic, whicheagerlyadoptedmanyofthenewwaystoconsumemedia,changingtheir mediausesandhabits.Theyalsosentunceasingtidesofchangethroughthe mediaindustryitself,withwhichmanagersateverycompanyandeverylevel hadtodeal.Itwasatrulychaoticbusinessenvironment–asneezeinChicago maynotcauseatsunamiinBeijing,butcomputerprocessorsinSanJosecer- tainlycausedatsunamiinthemediaindustrythathaslastedforlongerthan twodecades.
Digitalcontentcreationchangedthespeed,flexibility,andcostofcontentpro- duction,makingitcheaperforconsumers,butsometimesmoreexpensivefor Digitalcontentcreationchangedthespeed,flexibility,andcostofcontentpro- duction,makingitcheaperforconsumers,butsometimesmoreexpensivefor
isindevelopmentaroundtheworld.Theuniversitiesandgovernmentsofmany countries are connected to it, and scientists and engineers are hard at work buildingthetechnologiesneededforitsintroductionandpublicadoption.
Thepurposeofthisbookistolayafoundationforunderstandingandpartici- patingintheongoingevolutionofthemediaindustry.Itprovidestheconcepts andvocabularythatmanagershavedevisedtomeetthechallengesoftoday’s market and to position their organizations to succeed in a dynamic future businessenvironment.Atthesametime,managersrelyonmanytraditional ideasandprocessestoguidetheiractions.Insomeways,mediabusinessesare notsodifferentfromhowtheywereinthepast,orisolatedfromthepractices thatgovernmodernbusinesseseverywhere.
Thebooktriestokeeponefootintherecentpast,anotherinthenearfuture, withoutlosingsightofthepresent,whichdemandsknowledgeofbothpast andfuturedimensions:
Chapter1introducesstudentstothemediaindustries–theirsize, structure,segments,androleinsociety.
Chapter2looksatmediaorganizations,whattheydo,andhowthey createvaluetobesuccessfulandprofitable.
Chapter3examinesleadershipandmanagementtechniques,withbrief biosofthebusinessaccomplishmentsofmediaindustrymanagers.
Chapter4detailshowmediacompanieshandlehumanresources,in industriesthatarehighlydependentonskilledcreativepeople.
Chapter5showsstudentshowtofollowthemoney,givingtheminsight intothepervasiveimportanceinmediaindustryorganizationoffinancial planning,budgeting,andmanagement.
Chapter6exploresthenewparadigmofmediaconsumers,whomaybe customers,viewers,listeners,readers,users,players,friends,andfollowers, dependingonwhichmediasegmentanexecutivemanages.
Chapter7discussestherevolutioninmediacontent,includingtraditionaland newmeansofproduction,contentacquisition,anduser-generatedcontent.
Chapter8presentstheBigPicturestrategiesformarketingmediacontent, attheheartoforganizationalgrowthandprofitability.
Acknowledgments xi
Chapter13presentsever-evolvingmediaindustrybusinessmodelsthat serveasashorthandwayofdescribingtheproductsthebusinesswill bringtomarketandhowitwillattractconsumers.Thebusinessmodel alsoincludeshowtheorganizationwilldelivertheproductorserviceand deriverevenuefromit.
Chapter14providesanoverviewofthelegalandregulatoryissuesthat affectmediaenterprisesthatoperateinbothU.S.andinternationalmar- kets,includingthenewfrontieroftheInternet.
Chapter15askssomeofthemostdifficultquestionsthemediaindustries face:theethicalconsiderationsbroughtupbytheirinfluentialroleinthe publicsphereandprivateconsciousnessofindividuals.
Some readers may want to know why there is no chapter – perhaps even several chapters – specifically looking at communication technologies. To some extent, these topics are covered in Chapter 11, in the discussion of distributing content. The distribution infrastructure – wired and wireless networks–figuresolargeinallourlivesthatsuchatopicdeservesitsown booktoestimatethelikelyfuturegrowthandcapacity.Suchprojectionsare more or less impossible for consumer devices. There are probably college studentsatworkintheirgaragesanddormsrightnowfiguringoutsomenew fabulous way to consume content that no one has ever thought of before andwillturnsomepartofthemediaindustryupsidedown.Ilookforward totheirproductsandtheenchantingcreationsthatwillfollow,butIwillnot attempttoguesswhattheymightproduce!Indeed,ifIcould,Iwouldbeout inmyowngarage.
ACKNOWLEDGMENTS Joan Van Tassel
I want to thank so many people for their help, guidance, and patience as I wrote this book. First and foremost, Elinor Actipis and Michele Cronin at FocalPressdeservemedalsfortheirforbearanceandkindnesstomeasIwrote I want to thank so many people for their help, guidance, and patience as I wrote this book. First and foremost, Elinor Actipis and Michele Cronin at FocalPressdeservemedalsfortheirforbearanceandkindnesstomeasIwrote
Todd Chambers, John Allen Hendricks, and a reviewer who wished to be anonymoushaveimprovedthebookfarbeyondwhatitwouldhavebeenwith- outtheirgenerousassistance.
Anauthor’sfamilyalwayspaysaprice,includingmysiblings,ElaineBaerand Nancy,Gordon,Karen,Bailey,Emmy,andLucilleVanTassel.RobertandIrene Newton, Mona Nasir, and my personal coach, star journalist Mary Murphy. Havealwaysbeenhugesupporters,too.Ilovethem,eachandeveryone.
NationalUniversitycolleagueshavegivenmetime,encouragement,andsup- portinthewritingofthisbook.Imustmentionmembersoftheadministra- tion,DebraBean,PatriciaPotter,andKarlaBerry.Iwouldnotwanttoleave outmywonderfulfacultycolleagues:CynthiaChandler,LouisRumpf,Scott Campbell, Sara Ellen Amster, Sara Kelly, Roger Gunn, John Banks, Maureen O’Hara,andIsmailSebetan.
Finally,PeterClarkeandSusanEvansattheUniversityofSouthernCalifornia weremymentorsattheAnnenbergSchoolforCommunicationandcontinue toinspire,encourage,andhelpmetothisday.IrememberEverettRogers,a member of my dissertation committee when I was a graduate student, and alwaysregrethispassing.TheworldwithoutEvisalesserplace.ToRonRice, IwillalwaysbegratefulforhisdirectiongiventomeonthedayIdefendedmy dissertation:“Goforthandcommunicate.”Withthisbook,IhopeIhave.
Lisa Poe-Howfield
Firstandforemost!Inmymaidenvoyageascoauthor,Isendoutmyeternal gratitude,respectandthankstoJoanMarieVanTasselforprovidingmewith thisincredibleopportunity.Yourdedicationtoshareyourknowledge,notto mentionyourpatienceinwalkingmethroughtheprocess,servesasagreat inspirationtoall…thankyou!
ThankyoutoElinorActipisandMicheleCroninatFocalPressMediaforkeep- ingmeontrackandprovidingjusttherightguidance.
Professionally,Ihavebeenblessedwithgreatrolemodelsinmylifeincluding
Day in the Life Features xiii
Thankyouallfortakingtimefromyourbusyschedulestoshareyourreallife experiences.
Onapersonalnote,Igivethankstomyparents,AllenandPeggyPoe,who sacrificedmuchandworkeddiligentlytoprovidemewiththemeanstoobtain my college education at Pepperdine University and to my Mother-in-law, Margaret Howfield, who lost her battle with leukemia while this book was beingwritten,butleftalegacyoftruestrength.Averyspecialthankyouand muchlovetomyhusband,IanHowfield,andson,KyleRoot,whocontinually demonstrateincrediblesupportwiththeirkindwords,wittyhumorandpow- erfulhugs–makingallthingspossible.
DAY IN THE LIFE FEATURES
Day in the Life sectionfeaturetopmediaexecutivesandhighlighttheireveryday routines,showcasingsomeoftheirkeyconcernsandperspectivesontoday’s media.Eachsectionincludesabriefessayandadailyrundown.
Craig Robinson – President and General Manager, KNBC/TV-Los Angeles, California(Chapter1)
Lloyd Kaufman –Co-FounderandPresidentofTromaEntertainment;Chair- manoftheIndependentFilm&TelevisionAlliance(IFTA);authorof Direct Your Own Damn Movie, Produce Your Own Damn Movie , andMake Your Own Damn Movie (Chapter2)
Sam Bush –SeniorVicePresidentandChiefFinancialOfficerofSagaCom- munications,Inc.(Chapter5)
Debbie Carter – Vice President and Director of Sales for Blair Television (Chapter6)
Ann Marie Gillen –CEOandFounderoftheGillenGroup,LLC;FilmPro- ducer&EntertainmentIndustryConsultant(Chapter7)
Dorothy Hui –VicePresident,PartnershipMarketing&Sales,Wind-upRecords (Chapter8) Dorothy Hui –VicePresident,PartnershipMarketing&Sales,Wind-upRecords (Chapter8)
Richard Conlon – Vice President, New Media & Strategic Development - BroadcastMusic,Inc.(BMI)(Chapter12)
Bob Kaplitz – Principal and Senior Station Strategies for AR&D, author of Creating Execution Superstars with Budgets Cut to the Bone (Chapter13)
Vivi Zigler –PresidentofNBCDigitalEntertainment(Chapter13) Brad Williams –VicePresident,MemberBenefitsandDevelopments–NAB
(NationalAssociationofBroadcasters)(Chapter14)
CHAPTER 1
The Media Industries: Segments, Structures, and Similarities
Don’t hate the media. Be the media.
Jello Biafra
CHAPTER OBJECTIVES CONTENTS
Theobjectiveofthischapteristoprovideyouwithinformationabout: Chapter Objectives .....1 ■ Thestructureandcharacteristicsofthecontentindustries
Introduction .................1 ■ Thesegmentsthatmakeupthecontentindustries
Thewiderangeofbusinesseswithinthesegmentsofthecontent Structure and Characteristics of the
industries Media Industries .........3 ■ Thechangingcultural,social,political,andeconomicconditionsthat
establishthebusinesscontextofthecontentindustries
A Day in the Life of Craig Robinson .........18
Common Characteristics of
INTRODUCTION
the Segments of the Media Industries .......20
Movies, music, games, magazines, books, newspapers, Internet, comedy, Summary ...................25 drama,news–thismediacontentconstitutestheexcitingvisiblefaceofthe
mediaworldthatthrillsandenthrallsaudiencesaroundtheworld.Manypeo- What’s Ahead ............25 ple have fantasies of being in the public eye as actors, singers, writers, and Case Study 1.1 journalists,andafewofusgoontoperform.Butbehindthescenes,thereare Media Expansion ......25
2 C H A P T E R 1 : The Media Industries: Segments, Structures, and Similarities
15th Century 17th Century 18th Century
19th Century
20th Century
1928 – W3XK First Book,
1465 – 1665 – First 1741 – First
First TV Guttenberg
Newspaper, Magazine,
First Movie,
Station Bible
Lumière
Gazette
Magazine
Telegraph Bros. Cinema
on Air
Books News-
1920 – KDKA 1992 – First Radio
Internet Station
Society
Formed FIGURE 1-1 Timeline of mass media platforms
on Air
Theshortlifetimeofelectronicmediameansthatthestructureofmediacom- paniesevolvedsomewhatdifferentlyfrombusinessesinolder,industrialenter- prises.Theystandardizedproductsandprocesses,seekinggreaterproduction efficiencies.Oncedeveloped,manufacturingmaynotchangeforseveralyears. Buteachcontentproducthasatleastsomeuniqueproperties,suchasepisodes oftelevisionseries,andothersareentirelyunique,includingmotionpictures andmusicalbums.Itisonlyatthepointofdistributionthatcontentproducts arestandardizedfordeliveryandconsumption.
Atthesametime,therearealsomanysimilaritiesbetweencompaniesinthe mediaindustryandthoseinothersectors.Mostoftheworkinmediaorganiza- tionsisinitiatedandsupportedbymanagers–executiveswhohaveresponsi- bilityfordirecting,controlling,andsupervisingtheaffairsoftheenterprise.To carryoutthework,theydrawonallthehuman,financial,technological,and
environmentalresourcesavailabletothem. 1
Structure and Characteristics of the Media Industries 3
Managersworkineverykindoforganization,industry,geography,nation,and society.Theirresponsibilitieshaveagreatdealincommon,whetherthetask ismanagingachemicalcompany,alargefarm,anot-for-profitsocialservice agency, or a music label. Yet each business enterprise and environment has itsowncharacteristicsthataffecthowmanagersconceptualizeproblemsand solutionsandhowtheycarryouttheirduties.
Theglamorousmediaindustriesarenoexception–evenroutine,predictable workcarriesthepatinaofthepowerandvisibilitythatsurroundstheseenter- prises. Human resources hire personnel – sometimes performers like Sean Penn. Legal departments negotiate and approve contracts – sometimes for albums like OK Computer by Radiohead. Business development units estab- lish partnerships, finance and accounting departments handle payables and receivablesandimposeorganizationalcost-reductionprograms,andmarket- ingteamstraversethecomplexwholesaleandretailchannelsthatfinallyput productsinthehandsofconsumers,forallproducedcontent–evenacompel- linghitTVserieslikeHouse.
STRUCTURE AND CHARACTERISTICS OF THE MEDIA INDUSTRIES
Itisagiventhatmanagerswillknowagreatdealabouttheindustryinwhich theywork.Theygetthatinformationfrommanysources.Somemediaenter- prisesgatherandanalyzeinformationabouttheirconsumersandcustomers fromdirectcontact.Iftheydon’thaveinternalinformation,companiesreceive researchreportsthattellexecutivesabouttheiraudience,productperformance, andmarkets.Thereisalotofpublicinformationaswell,asthemediaarefre- quentsubjectsofjournalisticcoveragethatreportonfinancial,technological, andculturalaspectsoftheindustry.Managersalsogainvaluableinformation fromtheirownpersonalexperienceswithbuyingandconsumingcontent.
Anotherfactorthatinfluenceshowmanagersmakedecisionsistheimportance ofthemediainpeople’slives.Manyspendmoretimewatching,listening,and readingthemediathantheydoanythingelse,exceptbreathing.Addingupall
4 C H A P T E R 1 : The Media Industries: Segments, Structures, and Similarities
Indeed,themediaconstituteapervasive,virtualenvironmentwhoseimpact sometimes seems to transcend even the physical world. Managers find that theirbusinesscanbeaffectedbythecontenttheyprovide–rememberJanet Jackson’s“wardrobemalfunction”?Itupsetmanyviewers,resultinginfinesfor thenetworkandelectronicbanishmentforJackson.
Industry Size and Composition
In2011,theglobalmediaindustrieswillaccountfornearly$2.0trillioninrev- enue. 3 However,theyarepartofalargercommercialcomplex,calledthecopy- right industries .Theorganizationsthatmakeupthecopyrightindustriesengage inthe“generation,productionanddisseminationofnewcopyrightedmate-
rial.” 4 Thespecificcontentmaydiffer,butthemanagementoftheseactivities isstrikinglysimilar,regardlessofthespecificindustrysegmentorenterprisein whichtheytakeplace.
Fourcomponentsmakeupthecopyrightindustries:
Core industries: Industrieswhoseprimarypurposeistocreate,produce, distribute,orexhibitcopyrightedmaterials,includingbroadcast,music, motionpictures,entertainmentsoftware,newspapers,andmagazines,as showninFigure1-2.
Partial copyright industries: Industriesforwhichonlysomeaspect orportionoftheproductsqualifyforcopyrightprotection,suchasthe FordMotorCompany,whosecarsmaybepatented,butnotcopyrighted. However,thebrochures,TVspots,andotherpromotionalmaterialsthe companyproducesarecopyright-protected.
Nondedicated support industries: Industriesthatprovidedistribution, marketing,andsalessupporttothecopyrightedcontenteconomy,includ- ingtransportationservices,telecommunicationsservices,wholesalers,and retailestablishments.Examplesofnondedicatedsupportindustriesare telephonecompaniesandInternetinfrastructuresthatprovidethetrans- portnetworksforcontent.
Interdependent industries: Industriesthatmanufactureandsellprod- uctsthatenablethecreation,production,distribution,orconsumptionof
Structure and Characteristics of the Media Industries 5
Radio & Television Motion Pictures
Newspapers, (Cable, Broadcast,
Music Recording,
Entertainment and
CDs, Downloads
Business Software
Periodicals, and
and Satellite)
Books
FIGURE 1-2 The core copyright industries
COPYRIGHT
A legal framework that applies to original works that reserves the right of copying to the creator. Different countries have different legal frameworks that define these rights in different ways with respect to duration, enforcement mechanisms, and penalties for violation. In the United States, copyright is constitutionally protected.
radioprograms,andcomputersoftware(includingvideogames).Asshownin Figure1-2,thecopyrightindustriesareanimportantpartoftheU.S.economy andcopyrightedproductsarethelargestU.S.export.
InEurope,thecopyrightindustriesareequallyimportant.In2000,theycon- tributedmorethanatrillioneuros(€1,200billion)totheEUeconomy–about 5.3percentofitstotalvalue.Andtheyemployedmorethan5millionpeople
intheEuropeanUnion,constituting3.1percentofthetotalEUworkforce. 5 In
theUnitedKingdom,theimportanceofthecreationofcopyrightedmaterialis evengreater:creativeindustriesaccountfor8percentoftheeconomy. 6
Althoughtherearemanymanagementjobsinthecoreindustries,theyalso existinlargenumbersinthesupportandinterdependentindustries.Thepar- tialcopyrightcategoryisaninterestingonefortoday’sjobseekers.Thiscat- egorycoversthemedianeedsofenterprisesthatofferproductsandservices inotherindustries:automobiles,clothing,cosmetics,fishinggear,restaurants, andcarwashingestablishments.Allthesecompaniesneedmaterialtocommu- nicatetoconsumers,investors,andemployees.Increasingly,thesecommunica- tionsincludevideoandaudio,whichrequiremoreexpertiseandmanagement supervisionthanprintmedia. 7
6 C H A P T E R 1 : The Media Industries: Segments, Structures, and Similarities CAGR
In business, compound annual growth rate describes changes in value over time, taking into account year-to-year changes. In media and entertainment industries, CAGR normally refers to revenues, but the formula applies to any asset. It is a more accurate measurement than simply saying, “revenues are expected to double over the next five years.” (When an industry is shrink- ing, the CAGR will be a negative value.) The formula to calculate CAGR is:
d Ending Value 1 # Years n
CAGR = d Beginning Value n
entertainment, broadcast and cable television networks, television distribu- tion,recordedmusic,radio,Internetadvertising,Internetaccess,videogames, book,newspaper,magazineandotherprintpublishing,andcorporatemedia. Thenextsectionswilllookatthesizeandstructureofeachofthesegments.
Managers within each segment of the creative industries need to consider theparticularsoftheirorganizationandthemarketstheyface.Typically,the marketsarelarge,oftenglobalinscope.Insomethegrowthrate(CAGR,for compoundannualgrowthrate–seetheboxonthisterm)ishigh,inothers moremoderate.Table1-1describessomeofthedifferencesbetweencreative industrysegments.Inthetable,noticethatallthesesegmentsfaceasimilar formidablechallenge:theeaseofcopyingandlarge-scalepiracyinthedigital environment.
Filmed Entertainment
LosAngeles,NewYork,London,Paris,Mumbai,andHongKongaretheglobal centersoffilmedentertainment.Thecategoryincludesrevenuesreceivedfrom motionpictures,theaterboxoffices,rentalincomefromvideostores,salesin retailestablishments,andonlinesubscriptions(includingdownloadedfilms andTVprogramsandDVDssentthroughthemail).Thiscategorydoesnot includerevenuesreceivedfromdistributionviacable,satellite,telephonecom- panies–allcoveredintheTVdistributionsegment.
Structure and Characteristics of the Media Industries 7
Table 1-1 Comparing Media Industry Segments. Based on PricewaterhouseCoopers Media & Entertainment Markets, 2008–2013
Est. 2009 Global Market Size (in billions)/
Industry 2008–2011 CAGR Segment
(percent)
Growth Drivers
Challenges to Growth
Filmed 92.6/4.9
Ease of digital copying and Entertainment
Digital direct-to-consumer distribution:
downloads and subscriptions
piracy
Digital cinema High-definition DVDs
Ease of digital copying and Networks
Television 204.6/5.8
Growth of high-definition TV
Growth of digital households and rise in
piracy
multichannel advertising
Television 206.7/9.3
— Distribution
Growth of digital households, by cable and
telephone companies, particularly in the Asia Pacific region
Recorded 37.7/2.3
Ease of digital copying and Music
Digital distribution
Wireless, mobile digital distribution
piracy Lackluster content
Radio 80.7/5.2
High-definition radio
Stale formats
Lackluster content Internet
Satellite radio
Dependent on network Advertising &
Expansion of number of broadband
accessibility for and band- Access
households
width to consumers Spending
Rise of Internet as center for social
networking and media and entertainment center
Videogames 44.2/9.1
Expansion of number of broadband
Ease of digital copying and
households
piracy
Introduction of new games Introduction of more advanced devices
Expansion of wireless subscribers Expansion of broadband wireless
subscribers
Magazine 110/3.1
Rising incomes in emerging markets
Reader and advertising
8 C H A P T E R 1 : The Media Industries: Segments, Structures, and Similarities
Filmedentertainmentisafairlylargesegmentofthemediaindustries,butnot nearlyasbigasthemarketfortelevisionnetworksandtelevisiondistribution. 8 Forecasts of worldwide revenues anticipate growth at a modest 4.9 percent (CAGR) over the next 5 years. The United States and Europe are the largest markets,buttheyarealsorelativelyslow-growing.TheAsiaPacificandLatin Americaregionsaretheworld’sfastestgrowingmarkets.
Filmedentertainmentbringsinsignificantrevenue,butitisalsoexpensiveto create. High costs impose a significant barrier to entry for many producers, althoughwiththetransitiontodigitalproductiontoolsanddistribution,there issomecostreduction.Nevertheless,therealityremainsthatbigblockbusters comefrombigstudios.Withtheexceptionofonlyafewindependentstudios andproducers,largestudiosthatarebusinessunitsofhugemultinationalmedia corporationsproduceanddistributemostgloballysuccessfulmotionpictures.
Forecastingrevenuesforthissegmentisdifficult,becausefilmedentertainment isahit-drivenbusiness–incomedependsonthereleaseofcompellingcon- tent. However, they will continue to grow through 2010, stimulated by new technologiessuchasdigitalcinema,modernizedtheatricalauditoriums,high- definition television screens and DVDs, subscription and on-demand Inter- netdownloadingservices,mobileplayersandreceivers,andtheexpansionof the number of broadband households. According to copyright owners, one inhibitorofgrowthisthecopyinganddistributionofcontentwithoutpermis- sionfrom(andusuallywithoutpaymentto)thecopyrightholder.Professional counterfeitersandcasualcopyingthroughpeer-to-peernetworkingbothcon- tributetosomelossofprofitsbymediacompanies,althoughthereisdisagree- mentaboutexactlyhowmuchmoneyisinvolved.
Broadcast and Cable Television Networks
Economistsbasethesizeofthemarketforbroadcastandcabletelevisionnet- worksontheincomethesenetworksattractfromadvertisersaswellasrevenue fromcarriers,suchascableandsatelliteoperators.Thegeographicalcentersof televisionnetworksmirrorthoseoffilmedentertainment,andtheyareusu- ally operated by the same media giants. In the United States, this category
Structure and Characteristics of the Media Industries 9
The Nielsen company, which provides television viewing data for the industry, defines ratings and shares:
Rating:
A rating is a percent of the universe that is being measured, most commonly dis- cussed as a percent of all television households. *
Share:
A share is the percent of households or persons using television at the time the program is airing and who are watching a particular program […]. Shares can be useful as a gauge of competitive standing. 10
* NOTE: All households are counted, whether they have the TV set on or not.
Internetvideoandthegrowthofvideo-on-demandplatformswillalsodrive increasedrevenueat6.5percentCAGR.Revenuefromthereleaseofseasonsof TVprogrammingonDVDsaddsincrementallytoincome,althoughpiracyisa concernasthismarketgrows.
Inthepast,U.S.broadcasttelevisionnetworkscreatedhitshowsthathadbroad appeal.Manyyearsago,whentherewereonlythreenetworks,ahitshowmight attainashareof70percentoftheviewingaudience.(NielsenMediaResearch measuresthepopularityoftelevisionshowsfortheindustrybyreportingrating points and shares. ThesetermswillbecoveredmorefullyinChapter6,which examinesaudiencesandprogramming.)
Todaytherearehundredsofnetworksandthemassaudiencehassplintered undertheonslaughtofcablenetworkswithnicheappeal.Inthefirstweekof October2009,Nielsendatashowedthatthefourlargestbroadcastnetworks wereashadowoftheirformer30percentormoreselves:CBSaveraged11.3 millionviewers(7.2rating,12share).ABChad9.6millionviewers(6.2,10), NBChad7.8million(4.9,8),andFoxhad7.6million(4.5,7).Eventhemost popularshowsfarelittlebetter.Inthefallof2009,Housebeganthenewseason witha6.5rating(6.5percentofallTVhouseholds)anda16share(16percent ofallTVhouseholdswatchingatelevisionshowatthetime).
Eventhoughthenumberofpeoplewatchinganyparticulartelevisionshow went down, the cost of buying television advertising time actually went up.
10 C H A P T E R 1 : The Media Industries: Segments, Structures, and Similarities
seasonofshowsisagrowingsourceofrevenuefortelevisionnetworksthat havecreatedhitshows.BothclassicandcontemporaryTVshowscansellwell. As with other content distributed on DVDs, piracy could threaten this new revenuestream.
However,theaudiencecontinuestofragmentacrossmultiplemediavenues. Broadband Internet access is growing rapidly. More than 54 million house-
holdshaveaccesstovideo-on-demandservices. 11 Morethan35millionhave DVRs(digitalvideorecorders). 12 OnApril9,2007,Appleannouncedthatit hadsold220millioniPods. 13
Television Distribution
Television distribution includes the amount consumers spend on subscrip- tionsandpremiumchannelaccess,suchaspay-per-viewandvideo-on-demand access.ItalsoincludesrevenuesforTVprogrammingdistributedonmobile phonesinAsia,whereconsumerspaysubscriptionfeesforthisservice.Growth fortelevisiondistributionwillbehigh:9.3percentCAGRbetween2007and
2011. 14 However, this overall figure hides the large discrepancy in regional growth:TVdistributionwillgrow18.1percentCAGRinAsia,withespecially bigincreasesintheAsiaPacificregion,12.3percentinLatinAmerica,and12.3 percentinEurope,theMiddleEast,andAfrica.
However,intheUnitedStates,growthwillbeamodest5.4percent,because consumers can already choose cable or satellite television delivery, and the marketissaturated–subscriptionpenetrationisatnearly90percent.Viewers in other regions have fewer choices, and many have only satellite subscrip- tionserviceasamultichannelprovider.Astelephonecompaniesbegintooffer high-speedInternetaccessservices,theyarelikelytomarketbundledoffersof televisionsubscriptionandInternetaccessbothinallregionsoftheworld,but intheUnitedStates,theyarelikelytotakemarketshareawayfromcableand satellite,ratherthanincreasingtheoverallmarketverymuch.
Recorded Music
Music is recorded around the globe, in most major cities of the world. The equipmentisessentiallythesame,whetherthegigtakesplaceinLosAngelesor
Structure and Characteristics of the Media Industries 11
Ringtones: The sounds your mobile phone makes when it rings Ringtunes: Sounds based on recognized songs that mobile phones make when they ring Ringbacks: The sounds you hear in your mobile phone when the telephone you are calling is ringing
Byanymeasure,ithasnotbeenagood15yearsforthisindustrysegment.The marketforrecordedmusicencompassesphysicalmedia–albums,singlerecordings, andmusicvideo–andpaiddigitaldistributionviabothwiredandwirelessnet- works.Inadditiontosongsandalbums,thecategoryalsoincludesrevenuefrom thesalesofringtones,ringtunes,andringbacks.Theglobalmarketisgrowingvery slowly,from$36.1billionin2006toabout$40.4billionin2011,a2.3percent CAGR.Eveninfast-growingregionslikeAsiaPacificandLatinAmerica,themarket willgrowonlyat5.4percentCAGR.ForecastscallfortheUnitedStates,thelargest marketinthiscategory,todeclineby0.4percentCAGR.
Thedeclineofthemarketforrecordedmusicseemstobeaccelerating.Inmid- 2007,reportedsalesofthetop-sellingCDalbumsweredown30percent,com- paredtothesameperiodtheyearbefore.Someanalystsattributethelowering revenuestopiracy,andbothprofessionalcounterfeitingandpeer-to-peerfile sharinghaveprobablyplayedaroleinthedeclineofsales.However,others pointtopoormarketleadershiponthepartoflargemusiccompanies,ormusic labels ,astheyareoftencalled.
“Themightymusicbusinessisinafreefall–ithaslostcontrolofradio;retail outletslikeTowerRecordshaveshutdown;MTVrarelybroadcastsmusicvideos; andtheoncelucrativealbummarkethasbeenovershadowedbydownloaded singles,whichmainlybenefitsApple,”writesHirschberg(2007)intheNew York
Times Magazine. 15 Commentinginthearticle,DavidGeffen,thelegendarymusic mogul,said,“Themusicbusiness,asawhole,haslostitsfaithincontent.Only tenyearsago,companieswantedtomakerecords,presumablygoodrecords, andseeiftheysold.Butpanichassetin,andnowit’snolongeraboutmaking music,it’sallabouthowtosellmusic.Andthere’snoclearanswerabouthow tofixthatproblem.ButIstillbelievethatthetoppriorityatanyrecordcom-
12 C H A P T E R 1 : The Media Industries: Segments, Structures, and Similarities
However,digitalfilesarevulnerabletoeasycopying,sotheyhaveengagedin manyeffortstoreducecasualcopyingandfilesharingbyconsumers.Between 2003and2007,themusiclabels’tradegroup,theRecordingIndustryAssocia- tionofAmerica,initiatedorthreatenedlegalactionagainstmorethan20,000
people. 17 They have also adopted technological barriers such as proprietary fileformatsthatrequirespecialplayersorsoftwarethatrestrictscopying.These technologiesareoftencalleddigital rights managementorDRM.
Radio
The radio segment includes advertising revenue spending, local over-the-air free broadcast radio stations, and advertising spending and consumer sub- scriptionspendingforsatelliteradio.Companiesthatownradiocompanies are usually in financial centers of the country where they operate; however, transmitterscanbeanywhereor,aswithsatellitedelivery,everywhere.Likethe music industry, broadcast radio is experiencing a difficult business environ-
ment.Overallglobalrevenuesareprojectedtogrowat5.2CAGR. 18 InEurope, increasesinradioadrevenueareunlikelytotop3percentbetween2007and 2011.IntheUnitedStates,advertisingonradiohasbeenflatfor3yearsand forecasterspredictthat2007levelswillrangebetween2percentupand2per-
centdown. 19 Despitethestagnantrevenues,thesaleofradiostationshasnot slowed,becauseinvestorscontinuetofindradiostationsveryprofitablebusi- nesses,particularlyinmediumandlargemarkets.
Thereareseveralexplanationsfortheindustry’slackofgrowthinmaturemar- kets, such as the United States and Europe. Some analysts cite concern with businessprocesses,suchasthecomplexityadvertisersfacewhenbuyingtimeon multiplestations,lackofelectronicinvoicing,andaudiencemeasurement.Other observersbelievethatformatsandprogrammingpracticesareaproblem.
“Radioisastalemedium,”saysSteveKalb,seniorVPanddirectorofbroadcast mediaforMullen’smediaHUB,whonotesthathekeepsacloseeyeondeclining listeninglevels.“Everytownhasthesamekindofformat.It’sthesamemusic.It’s verygenericandwhite-bread.Thehomogenizationofradioisfrightening.” 20
IntheUnitedStates,consolidationisoftenblamedforthedeathofprogram-
Structure and Characteristics of the Media Industries 13
IntheUnitedStates,consolidationoccurredasaresultofchangesinregulations bytheFederalCommunicationCommission(FCC),whicheliminatedbarri- ers to the number of stations companies could own. The FCC also lowered therequirementsforlocalprogramming,sothatmanystationsrunsimplyas automatedcomputerservers,transmittingcontentproducedelsewhere.Inthis way,consolidationhasreducedthenumberofjobsintheradioindustry,so thataverysmallnumberofmanagersrunaverylargenumberofstations.The lossofindividualstationshasalsocausedstationdiversitytodecline,sothat stations(andtheirmanagers)appeartospeakwithonevoice.
Analystsexpectradioformataudiencestoshiftinthenextfewyears,withcoun- trymusiclistenershipgrowingby24percent,news/talkformatsby20percent, urbanstationsby15percent,andSpanishradio14percent.Allotherformats, suchasoldies,adultcontemporary,rock,jazz,andadulthits,areprojectedto
decline. 22 Independentmusiclabelssufferthemostfromthenear-monopoly oncommercialradiobymajorlabels–theirpay-for-playdominationofradio makesitimpossibleforindependentmusicianstogetairplay,confininginde- pendentartiststothemargins.NowfilesharingandCDburninghavecreated the first real opportunity to break the major label cartel, and independents have the most to gain. Many independents are no longer pounding on the doorsofradiostations,becausetheybelievethatthelinkbetweenradioplay
andmusicsalesisnowbroken. 23 Intheirview,theInternetprovidesamuch
moreflexible,discovery-orientedmediumforfanstofindnewmusic.
Internet Advertising and Access Spending
Internetadvertisingisthefastestgrowingadmedium.Itisasegmentwhere jobseekersjustoutofcollegemaybeabletofindajobandbeabletogrowa careerastheindustrymatures.MuchofthejobofInternetmanagersiseducat- ingthosenotintimatelyinvolvedwiththeindustryaboutwhattheNetcando forthemandtheircompanies.
Internetcompaniesareeverywhere,buttheyarethickonthegroundintech- nological centers. They are likely to be near universities that offer sophisti- catedcomputerscienceandothercommunicationsengineeringprogramsand confermaster’sanddoctoraldegrees.IntheUnitedStates,theselocationsare
14 C H A P T E R 1 : The Media Industries: Segments, Structures, and Similarities
the global Internet access market will rise from $169.5 billion to $298.4, a 12.2 percent CAGR. The access market differs across regions, because some territoriesalreadyhavealargenumberofsubscribers.TheU.S.Internetaccess marketwillgrowata7.1percentCAGR;AsiaPacificwillexpandata16.9per- centCAGR. 24
In2004,Internetadvertisingrevenuessurpassedthoseofoutofhomeadver- tising(outdoorboardsandsigns).In2007,theNetovertookradio.In2010, itwillbringinmoreaddollarsthanmagazines.However,asof2007,Internet adincome($49.6billion)isfarbehindtheremainingmassmedia–television ($196.9billion)andnewspapers($117,878).
Globally, Internet advertising is growing at a double-digit rate, about 18.3 CAGR.Asfastasthiscategoryisexpanding,itisstilllimitedbyoverallrates ofconnectivity.IntheUnitedStates,whereadvertisingisalong-established part of media environments, the Internet advertising market is well devel- oped.In2007,almost40.3percentofadvertisers’budgetswenttowardkey- wordsearch–aboutthree-quartersofthisspendingwenttoGoogle.Classified ads received 25.6 percent of ad money, video brought in 3.3 percent, and otherformsofadvertisingsuchasbanneradsanddisplayadsaccountedfor 30.8percentofallmoneyspentonInternetadvertising.Forecastscallforkey- wordsearchadvertisingtoincreaseoverthenext5years.Spendingonbanner adsandotherstaticformatswilldeclineasbroadbandusageexpands,allowing advertiserstousemorevideocontent.
Managers of Internet companies agree that one barrier to faster ad revenue growthinthismediasegmenthasbeentheabsenceofagreed-uponmethods ofmeasuringeffectiveness,ormetrics.Advertisingmanagersusemetricstocon- vincetheirsupervisorstospendpartoftheirbudgetsonWebsites.Theyalso usemetricsafterthecampaigntoshowtheeffectivenessoftheadspend.
Theuniversallanguageofadvertising,irrespectiveofmedium,isimpressions. TheInternetAdvertisingBureau(IAB),atradegroup,hasbeenworkingon establishingindustry-widemetricsforimpressions.Twocompaniesdominate themeasurementofInternetadvertising,ComScoreandNielsen/NetRatings. Advertisersareconcernedwithdiscrepanciesbetweenthemeasurementsof
Structure and Characteristics of the Media Industries 15
IMPRESSION
Exposure of a person or household to an advertising message. Sometimes advertisers pay for the services of an ad agency, based on a particular number of impressions by specific demo- graphic groups, such as “men 18–35,” “women 25–49,” or even more narrowly targeted groups. As the focus narrows, the cost per impression goes up.
aboutassuringtheintegrityofaudiencemeasurementsystemsandprocessesas
interactivetechnologiescontinuetoevolve.” 25 In2008,theIABissuedguide-
linesforaudiencereachmeasurement.Thegrouphopedtoestablishconsis- tentdefinitionsofmetricsandtosetmeasurementstandards.However,some oftheseissueswerestillnotresolvedbymid-2009,particularlyforrichmedia, suchasvideo. 26
Internetadvertisingwillbecomeprominentwhentheindustryreachesacon- sensusabouthowtocollect,aggregate,mine,andapplyspecificmetrics–and positionthemselvestosupplythem.Thisistheworkofthetoday’smanagers andexecutivesintheInternet,andtheyareactivelyengagedinit.Theuseof GoogleAnalyticsiswidespread,butdoesnotprovideaneutralmeasurement service,asNielsendoesforthetelevisionindustry.
Once the metrics issues are more fully worked out, the Internet will offer a powerfulcomplementtothemassgiants,becauseitoffersadvertiserstheabil- ity to reach individuals with offers tailored to their needs and desires. In a worldwheretherearefewinformationsources,advertisersmustpresentgen- eralofferstoanaggregatedbuyingpublic.TheInternetbringsanalmostinfi- nitenumberofinformationsourcesthatchangesadvertisingandmarketing strategytooneofapplyingdatatoindividualcustomers.
Internetadvertisingdependsonthenumberofpeoplewhoareconnected,so managersinInternetcompaniessupportbroadbandsubscriptionasmuchas theycan.Peoplewithbroadbandspendmoretimeonline.Thegreaterband- widthallowsadvertiserstousegraphics,animation,audio,andevenvideoto communicatetheircommercialmessages.In2007,theUnitedStatesaccounted
16 C H A P T E R 1 : The Media Industries: Segments, Structures, and Similarities
Table 1-2 Internet Household Connectivity, by Access Type and Region 28
Connect Using
Connect Using Territory
Connected to
Broadband
Internet (percent)
(percent)
Dialup (percent)
United States 76.6 51.9 24.7 Western Europe
65 49.3 15.7 Eastern Europe
26.7 12.8 13.9 Asia Pacific
28.9 15.7 13.2 Latin America
Videogames
Videogamesarepopular.In2003,theindustrysurpassedthemotionpicture industryinrevenue.Themarketforvideogamesincludesconsumerspending onthegamesthemselves,ratherthanthehardwareplatformonwhichtoplay them. (The game platforms – computers, consoles, and handhelds – are all partoftheconsumerelectronicsindustry,notthemediaindustries.)Games arepurchasedindividuallyorbysubscription,asretailboxedgamesordown- loadeddigitalproducts.Thetypesofgamesareconsolegames,personalcom- putergames,onlinegames,streamedon-demandgames,andwirelessmobile games.IntheUnitedStates,advertisingspendingformessageswithingames isincludedaswell.
As in many other media segments, videogames are hit-driven. Sales can be volatile, changing from month to month. As of September 2009, the most popularconsolegameswereHalo3(Xbox360),SportsResort(Wii),andPro- fessorLaytonandtheDiabolicalBox(NintendoDS).Themostpopularonline gamesinmid-2009wereWorldofWarcraft,HabboHotel,andRuneScape.
Themarketforconsolegamesiscyclical:acyclestartswiththeintroduction ofanewconsole.Thendesignersbuildgamesthattakeadvantageofthemore advancedfeaturesthenewconsoleoffers.Whenoneofthenewgamesgener-
Structure and Characteristics of the Media Industries 17
machinesthatcanemulateanygameconsole.Thechameleon-likecharacteristics ofcomputersmeanthatgamerscanplayagamecreatedforanyplatformon theircomputers,notjusttheconsoleforwhichdevelopersdesignedthegame. In2007,MicrosoftintroducedtheVistaoperatingsystem.Itshowshowimpor- tantvideogamesareintoday’smarketplacethatthepurposeofmanyofVista’s featureswastoenrichgamingbyprovidingforfastergraphicshandlingand gameplay.
Thedesignofsomegameslimitsthemtoplaybyasingleperson;othersallow smallgroupsorteamstoplay.Ifthemeansofplayingthegame–consoleorPC– providesonlineconnectivity,thenthegamemayallowmanypeopletoplay, sometimesnumberinginthethousands.SuchgamesarecalledMMOGs,which standsformassive multiplayer online games.Gamesfitintooneormoregenres, basedonthedesignoftheplay,thetheme,ortheunderlyingrealitythatthe gamereferences.Themostpopulargenresareaction(includingshootergames), adventure,fighting,role-playing,simulation,sports,andstrategygames.Other genresareadult,arcade,advergame,artillery,education,music,party,pinball, puzzle,stealth,survival,horror,traditional,andvehicularcombatgames.
Thegrowthofthevideogamemarketreflectsadvancesinrich,realistic,fast- changinggraphicsandthespeedofgameplay.Thesecharacteristicsdepend ontheprocessingspeedofthehardwareitrunson–console,computer,or handheld,soadvancesinprocessingprecedesalesandprofits.Theexpansion
BANDWIDTH
The size of an information channel. One way to picture a communication channel is as a pipe that carries liquid. The bigger the pipe, the more liquid it will carry.
A water pipe carries a given amount of water in a given amount of time. For example, a pump might have the capacity to move 50,000 gallons of water per hour. Similarly, although the technical measure of bandwidth is the number of frequencies it includes, the more oft-used measurement is the data rate, or the amount of information bits carried, usually in seconds. For example, cable companies routinely deliver 3 megabits per seconds (3 mbps) of information to their computer companies. This measurement means that the channel permits the transmission of 3 million bits of information every second.
18 C H A P T E R 1 : The Media Industries: Segments, Structures, and Similarities
ofbroadbandnetworkaccess,bothwiredandwireless,willalsostimulatethe growthofthissegment. 29 Nearreal-timeknowledgeofotherplayers’actions andtheabilitytolaunchimmediateresponsesmakeforsatisfyingfastgame action.Thisreal-timetele-presence,accompaniedbyinformationabouthowthe movesofhundreds(eventhousands)ofotherplayersaffecttheenvironment, isafunctionofhowmuchinformationcanbeprovidedtoalltheplayersina givenamountoftime–theavailablebandwidth.
Bandwidthisatwo-edgedsword.Itmakesitpossibleforgamerstoplaywith manypeopleliveovertheInternet.ThepopularityofMMOGslikeWorldof Warcraft,HabboHotel,andRuneScape,eachwithmillionsofmonthlysub- scribers,testifiestotheincreasingappealofonlinegaming.Mediagiantshave taken notice of this trend and both Warner Bros. and MTV have developed
game-likeonlineenvironmentstopromotetheirbrands. 30 Butplentifulband- widthalsoallowsuserstodownloadlargefilesveryquickly,enablingthepiracy of game software – just as it facilitates downloading of music, movies and televisionprogramming.
A DAY IN THE LIFE OF CRAIG ROBINSON
Craig Robinson, President and GM,
more complex meetings for the morning, while everyone is
KNBC TV/Los Angeles, California
fresh.”
Craig Robinson is the President and General Manager of We’ve all heard that old adage, “It ain’t easy at the top.” So, KNBC-TV in Los Angeles, California, the second largest tele-
tell us what are some of the most challenging issues you face? vision market in the United States. In his own words, Craig
“Keeping a motivated and healthy workforce is always describes his climb to the top: “Through the years I’ve had
the most challenging issue, particularly in a tough economic the good fortune to hold many key jobs within a television
environment.”
station, including executive assistant, sales trainee, salesper- It’s well known that you sincerely enjoy your position. son, sales manager and vice president of sales. Working at
Can you describe the highlights of your workday? all levels of the organization has given me an appreciation
“Talking to the people who make it happen every day, for some of the positions that aren’t high profile, but that are
acknowledging their successes. I meet on a regular basis integral to the success of the business.”
with the heads of each department, but it’s always energiz- When asked to describe a “typical” day in this high- profile
ing to hear from the people on the front lines.” and fast-paced position, Craig provides a quick snapshot:
After a full day at the office, which is typically longer than “Every day involves some revenue forecasting and expense
eight hours, how do you end your day?
Structure and Characteristics of the Media Industries 19
Daily Planner
Date: 8/17/2009
17 August, 2009
Prioritized Task List
People to Call
20 C H A P T E R 1 : The Media Industries: Segments, Structures, and Similarities BUSINESS MODEL