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Chapter 14: Media TransformationQuestions answered in this
chapter:What is media convergence?What conditions make media
convergence possible?How do new media companies leverage
traditional media channels?What are the reasons for media
Megamergers?
Chapter 14: Media Transformation
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What is Media convergence?The media infrastructure includes all
of the communication companies and channels of communications such
as radio, television, newspapers and magazines.
Media convergence is the process by which different types of
media content are evolving into a single media platform through the
internet.
Chapter 14: Media Transformation
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What conditions make media convergence possible?The conversion
of analog signals to digital signals has been one of the major
steps in making media convergence possible. Some of the key factors
are:Continued advances and decreasing cost of digital
technology.Low Cost digital network infrastructure.Media
Proliferation.Media-Usage Fragmentation in American
households.Forecasted continued Media proliferation and media usage
fragmentation.
Chapter 14: Media Transformation
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Chapter 14: Media Transformation
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Table 14-1: Primetime Viewing Shares of Free and Cable
Television Networks
Note:For all television viewing Monday-Sunday, 8-11pm EST. Due
to multiset use and independent roundings, totals add up to more
than 100.All Other includes the FOX network, UPN, WB, other
independent stations, pay cable and public televisionSource: Cable
Advertising Bureau, Cable TV Facts (1999)
Chart1
0.6930.0750.232
0.5810.1640.255
0.5510.1930.256
0.5490.1980.253
0.5290.2110.26
0.5240.2130.263
0.4870.2430.27
0.460.2670.273
0.4210.2970.282
0.3960.3250.279
Network Affiliates
Basic Cable
All Other
Primetime Viewing Shares of Free and Cable TV
Networks1985-1998
Sheet1
Network AffiliatesBasic CableAll Other
198569.30%7.50%23.20%
199058.10%16.40%25.50%
199155.10%19.30%25.60%
199254.90%19.80%25.30%
199352.90%21.10%26.00%
199452.40%21.30%26.30%
199548.70%24.30%27.00%
199646.00%26.70%27.30%
199742.10%29.70%28.20%
199839.60%32.50%27.90%
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Chapter 14: Media Transformation
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Table 14 2: Penetration of Technologies Into U.S. Households -
2000
Source: National Cable Television Association, Nielson Media
Research, Electronic Industries Association, Consumer Electronics
Manufacturers Association, U.S. Department of Commerce
Sheet1
Penetration of Service / Device in U.S. Households
19902000Differenece
Satellite Dish3%13%+10
Video Game Console5%44%+39
Online Services0%31%+31
Camcorder10%33%+23
PC23%53%+20
PDA0%20%+20
CD Player (Audio)19%55%+36
VCR68%91%+23
DVD Player0%22%+22
Home Fax Machine / Modem19%51%+32
Answering Machine31%74%+43
Cellular Phone0%51%+51
Cordless Phone25%78%+53
Corded Phone98%96%-2
Telephone Service48%98%+50
Radio99%98%-1
Basic Cable Television21%68%+47
B & W TV50%47%-3
Color TV96%98%+2
All Television99%99%0
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Chapter 14: Media Transformation
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Table 14-3: Hours Spent Per Year Per Consumer Per Media, 1990 -
2000
Sheet1
Number of Hours Per Person Per Year Using Consumer Media
199219972002
Total Television (Broadcast and Cable)151015611575
Radio115010821040
Recorded Music233265289
Daily Newspapers172159152
Consumer Books1009297
Consumer Magazines858279
Home Video425058
Movies in Theatres111313
Video Games193646
Consumer Online22849
Total Hours Per Person:332433683398
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Sources: Veronis, Suhler &Associates, Wilkofsky Gruen
Associates, Nielsen Media Research, Simmons Market Research,
Interactive Digital Software Association Paul Kagan Associates,
Motion Picture Association of America, Book Industry Study Group,
Magazine Publishers of America, Software Publishers
Association.
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Chapter 14: Media Transformation
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Exhibit 14-1: Media Fragmentation, 1960s to 2010s
Source:Business Week, February 16,1998
Most Americans watch the Big Three Networks every night
UHF Stations bring more choices, and the fledging cable industry
intoduces a few new channels like HBO and Turners TBS
Superstation
The VCR becomes commonplace, letting consumers watch recorded
shows and movies whenever they want. Cable explodes, with new
networks like CNN and MTV.
Digital compression and two-way networks allow cable companies
to offer even more channels and services. DBS services grow more
entrenched. As TVs are linked to the Internet, new programming
delivered via the Internet takes hold. Result: 300 choices at any
moment.
Broadcasters may use high-definitionTV spectrum to launch more
channels. Internet chat evolves into networked virtual reality
games, interactive movies, and other activities being hatched by
MITs media lab and others. News Corp. forecasts 1,000 channels, now
called context windows.
Direct-broadcast satellites are introduced offering hundreds of
channels. Cable systems are slowly upgraded with more channels
1960s
1970s
1980s
1990s
2000s
2010s
TV faces the worst audience fragmentation of all. Here, News
Corp. tracks and forecasts the explosion of TV-viewing choices
available in any given hour. Once there were three options; soon
there will be 1,000
-
How do New Media Companies leverage traditional media
channels?The new economy is actually dependent on the traditional
media channels to build an audience for new media.Dot-com companies
were predicted to spend an estimated $5 billion to $6 billion in
advertising in 2000.90 percent of the amount spent in advertising
were to be spent on ads placed in traditional media outlets.Top
dot-com advertisers were E*Trade, Dow Jones, Cheap Tickets,
Priceline.com and Charles Schwabs online trading site. Internet is
emerging as a mechanism for supplementing, not replacing,
traditional media sources.
Chapter 14: Media Transformation
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How do New Media Companies leverage traditional media channels?
(contd)We delve deeper into this section by considering the
following case examples:The New York Times Real NetworksMSNBC
Chapter 14: Media Transformation
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Chapter 14: Media Transformation
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Exhibit 14-2: NY Times on the Web Home Page
-
The New York Times on the webNYTimes.com was launched in 1996
and by the end of 2000 it emerged as the leading newspaper site on
the web.It had 14 million registered users and it was getting 178
million page views. The site forces users to register to access the
archives of other site services. The site collects user information
like e-mail address along with basic demographic information. The
key differentiating strategy that can be attributed to the success
of NYTimes.com is to deliver a targeted, upscale audience to its
advertisers.
Chapter 14: Media Transformation
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RealNetworksThe company was founded in 1994 by Rob Glaser.It has
emerged as the leading maker of streaming media software products,
which deliver audio, video, and other multimedia services to PCs
and digital devices. Currently RealPlayer products (which include
RealVideo, RealJukebox and GoldPass) are used by 170 million
people.It has alliances with several major media content makers
such as CNN, ABCNews.com, Oxygen, ESPN Sports and Bloomberg as well
as over 2500 radio stations.The company earned an operating profit
of $30.9 million on net revenue of $241.5 million in fiscal year
2000.
Chapter 14: Media Transformation
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Chapter 14: Media Transformation
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Exhibit 14-3: Real Networks Real Player
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MSNBCThis cable and online news channel was launched in 1996,
which is jointly owned by Microsoft and General Electric, the
parent company of NBC.MSNBC.com is the leading news site on the web
with 12.3 million unique visitors.It provides 24 hour news and
information content on both cable television and the web.Visitors
can view segments, participate in audience jury vote or watch the
the MSNBC cable news channel live.Strategic alliance with The
Washington Post allows MSNBC.com to also post print stories from
the Washington Post and Newsweek on its site.
Chapter 14: Media Transformation
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Chapter 14: Media Transformation
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Exhibit 14-4: MSNBC Home Page
-
What are the reasons for Media Megamergers?One of the key
strategies to capture wide audiences has been to develop vertical
integration for content and distribution across all three core
media types.This has been possible through media megamergers like:
Time Warner and Turner Broadcasting.The Walt Disney Company and
Capital Cities/ABC.Westinghouse and CBS.Viacom and CBS.AOL and Time
Warner.Tribune Company and Times Mirror.
Chapter 14: Media Transformation
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What are the reasons for Media Megamergers? (contd)The five most
important reasons for the media mega- mergers are:The
Telecommunications act of 1996Vertical IntegrationPursuit of
multiple revenue streamsAdvances in new digital technologiesEntry
into global markets
Chapter 14: Media Transformation
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Chapter 14: Media Transformation
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Exhibit 14-5: ABCNews.com Home Page
ABC Television
ABC TV Affiliates
ABC Radio
ABC Television
ABC Television
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Chapter 14: Media Transformation
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Exhibit 14-6: Sony Playstation 2
Games: Runs PS1 titles, but new PS2 . will make the old ones
look like Pong
DVD Player: Can play digital movies right out of the box. Not a
bad deal just for that.
Music CDs: PS2 spins them, too. Pressed for space? Give the old
player away.
Internet: In 2001, Sony says, you can add Net connectivity.
Browse and buy.
Download: Beginning in 2001; store and replay digital music and
video from the Web
-
Media EconomicsEach form of media has its own economics and
hence a different business model. The most commonly discussed media
types are:NewspapersMagazinesBooksBroadcast TelevisionCable
TelevisionRadioFilmVideosDVDsMusic CDsVideo Game Consoles, and
MP3
Chapter 14: Media Transformation
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Media Economics (contd)NewspapersThe top 4 newspapers in the
United States at the end of 1999 were USA today, The Wall Street
Journal, The New York Times and the Los Angeles Times with each of
them having a daily circulation of 1 million or more.The average
newspaper reader is older, well educated, and earns a relatively
high income. Newspaper sales account only for a portion of a daily
newspaper revenue with approximately 75% coming from advertisers.45
% of the advertising comes from retail and classifieds and the
balance comes from national advertising which represented national
accounts such as financial services, airlines and hotels.
Chapter 14: Media Transformation
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Media Economics (contd)MagazinesAt the end of 1998, the top
magazines were Modern Maturity, Readers Digest, AARP Bulletin and
TV guide.Approximately 82% of all consumer magazines are sold
through subscription; the remaining 18% are sold through retail
outlets such as supermarkets and newsstands.Almost all magazines
make money through a combination of circulation and advertising
revenue.Many magazines have launched companion websites as a way to
enhance subscriber benefits and to build home delivery
circulation.
Chapter 14: Media Transformation
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Media Economics(contd)BooksThe popular subject areas are
sociology, fiction, juvenile and technology.With the continued
proliferation of the Internet, book publishers are looking at the
possibility of going from print and distribute model to distribute
and print model.Consulting firm Accenture predicts that e-books
will be at $2.3 billion business by 2005, which represents
one-tenth of the $23 billion book market.
Chapter 14: Media Transformation
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Media Economics (contd)Broadcast TelevisionThe three major U.S
networks are: ABC, CBS, NBC, each having approximately 200 local
television affiliates.On an average each network airs 90 hours of
programming a week.Digital television, which offers lifelike
picture and CD quality sound is considered to be the biggest
broadcast innovation since color television was introduced in
1950s.Introduction of Digital Television(DTV) will increase the
number of network channels offered in the future.
Chapter 14: Media Transformation
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Media Economics (contd)Cable TelevisionRCA began to transmit
programming to independent cable operators around the country,
under the name HBO, who then relayed it to subscribers.The number
of cable television subscribers has grown from 496,000 in 1975 to
48.4 million in 2000.The cable channels make their revenue through
a combination of advertising and subscription fees.The top six
channels by the end of 1999 were: TBS Superstation, The Discovery
Channel, USA Network, ESPN, C-SPAN and CNN.
Chapter 14: Media Transformation
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Media Economics (contd)RadioSimilar to broadcast television,
radio generates nearly all of its revenue from advertising by
delivering a select audience to advertisers.At the end of 1999,
there were 12,641 radio stations on the air, approximately 81% of
which were commercial stations.FilmThe motion picture industry
earned an estimated $7.7 billion in 2000 with various studios
releasing an average of 400 films per year.By 1998, average cost of
movie making had tripled to $52.7 million, largely due to rising
actor salaries, increased demand for special effects and other
spiraling costs.
Chapter 14: Media Transformation
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Media Economics (contd)The other important forms of media
are:Video DVDsMusic CDs Video Game consoles, and MP3.
Chapter 14: Media Transformation
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Chapter 14: Media Transformation
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Table 14-4: Summary of Media Economics
Sheet1
MEDIA ECONOMICSIndustryAverage $RevenueTime spentLeading
SalesPer ConsumerStreamsWithFranchises
NewspapersNew York
$69.7 billion$53.75 perAdvertising3.0 hoursTimes, USA
yearand Circulationper weekToday
MagazinesTime, Sports
$20.8 billion$40.61 perAdvertising1.5 hoursIllustrated,
yearand Circulationper weekPeople
Consumer BooksMcGraw
$17.9 billion$87.84 perBook Sales1.9 hoursHill, Little
yearper weekBrown, etc.
Broadcast TelevisionCBS, NBC,
$42.7 billionFreeAdvertising15.5 hoursABC, Fox
per weekWB
Cable TelevisionHBO, Turner
$54.3 billion$205.75 perAdvertising and14.7 hoursNetworks,
monthSubscription Feesper weekESPN, etc.
RadioInfinity Radio
$18.2 billionFreeAdvertising20.3 hoursWestwood
per weekOne
FilmUniversal,
$7.7 billion$31.67 perBox Ticket Sales0.25 hoursParamount,
movieper weekDisney
Home VideosUniversal,
$19 billion$89.93 perVideo Sales1.1 hoursParamount,
yearper weekDisney
DVDsUniversal,
--DVD Sales0.2 hoursParamount,
per weekDisney
Video GamesSony,
$4 billion18.71 perConsole Sales,0.8 hoursNintendo,
yearVideo Gamesper weekSega
Music CDsBMP, Sony
$12 billion$61.64 perCD Sales5.17 hoursDisney
yearper week
Sources: Prudential Securities, Wikosfsky Green Associates,
Inc., Entertainment Industry Economics
(Harold L. Vogel, Cambridge)
Sheet2
MICROSOFT- STRATEGYMICROSOFT- STRATEGY
TODAYFUTURE
Operating SystemsOperating Systems
ApplicationsApplications
MSNBC Joint VentureMSNBC Joint Venture
MSN NetworkMSN Network
Web TVWeb TV
ServersServers
Windows CE for palmtopsWindows CE for palmtops
Microsoft Reader- eBooks
X-Box - Video Games
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