Distribution Strategies

The Business of Content – The Evolution of the Newspaper & Media Industry

Let’s rewind back 10 years. Commercial Distribution of news was relatively straightforward. News was collected, collated and printed overnight for viewing by the end user by either being picked up or delivered. It was a push model that relied on news corporations pushing the content out to users and picking up a subscription fee plus gaining revenues from advertising.  Let’s re-look at what has happened. Enter the world of online media, smartphones and tablets. Consumers are now using a pull strategy by extracting the latest news (available online) via their laptops or smartphones for free. What happened to print? 

It is no secret that online distribution of the newspaper industry has been a slow however disruptive force for the newspaper industry, a model that relied mostly on print advertisements.  With access to various sources of news online for free, there is a clear paradigm shift in the business model for newspapers.  Rupert Murdoch, Chairman of News Corporation is a man on a mission with this adverse shift in the news and media space. In the face of shrinking circulation figures and resultant drop in advertising revenues for print newspapers, Murdoch has taken on himself to change the new media model. He has already expressed his intention by raising a paywall around NewsCorp’s prized publications Times of London as well as the Wall Street Journal.  Unlike print, where the consumer actually pays for the service beforehand, it is not probable to control what people do the internet.  The Internet is a “giant copy machine” and the future lies in the hands of companies who can curate the information differently rather than just delivering a message. It’s curious how in the world of the Web, where information and content is considered king (and has lead to the dominance of megaliths such as Google, Microsoft , Amazon etc) that news is considered a de-valued commodity.

Murdoch views media as an industry which can work only when consumers are ready to pay for content and he has made his intentions clear by announcing only paid content access to NewsCorp. It makes sense, simply because what iTunes and Netflix have done to the music and video industry is what Murdoch attempts to do the news industry. Digital Distribution is the way forward and although Murdoch ‘s approach to business is not of a modern marketer, he does understand how to withstand medium term pain for long term benefit. By establishing his first move towards paid content (he closed a free post for iPad users recently), he has almost single handedly, not just made the paid model  the main topic of digital strategy in other traditional publishing companies but imbued it with nearly the forces of a fait accompli.

Attached is a BCG study that consumers are willing to pay for online news.

Bibliography

1.)    http://www.thefuturesagency.com/post/6618929800/the-future-of-news-digital-content-mobile-social

2.)    http://www.thewrap.com/media/column-post/freshman-education-industry-murdoch-earns-pluses-and-minuses-28449

3.)    http://www.vanityfair.com/business/features/2009/11/michael-wolff-200911?currentPage=2

4.)    http://www.adweek.com/news/press/news-corps-murdoch-sees-digital-future-newspaper-industry-112427

Distribution Strategies

Apple and the iCloud

One of the key areas of diversification for every major technology corporation today lies in exploration and extraction of value from cloud computing.  This new phenomenon has different meanings for users and businesses, both of whom are exploring opportunities in being able to scale their operations by outsourcing data and IT requirements.

The Apple iCloud is the beginning of a new stream of Cloud Computing solution that will enable users to access software as a service and break from the realm of proprietary technological solutions that seldom seem to satisfy our true needs. The cloud will create an environment where you potentially never have the chance to lose access to your data and all Apple products from Macbook to iPhone as well as the iPad will have automatic synchronization between the cloud and their devices.  For example you can buy a song from iTunes on your iPad and arrive at home to see it already synced to your Macbook.

The iCloud offers Apple the opportunity to keep their status as the most popular destination for user content management by offering storage for music, documents and photos taken from any Apple device. This is a direct threat to services offered by Google and Amazon especially in the music space where Apple has the attention of the top 4 music labels because of their dominant position with iTunes. Their strategy towards integrating their services with the cloud will provide users with wireless uploading and convenience when using Apple devices. Apple also has licensing rights with the labels so there will never be an issue of infringement or piracy making it more secure for users to store their music on the cloud.

Whilst Google and Amazon have definitely obtained a first mover advantage, Apple’s penchant for a friendly user interface and their sheer scale and critical mass with their product portfolio (Macbook, iPhone, iPad) could edge out competition shortly. The iCloud will generate competitive advantage for small businesses that can use it for storage along with also being able to develop private clouds where they could have a network of documents, data and other information to propagate worldwide access for management. Management of enterprise servers and IT teams would be limited providing resources to small businesses as well as users to concentrate on core competencies while paying a fee to Apple for storage and management of such services. 

It isn’t only music that Apple’s iCloud is looking to dominate. Consider instant messaging, an area where Blackberry’s Messenger became synonymous with instant chat. Apple’s introduction of iMessage will allow users to send messages to any device features iOS (Apple’s OS) and allow group chats using the iCloud. In a general estimate the number of iPhones, iPad’s and Macbook’s unquestionably exceed RIM’s smartphone users, and thereby we see another platform for instant messaging being developed. The document management system by iCloud will allow users to store photos, apps and will be a direct competitor to the Google Chromebook challenging the dominance of Google in the cloud space. Given Apple’s reputation for security and their persistent desire to provide a great consumer experience; the iCloud will be a disruptive force that will distort the industry and could perhaps be a leading indicator that will make cloud based computing more acceptable.

BIBLIOGRAPHY

1.)    www.apple.com/icloud/

2.)    http://www.niemanlab.org/2011/06/newsstand-reader-icloud-3-takeaways-for-the-news-business-from-todays-apple-announcement/

3.)    http://www.foxnews.com/scitech/2011/06/06/apples-jobs-takes-stage-unveils-icloud-music-service/

4.)    http://techcrunch.com/2011/05/31/apple-icloud/

5.)    http://www.crunchbase.com/product/icloud-3

Social Web

Airlines have traditionally been an industry associated with lifestyle, travel and  leisure along with loss making connotations. Their business is driven by providing customer value via their brand equity along with their ability to provide competitive offerings in terms of tariffs and services. It is a rather well known fact that even though these  carriers connect us from A to B, their business model involves a whole lot more than just simply transporting passengers. The architecture of a scheduled air travel involves bookings, airport access, ticketing and customer services, government regulatory approvals, inventory of aircraft and supplies, contingency planning as well as staff management. This colossal network of activities surrounds their business model, however customer management and satisfaction surpasses all others in an attempt to build and maintain brand value. We seldom find ourselves in a situation that we comment or blog about our wonderful experiences on airlines, however the reverse is most certainly true. That is the general nature of the consumer especially when dealing with a brand that has a direct effect on our perception of travel and lifestyle.
If I was Air Europa, I would have certainly used technology and the social media platform as an enabling factor to capture the attention of the management in order to better understand the customer point of view. Social Media interaction as a critical viewpoint is gaining critical acclaim in revolutionizing the service level of companies that have a direct consumer approach. When an airline asks for a company/ person's business, it is conformed to the same Service Level Agreements that other corporations measure when awarding contracts. It is important we adopt a self voluntary approach towards customer satisfaction in order to maximize the value of our brand, and even though we understand that not every customer can be truly satisfied, a personalized approach towards customer management as well as a focus on differentiation are they key drivers to maintain standards that the airline promises to deliver. Adoption of interactive media platforms and constant third party checks on customer service are key to optimizing the value that customers will get when travelling with Air Europa. Air Europa plans to outsource activities such as inventory management, supplies, government regulatory approvals as well as other engineering services in order to increase focus on the customer and offer better services at competitive prices. Our business model is to serve you and provide you with the utmost value, and we plan to reallocate our resources more efficiently in order to offer the best customer experience in the skies.

Distribution Strategies - Zynga

Zynga – the new Silicon Valley giant

Social Gaming is the next evolution of gaming, and is a signal towards digital convergence between the traditional videogame industry and the Web 2.0. There is a growing need for greater user interactivity in the traditional gaming industry, and the emergence of online gaming marks the stepping stone towards open source platform of harvesting user attention as compared to the general proprietary technology operators (Ninetendo, PS3, XBOX) that clogged users to its platform. Zynga business model relies heavily on social networking as a platform to encourage gaming between users.  The critical success factor of the company is its ability to leverage itself on the social networking effect and capitalize on it by providing entertaining games that users love and build communities and networks around.  Zynga’s success can be contributed towards the right vision and timing (social gaming), the right platform for launch (Facebook) and last but not least, the content – which proves itself undoubtedly valuable in the clutter of the web. Mark Pincus (CEO Zynga) understood that since social networks were becoming platforms of social interactivity and engagement, it was inevitable that gaming should be precluded from such a network.  Gaming was typically enjoyed more when played against/with friends and offered different parallels of connectivity to all types of age groups. Initially Pincus’ vision was to have his own network, however given the sheer scale of Facebook and its growing ubiquity, he decided to be a third party developer and ride on their network.

Wait, a third party application developer producing gaming content (at substantially lower costs because of the inferior graphical requirements) and distributing it via Facebook has overtaken Electronic Arts in market valuation?  Well, Netflix has effectively bankrupted Blockbuster. Digital Distribution is the way forward.  Companies who have been able to develop or license the right content and use the best distribution channels have been winners.  Rapid growth on the web is a tactical task, especially for companies such as Zynga which have to constantly develop newer products and features to keep users engaged on to their games.  Their strategy to keep existing user engagement involved through constant upgrades in game functionalities as well as to rapidly develop games (as they have been) to attract new user segments.  Analysts describe Zynga’s strategy as “Fast, Light and Right stressing on how they develop and launch games within weeks instead of the regular 2 years that most traditional video game companies require”.

Zynga’s business model relies heavily on its transport mechanism, i.e. Facebook. Facebook’s ubiquity and a 700 million user base provider Zynga with an audience beyond what any network can offer, all at a fraction of the cost. Business models such as Zynga are giving EA a run for their money. Within a span of 4 years, Zynga has displaced all other gaming companies and is being valued anywhere between USD 8-14 billon. Zynga cuts through a lot of entry barriers for potential users in making their content accessible. Firstly unlike Nintendo, Sony or PlayStation which require hardware and software, Zynga simply requires a computer with a Facebook account. However what really makes them successful is their content that relies on “connecting users through games”.  Although their current stance on being completely reliant on Facebook is viewed cautiously (especially after Facebook decided to develop Facebook credits and extract 30% of Zynga’s revenues through their main revenue model i.e. selling of virtual items), Pincus is confident that Facebook does provide “definite value for users and developers in having the trusted Facebook brand associated with buying virtual goods".

With their IPO weeks from now and with competitors such as EA releasing their own social games (Sims Social) on Facebook, it will be interesting to see the evolution of gaming companies evolve especially in relation to their content to suit the new dimension of social gaming as well as leverage digitally on established networks to outpace the dominance of Zynga.

BIBLIOGRAPGY

1.)    Zynga – Harvard Business School Case Study – 9-710-464

2.)    http://www.gamebandits.com/news/pc/the-sims-social-social-network-gaming-isnt-all-about-farmville-anymore-07036/

3.)    www.fastcompany.com/most-innovative-companies/.../zynga.php

4.)    http://news.softpedia.com/news/Zynga-Now-Worth-10-Billion-Almost-the-Biggest-Video-Game-Company-185160.shtml

5.)    http://techcrunch.com/2010/05/07/zynga-gunning-up-and-lawyering-up-for-war-against-facebook-with-zynga-live/

Distribution Strategies

Blockbuster goes bust – the emergence of Netflix

Blockbuster was widely known to be America’s weekend fascination, a place where families go to “rent” videos for daily, weekly or monthly use.  Blockbuster’s dominance as a video rental conglomerate was guided by their ubiquity in respect to providing services to customers via 5000 stores and 60,000 employees.  Along came Netflix. Using technology as an enabling factor, Netflix did what Dell did to PC’s in the early 90’s. They bypassed the brick and mortar stores and went directly to serve their customers over the internet. Netflix now has over 20 million subscribers generating estimated revenue s of $1.7 billion (2009). Their rapid transition to be the world’s largest Internet subscription service for enjoying movies and TV shows emphasizes the changing dynamics in the video subscription industry especially in relation to the balance of power and distribution strategies.

Netflix has been the only true innovator in the Direct To Home video space, consistently establishing a first mover advantage with abolition of late service charges, monthly plans and incredible user interactivity through their database of videos. The content provider is now America’s largest bandwidth user surpassing Comcast in number of subscribers. They started out as a DVD rentals-by-mail service and business has been booming ever since they introduced a streaming subscription service as well. Blockbuster isn’t the only one feeling threatened by Netflix. Paid television services are also losing subscribers to the cheaper streaming site.HBO has been holding on to provide Netflix with content because of the implications it would have for HBO’s subscriber base.

Netflix has shaken up the entire eco-system by disrupting the business models of distribution, a territory that was initially dominated by the likes of Blockbuster in monopoly practises with studios.  Studios consider Netflix growing popularity a direct threat to their business model especially with its ability to distribute content cheaply and to a larger audience than their own established distribution outfits.  Studio’s believe that Netflix’s ability to offer a multitude selection of movies “takes scarcity out of the equation”  (on demand) leading to lack of encouragement for buying new releases thereby decreasing  economic profits. There is a bitter battle that continues to surround Netflix’s emerging dominance (like how retailers and distributors disliked Dell initially) as a content distributor. However Netflix is the now one of the sources that is rescuing the movie industry. Industry insiders who have observed Netflix’s business model indicate that the “long tail strategy” of Netflix has benefitted back catalog titles made by studios (through generation of an audience) by being broadcasted on Netflix and also through Netflix paying higher content licensing fees to studios for shows that run off the air (Glee). As license fees skyrocket and digital distribution continues to evolve, content owners are making syndication deals without throwing digital distribution rights in order to sell them to Netflix who usually offers most compared to other digital distributors.

                                                                                                                                           

The ability to offer a magnanimous selection of titles via online distribution, affordable pricing model along with shift in balance of power that provides Netflix with more content is propelling them to become the next media conglomerate along the likes of Viacom, Time Warner and Fox.

 Valuable Resources-

http://www.homemediamagazine.com/netflix/netflix-helping-studios-up-content-license-fees-24156

http://techcrunch.com/2010/11/29/because-theyre-idiots/

http://www.dailytech.com/Hollywood+Executives+Fear+Netflixs+Impact+on+Film+Industry/article21075.htm

Distribution Strategies

The Indian Movie Industry - Uniting catalyst with the extensive Indian Diaspora

The Indian movie industry (including Bollywood) is said to produce twice the number of films produced by Hollywood or the American film industry. It sells nearly three times the number of tickets with majority contribution from India and now the growing Indian expat community settled abroad (which is very particular about its culture and want to cling on to it).

 But there is still some way to go before the largest movie industry by volume mints money from markets outside India. While American filmmakers are staring at a global box office with more than 70 per cent ticket sales coming from markets outside the US, Indian movies still sell the most in their home country. Let’s not forget, most Bollywood movies are made on a shoe-string budget in comparison to most Hollywood movies and do not have the luxury to release infinite number of prints to address many territories within the Indian sub-continent, let alone geographical markets such as US, UK and Australia which are buoyant with Indian activity. However, rapid globalization as well as emergence of large distribution companies such as Eros, Big (Reliance – now also a 50% owner in Dreamworks) and UTV are changing the landscape and trying to address the international markets via their established networks with sub- distributors who are located within the relevant market.  The scattered fragmentation of players within Bollywood is now slowly converging with co-operation between various production houses, distributors and exhibitors leading to a wider portfolio of films being released, both domestically and globally. (Companies such as Fox Searchlight have now collaborated with production houses on international distribution rights – using their presence to penetrate untapped markets such as Morocco, Syria, Jordan, Portugal etc)

While film festivals are fertile grounds for distribution tie-ups, the real value derivation for studios with the small budget movies (75% of the movies) is to distribute digitally. With 15-20% revenue being generated for mid budget movies from international markets and up to 40% for “A starrers”, it is important for the Indian Movie Industry to leverage on its enormous consumer base via the digital platform. Some early adopters have already entered this space to target expats as well as non-Indians. The increase in fan base will surely lead to incremental revenues and digital platforms such as Netflix have potentially increased the customer lifetime value for studios which produced “classics” and by adopting the long tail strategy to increase economic value in the chain.

With a 1000 movies being produced, distributed and exhibited every year catering to a population of over 1 billion domestically and approximately 35 million expats; it is no surprise that Indian superstar Shah Rukh Khan is more popular than Tom Cruise!  With the rapid and dynamic changes in better distribution, marketing and astute positioning, along with the cross-over genre of Indian cinema (many big budget Indian movies are in Hinglish); it is simply a matter of time before many more Slumdog Millionaire’s emerge to conquer the Kodak Theater we well as worldwide box office receipts. 

Google

Google. If you Google “Google” you get 9,576,000,000 results in 0.07 seconds.  Wait, I just said  Google “Google”? Does that make any sense? Well, yes and no.

Google is now unanimous with the word search and might as well be published as a synonym on print and online dictionaries because we seldom use the word “search”.  The ubiquity of Google is a clear example of its relevance in the digital world. Google defines the concept of a “technology company” concentrating on all spheres of activity within the value chain (picture below) spreading itself within the digital world from software applications such as Gmail, Chrome & GoogleDocs to hardware products such as the Google Nexus phone. Their disruptive model has challenged not only the software industry, but the world.

Google is now at the forefront of the technological curve and has greatly enhanced the internet user experience by offering services that truly provide value to its customers. However, Google’s rapid growth over the past decade in different spheres of the digital world has led to sour relationships between them and various other megaliths within the ecosystem such as Apple, Facebook, Microsoft and most recently payment gateway corporations such as Paypal. The challenges that Google will confront with vary from how different players in the network compete fiercely to seize the attention, information and loyalty of users. 

Google’s challenge to dethrone Apple from OS market is underway, however with fragmented versions of the Android and compatibility issues with device manufacturers , iOS is leading the way and continues to dominate Android with its synchronized network amongst Apple devices as well as its placement amongst the consumers as outperforming the technological barriers with innovative products.  Google CEO Eric Shmidt resigned from Apple board depicts a clear example of conflict of interest after the introduction of their Nexus One.

Although Google is the dominant search engine on the planet, can they really ignore the Chinese market? Their decision to withdraw from China may not be their best decision considering the 400 million Chinese internet users (mostly mobile) and with Apple, Microsoft/Nokia continuing their penetration into the Chinese telecommunications market,  Google’s Android will have a tough time trying to convince China’s leaders to work with them considering their public departure from the world’s second largest economy.

Facebook is to social what Google is to search. But wait, there seems to be a conflict of interest here as well. Facebook is constantly developing mechanisms to keep their users online by offering search alternates via social connections (leveraging their 600 million user base) and threatening Google’s main revenue model. Facebook overtaking Google as the most used link in 2010 raised alarms at Mountain View (Google headquarters).

Google vs. the world – Google is now constantly at war, not only with other giants in the software industry but also with governments, who are watching them like hawks internationally. The FTC’s scrutiny of Google Buzz and their acquisition of Admob along with various other issues such as governments opposing Google Maps in “sensitive areas” (India) highlights how Google is pushing the boundaries to an open organized information database, much to the dismay of government’s who would like to keep access to “sensitive information” private. Can Google really defend itself by shelling billions on lawsuits? Perhaps, it’s a cost a doing business?

 It’s Economics vs. Politics and we all know that both have an equally dominant role to play when it comes to decision making.  Google will need to woo not only market competition, but non-market competition if it wants to remain vanguard in the technological value chain.