Friday, 25 November 2011

EDGE research group focus on disruptive change in Media

This blog post is based on the article published in Swedish in "Meddelanden från Åbo Akademi" in November 2011 (Åbo Akademi University bulletin).
MfÅA 17/2011: Tryckt fortfarande relevant 

EDGE research group

EDGE is a research group established in 2011 at the School of Business and Economics at Åbo Akademi University. The focus of the group is issues surrounding business model innovation and revenue models in industries undergoing fundamental transformations. EDGE’s role is to support and service innovative business model development to ensure the creation of profitable new business that enables sustained growth, regardless of industry. The goal of EDGE is to serve both large and small firms, from startups to established corporations.

Business Model and Entrepreneurship

A business model is a concise representation of how an interrelated set of decision variables in the area of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in defined markets.
(Def. Morris et al, 2005 p. 727)

Entrepreneurship is the pursuit of opportunities beyond the resources you currently control. (Def. Stevensson and Jarillo, 1989)

Publishing and the Media Industry

The Media Industry including Publishing is facing a tremendous change as we go from a traditional business model based on printed products subscribed by consumers and part-financed by way advertising to a new digital era, where there is no single formula for success.

The Business Model for printed newspapers is nearly 200 years of age: On the morning of September 3rd 1833 a new kind of newspaper “the Sun” went on sale on the streets of New York. It was made cheap: at one penny, it was one-sixth of the price of most other papers and it appealed to people who had not bought newspapers before. In hindsight it was a turning point because it introduced a new business model to the industry. The Sun’s large circulation attracted advertisers, and the resulting revenue enabled the Publisher to keep the price of the newspaper down and its circulation up. This model worked well for a long time.

In Finland the print editions of newspapers still have a large readership, but the question is for how long. Will the change in consumer behavior take one generation (20 years) or will there be a faster transition towards an all-digital publishing model?

Today many American newspapers are in trouble, but in emerging markets (Africa, Asia) the news industry is roaring ahead. It should be pointed out that in Europe, and in Finland and Sweden in particular, the readership of newspapers and magazines has still fared well until the recent economic downturn. Advertising sales is heavily dependent on a large readership, still the fundamental business model in most Publishing firms, whether its newspapers or magazines.

In the 1990s the commercialization of the Internet resulted in its popularization and commoditization into virtually every aspect of modern human life. Regarding Publishing there is certainly a trend towards individuals becoming their own publishers, as people write blogs and authors of books become brands in their own right. Also the tremendous growth of Social Media Networks (e.g. Facebook, Google+, Twitter, YouTube) has led to more and more content created and shared by the individual. An increased part of individual’s time is spent on interaction in Social Media Networks. Social Media Networks encompass new groups, where individuals can create different groups (or Circles as in Google+) to categorize friends and contacts. Links to media and advertising are increasingly shared to friends and other contacts through social networks.

As well as making Google, Facebook and Twitter part of the news ecosystem, the Internet has also made possible entirely new kinds of services, some examples are listed below:

·        Contently  is an open marketplace for writers and publishers, empowering and connecting quality writers and brands.
·       Huffington Post – The Internet Newspaper and News Blogs Video Community, an App and a news site where the content is co-created by the Media Consumers. There is also a Huff Post Social News site, where people share their media content with a peer group.

·     Mashable – The Social Media Guide, originally a blog, nowadays a news site covering Social Media and Technology, focusing on sharing content through Social Media Networks.

Major business paradigm shift

A major business paradigm shift is underway, according to a recently published white paper (Ref: Business Wire, March, 2011). Will Media firms thrive in this new world of smart devices and technologies? What will be the implications of changing consumer behavior? Will content created by professional journalists and photographers still be “King” as it has been for the past two centuries?

A host of shiny new tablets from several manufacturers have been introduced since 2010, when Apple launched the iPad. When the Publisher of The New York Times and The Times in the U.K. – media mogul Rupert Murdoch – first saw the iPad he said: “I saw a glimpse of the future. You know what it reminds of – a newspaper.”

Tablets are selling well and the iPad may well be a disruptive game changer for the Publishing industry, as intended by Apple and its visionary founder Steve Jobs. New ecosystems are created alongside App Store by Apple, e.g. the Android Market launched by Google and supported by several manufacturers of mobile handsets. Most certainly Nokia will build its own ecosystem of Apps now that the company has opted for an operating system in co-operation with Microsoft. Also other players are pushing ahead with their new tablets, such as Amazon's Kindle Fire, which is right now overtaking other manufacturers of Android tablets. The Kindle Fire is a 7-inch tablet that links seamlessly with Amazon's impressive collection of digital music, video, magazine, and book services in one easy-to-use package. It boasts a great Web browser, and its curated Android app store includes most of the big must-have apps (such as Netflix, Pandora, and Hulu). The Fire has an affordable price tag, and the screen quality is exceptional for the price.

Both Apple and Google have rolled out subscription plans geared for media. Media content sales in digital format is a hot topic, especially for those working in the Media Industry worried about the downturn in the circulation of printed newspapers and magazines. Some Publishers have gone as far as opting for a “Digital First” strategy and are pressing ahead quite aggressively with this new strategy, e.g. the Publisher of The Guardian newspaper in the U.K. Guardian have recently introduced well conceived new Apps for the iPhone and the iPad, with focus on quality content and vivid images reinforcing the sense of quality.

Some other Publishers of newspapers have opted to set up “pay walls” to safeguard their valuable content, which was earlier put out for free on the Internet news sites of the respective Publisher. Among these are The New York Times and many other U.S. newspapers, as well as the The Times in the U.K. and the financial news services of Financial Times and The Wall Street Journal.

Magazine publishers have also been proactive in utilizing the latest technology for “rich media” editions of their popular magazine titles. Amongst the forerunners is Condé Nast, who came out with Wired magazine on the iPad already in June 2010, right after the tablet was made available to consumers. Condé Nast currently publishes Allure, Brides, Glamour, Self, GQ, Golf Digest, The New Yorker, Vanity Fair and Wired on the iPad, with Condé Nast Traveler, Bon Appétit, and Vogue expected to join the collection by the first part of 2012. The Business Model so far has included a free iPad version for the print subscribers of e.g. Wired magazine. Single copy sales have reportedly been boosted by sales through the App Store.

With the introduction of iOS 5 in October 2011 Apple also launched a new App called “Newsstand” intended for easy access to media content. Subscriptions are made easy and new issues are automatically updated. U.S. publishers are seeing some early success in this market: Publishers see Apple Newsstand sales surge. The critical question is will this trend continue and how will advertising sales follow, as advertising has been and is the cornerstone in the business model of publishers of newspapers and magazines worldwide.

It will interesting to see how many European publishers will opt for Newsstand, as many have been reluctant to Apple's policy of charging a 30% commission on the revenue generated from Apps. Time will tell.

Some new actors have entered the market with magazines made available for the tablet only (iPad and Android tablets) combined with a website and a TV program. An example of this is “Teknari” magazine published in 2010 and it has gained popularity among the tablet users in Finland, challenging established magazines in its field. The Teknari magazine for the tablet includes many “rich media” elements such as video clips and "live" test runs of cars, interactive advertising and infographs. Teknari claims to have the largest readership amongst the tablet magazines in Finland, however, you can download it for free (income is derived from advertising).

Some publishers, like the Financial Times have opted for their own concept of introducing apps. In August FT pulled out of App Store and introduced their own App based on HTML 5. Hence, subscribers pay directly to FT for the subscriptions, the App itself is for free. Now more than 15% of FT:s paid content is generated from tablet subscriptions. Digital content sales overall are booming for FT: The number of paying digital subscribers to the Financial Times has broken the quarter of a million mark; an increase of more than 30% year on year. Of these, 100,000 are corporate subscriptions coming from over 2,000 different licenses.

Following the original blog post The Economist disclosed on 28 November that it has already 100,000 digital-only subscriber and a further 300,000 print subscribers who read the weekly magazine in digital format each week. I am one of them. Monthly unique visitors to the Economist website has grown to 7 million, a 45% increase year on year. And even the print subscriptions have increased by 3%, all of this resulting in record profits. Impressive! This clearly shows that quality content is appreciated in all media channels. 

The pendulum may be swinging from technology back to content. Will quality journalism survive in a new world – I think so.

In short, it's a time of opportunity for media: the question is how to seize it?

1 comment:

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