Business model issues for the audiovisual sector
IBBT-SMIT, Pleinlaan 9, 1050 Brussel
A) OBSERVATIONS
B) EXPLANATIONS
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
SOME BASIC OBSERVATIONS
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Evolution physical vs. digital sales
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Rough projection physical vs. digital
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Piracy (Ofcom 2008)
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
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Illegal downloads
P2P: Bittorrent has replaced Napster, Limewire, Kazaa, etc …
Over http: downloadfora, blogs, google
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Piracy also follows hit behaviour
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Even free content is ‘pirated’
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Content industrie1. SMPTE Broadcast flag: For digital TV
2. CSS (Content Scramble System): DVD-CCA
3. AACS(LA) (Advanced Access Content System(Licensing Administrator)): For HD-DVD / Blue-Ray
4. IP Targeting (Case: hotspotshield)
Connectiviteitsindustrie1. Deep Packet Inspection
2. Traffic shaping (packet prioritization)
3. OMA DRM: Mobile world
4. OSF: Broadcasting world (DVB consortium)
5. 18 Crypt: Broadcasting world (DVB consortium)
Software industrie1. Windows Media DRM (BBC iPlayer);
Apple Fairplay; Helix DRM; Adobe Flash DRM
2. Protected Video Path (PVP)
3. Contentguard (XrML)
4. DReaM
Consumenten electronica
1. HDCP for HDMI
2. DTCP
3. Proprietary PVR techniques
Proliferation of Digital Rights Management
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Content industrie1. SMPTE Broadcast flag: For digital TV
2. CSS (Content Scramble System): DVD-CCA
3. AACS(LA) (Advanced Access Content System(Licensing Administrator)): For HD-DVD / Blue-Ray
4. IP Targeting (Case: hotspotshield)
Connectiviteitsindustrie1. Deep Packet Inspection
2. Traffic shaping (packet prioritization)
3. OMA DRM: Mobile world
4. OSF: Broadcasting world (DVB consortium)
5. 18 Crypt: Broadcasting world (DVB consortium)
Software industrie1. Windows Media DRM (BBC iPlayer);
Apple Fairplay; Helix DRM; Adobe Flash DRM
2. Protected Video Path (PVP)
3. Contentguard (XrML)
4. DReaM
Consumenten electronica
1. HDCP for HDMI
2. DTCP
3. Proprietary PVR techniques
Proliferation of Digital Rights Management
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
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Free streaming dominates
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Legal and economical arguments thicken
“Intellectual and artistic property rights are every bit as important as the rights of ownership to physical property. It is no less wrong to steal a film recording than it is to steal a teenager’s laptop.”
But stealing a laptop is zero-sum; stealing a digital song or movie is not.
Argument from efficiency: “Without enforceable artistic property rights, there is no incentive to produce.”
Empirically unproven
Argument from justice: “Taking something for nothing, without permission, and with no compensation for the person who created and owns it, is wrong.”
But creating does not imply ownership, nor is there a right to maximize income.
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
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B) EXPLANATIONS
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Explosion in supply & demand
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
DEMAND
Quantity
Pri
ce
SUPPLY
Democratization of digital production expands media supply…
…equilibrium price of media drops to below zero
€0
Source: Umair Haque
From the traditional value chain…
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
To value networks: modular value network
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
20
Google value network
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
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Telecom value network
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
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Strategic reasons for DRM
Each industrial actor attempts to control the value stream of its ecosystem
Content aggregators want to maintain traditional revenue model
ISPs are worried about broadband consumption Software providers strive for platform dominance Consumer Electronics manufacturers aim for hardware
profit margin The higher in the value chain, the greater the fear for
canibalisation. Biggest fear: Exchanging analog Euros for online cents.
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Creators and aggregators most afraid for digitalization
Bron: Telco2.net 2007 managersenquête(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
CONCLUSION:
DRM Business Motives
& Revenue models
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
1st pro memorie: Revenue mechanisms for online digitale content
Three basic mechanisms: Direct revenue model
“Pay-per-item” (iTunes 68%, AmazonMP3 5%) Subscriptions (license model: Rhapsody 2,5%)
Advertising based revenue model Free-to-air Product placement; merchandising
Rights clearance http://fairplaycalculator.nl/
Public broadcaster subsidies … and combinations of the above.
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
2nd pro memorie: Media consumer generations according to IBM
‘Massive Passives’ Older demographic Prime Time TV; “lean back”
‘Gadgetiers’ Younger professionals Focus on ease of use (iTunes, PVR)
‘Kool Kids’ Children, teenagers, students Multitaskers; Circumvent protections (download, rip and
share)
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
2nd pro memorie: Better approach :: Technology and age agnostic variables
Product category Do not treat ‘music’ or ‘books’ etc. as single content
forms Sort according to repeat use value
User groups Do not treat age cohorts as groups with same
technological competences Sort according to technology knowledgeability &
sensitivity
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Introducing supply & demand
Collectability & Sensitivity
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Zones of risk and opportunity
DRM
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Traditional revenue models
INDIRECT REVENUE MODEL (Advertising
based)
DIRECT REVENUE MODEL(Pay per use)
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
Adapting the digital content portfolio
Move?
Product bundles
DIRECT REVENUE MODEL
INDIRECT REVENUE MODEL
(c) 2009 - Olivier Braet, IBBT-SMIT, Pleinlaan 9, 1050 Brussel
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