Unbundled Media Content Poses A Challenge (Dinosaur Media Extinction Alert)

Forbes.com ^ | April 3, 2006 | Staff

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Media content is increasingly becoming "unbundled" from its physical distribution medium, such as CDs. This "disruptive" technology has led to different pricing models and lowered barriers to entry for content authors, creating a challenging business environment for publishers and media companies.

Historically, information and entertainment content were captive to their physical distribution medium or distribution time. Given the technology of the past, consumers were forced to purchase and access content using the physical medium or schedule dictated by the content distributor. This resulted in "appointment-based" consumption.

Today, this old model of consumption is vanishing, due to changes in three significant areas:

1. Unit pricing: Content and services have increasingly shifted to a "unit pricing" system through:

-- a "free" advertising-based content delivery model;

-- a value-added or "premium" subscription business model;

-- pricing on a per unit basis; and

-- pricing for access to specific content on a monthly or yearly basis.

2. On-demand access: Consumers can access or view content on-demand, rather than according to a schedule dictated by the distributor. For example:

-- automatic recording of television broadcasts through TiVo;

-- Comcast's "on-demand" cable service;

-- 24-hour access to newspaper and magazine content online;

-- digital recording of satellite radio; and

-- podcasting.

3. Digital delivery: All types of content can be delivered digitally over the Internet, or via cable systems or satellite radio, for viewing or local storage on a user's server or client device. Infrastructure for digital content delivery is superseding traditional models for delivery, viewing, recording and playback of content using physical media and temporally sequenced broadcast services.

Businesses, particularly traditional media companies and publishers, face several key challenges in the face of this technological change:

1. New revenue models: The need to transition from a product license-based to a services- or subscription-based revenue model.

2. New delivery methods: Companies are facing the transition from passive content-delivery models, in which the audience is captive to the viewing and "one size fits all" advertising, to active and highly customized "affinity-based" advertising.

3. Commoditization of content: Content increasingly is becoming a commodity, as it is either provided for free or priced at a very low cost, with revenue derived from:

-- value added services;

-- affinity-based advertising; or

-- development of brand equity and the sale of related products and services.

Successful Web sites often provide free content in an effort to provide value, which in turn supports increased user and customer adoption.

4. Web search evolution: Web searching is evolving as a replacement for manual Web browsing as the primary vehicle for finding information and resources.

5. Content 'filters:' Human "filters," or subject matter experts, are becoming increasingly important. They help shorten the "search cycle," impose quality control on the vast amount of information and resources available online, and help determine "winners" in various product categories.

6. Advice 'ecosystems:' Web services such as eBay provide users with information on pricing, demand, availability and the features of products for sale. This is provided through self-publishing by members in their product listings and in related Web sites. While there is no outside human editor or reviewer for eBay content and listings, the eBay 'ecosystem' acts as a de facto filter and subject matter expert for its users.

The unbundling of content and services across all media types and forms of technology has disrupted traditional content supply chains by increasing the power of content authors and producers, and content consumers, at the expense of the intermediaries who own and manage the traditional content distribution and supply chain. Since distributors of content have less power, they must compensate by offering more content for free--or at a low, unbundled cost. This has forced content distributors to seek additional sources of revenue to make up for their lost traditional distribution fees.

The proliferation of unbundled content business models has benefited consumers, by providing access to products and services at a significantly reduced cost. The consumption of content in smaller, more tailored units of delivery and consumption, will benefit companies who adopt affinity-based advertising and customized marketing through "advice ecosystems."

To read an extended version of this article, log on to Oxford Analytica's Web site.

Oxford Analytica is an independent strategic-consulting firm drawing on a network of more than 1,000 scholar experts at Oxford and other leading universities and research institutions around the world. For more information, please visit www.oxan.com. To find out how to subscribe to the firm's Daily Brief Service, click here.

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Another interesting analysis