Olivier Braet: Business model issues voor de audiovisuele sector

Business model issues for the audiovisual sector

olivier.braet@vub.ac.be

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

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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

Requests anyone?

Olivier BraetIBBT-SMIT (V.U.B.)

Pleinlaan 9, 1050 Brusselolivier.braet@vub.ac.be

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