The struggle to control prices of digital content sold online continues, with producers and distributors battling over prices for downloads of books and music.
In the latest skirmish, Amazon removed Macmillan books from its website after the company protested that online retail was using monopoly power to force publishers to accept prices no higher than $9.99. Macmillan and other publishers have now signed distribution deals with Apple that allows them to price downloads at $12.99 and $14.99.
Producers, of course, want higher prices because they produce higher revenue and better profits.
The struggle to control prices is not unique to the online environment. In the offline world, producers of books, magazines, CDs, and DVDs have long struggled to gain limited shelf space because there is a large oversupply of products and retailers’ have selection preferences for popular, rapidly selling products.
Large national and retailers have also used their bargaining power to push wholesale and manufacturer suggested retail prices downwards. Wal-Mart, now the number one music retailer in the World, uses its purchasing and sales power to sell large quantities of music at the lowest price possible—the basic price/quantity model for all the products it carries.
What is new in the offline world is that the conflict does not merely involve struggles over the price and quantity strategies of retailers, but that the retailers are using the media content as a joint product with their proprietary digital hardware.
Amazon wants content prices low not merely to sell more books, but because it helps it sell Kindle, its e-book reader. To date, it has been able to do so because it was the leading seller of both products—something it learned from Apple’s strategy with i-Tunes and i-Pod.
Competition in distributing content, even just a little competition, helps shift some of the power away from the retailer and back to the producer. Apple was forced to back away from its enforced price of 89 cents for a download when recording companies made deals with other download providers and threatened to end the rights for Apple to see their popular music. Apple is now playing spoiler to Amazon in the book downloads and Amazon has agreed to carry Macmillan books again.
Newspaper publishers are now seriously testing and considering a variety of e-readers as ways to reduce production and distribution costs. As part of their strategies, however, they would do well to learn from the experience of the music and book business. They need to remember that a basic rule of business is that if you don’t control price, you don’t control your business.
Showing posts with label audio recordings. Show all posts
Showing posts with label audio recordings. Show all posts
Tuesday, February 2, 2010
Wednesday, September 2, 2009
RADIO STATIONS FACE SIGNIFICANT STRATEGIC CHALLENGES
Fundamental market changes are pushing radio stations towards an uncertain future and managers and owners need to begin developing strategic responses to developments in their industry.
The challenges are being caused by declining demand for radio offerings due to lifestyle changes, the wide availability of substitutable audio platforms, and the primary content currently being offered. Audience behavior toward radio is changing and many U.S. stations now only make money for 4 to 6 hours each day. Overall, audiences are spending less time with radio and exhibiting less station loyalty than they did in the past, and young audiences are particularly difficult to attract and serve.
A major impetus of change is that audiences for music worldwide are progressively replacing radio listening with personalized playlists they have created on their computers, MP3 players, and mobile phones and by CDs on which they burned those favorites. They select music that suits their individual tastes and many have wider repositories of music in their own libraries than are offered on broadcaster playlists. Satellite and Internet radio are compounding the problem by offering hundreds of choices of highly focused music formats. These developments are increasingly making radio a less relevant platform for music entertainment delivery than it has been.
Concurrently, a wide variety of non-music programming is being offered by Satellite and Internet stations and audiences are increasingly using these services, as well as downloading podcasts on a variety of topics of individual interest from both broadcast and non-radio sources.
These problems are compounded in the U.S. because the rise of radio groups after deregulation in the mid 1990s led to national radio programmers making selections, reducing the range of genres of music and other content on radio stations. Overall, programming has become less local and less relevant as content decisions have been made elsewhere.
Advertisers sense the problem with audiences and the share of advertising expenditures going to radio is declining. Worldwide radio advertising expenditures are about 7 percent of total expenditures, down from a height of 9 percent in 1999. In the U.S. they peaked in 2002 at nearly 13 percent and are now down to about 10 percent. This downward trend is seen among most of the traditional leaders in radio advertising expenditures –Mexico, Japan, France, UK, Spain—and only in rapidly developing countries such as Brazil and China is the share spent on radio on a clear upward trajectory.
Another indicator of the problem is seen in the considerable weakening of sales prices for radio stations in recent years.
Radio station owners and managers need to start spending a good deal of time thinking about what is happening to their industry and how they will need to change their place in the media use mix. They need to seriously consider what business they are in and what unique value they produce so they can reposition their functions for audiences and advertisers.
The structure and offerings of the radio industry have been adjusted several times during its 9-decade history, but the last time the industry needed to recreate itself so dramatically occurred with the arrival of television. The arrival of television resulted in radio shifting from a general entertainment and information medium to a music entertainment platform in many nations. In the U.S., broadcasters on A.M. radio later shifted toward a talk and sports platform after F.M. developed and music migrated to that spectrum, creating new opportunities on both bands.
Repositioning radio again will not be a simple task, but it is one the industry needs to begin undertaking now. If radio managers do not start thinking ahead about the negative trends appearing in their industry, they will soon experience the alarm and fear that is pervasive in the newspaper industry. It is better for companies and industries to act before crises develop fully because they can respond to and help direct the course of change rather than merely experience its negative effects. Whether decisive action will emerge in the radio industry before we reach that point remains to be seen.
The challenges are being caused by declining demand for radio offerings due to lifestyle changes, the wide availability of substitutable audio platforms, and the primary content currently being offered. Audience behavior toward radio is changing and many U.S. stations now only make money for 4 to 6 hours each day. Overall, audiences are spending less time with radio and exhibiting less station loyalty than they did in the past, and young audiences are particularly difficult to attract and serve.
A major impetus of change is that audiences for music worldwide are progressively replacing radio listening with personalized playlists they have created on their computers, MP3 players, and mobile phones and by CDs on which they burned those favorites. They select music that suits their individual tastes and many have wider repositories of music in their own libraries than are offered on broadcaster playlists. Satellite and Internet radio are compounding the problem by offering hundreds of choices of highly focused music formats. These developments are increasingly making radio a less relevant platform for music entertainment delivery than it has been.
Concurrently, a wide variety of non-music programming is being offered by Satellite and Internet stations and audiences are increasingly using these services, as well as downloading podcasts on a variety of topics of individual interest from both broadcast and non-radio sources.
These problems are compounded in the U.S. because the rise of radio groups after deregulation in the mid 1990s led to national radio programmers making selections, reducing the range of genres of music and other content on radio stations. Overall, programming has become less local and less relevant as content decisions have been made elsewhere.
Advertisers sense the problem with audiences and the share of advertising expenditures going to radio is declining. Worldwide radio advertising expenditures are about 7 percent of total expenditures, down from a height of 9 percent in 1999. In the U.S. they peaked in 2002 at nearly 13 percent and are now down to about 10 percent. This downward trend is seen among most of the traditional leaders in radio advertising expenditures –Mexico, Japan, France, UK, Spain—and only in rapidly developing countries such as Brazil and China is the share spent on radio on a clear upward trajectory.
Another indicator of the problem is seen in the considerable weakening of sales prices for radio stations in recent years.
Radio station owners and managers need to start spending a good deal of time thinking about what is happening to their industry and how they will need to change their place in the media use mix. They need to seriously consider what business they are in and what unique value they produce so they can reposition their functions for audiences and advertisers.
The structure and offerings of the radio industry have been adjusted several times during its 9-decade history, but the last time the industry needed to recreate itself so dramatically occurred with the arrival of television. The arrival of television resulted in radio shifting from a general entertainment and information medium to a music entertainment platform in many nations. In the U.S., broadcasters on A.M. radio later shifted toward a talk and sports platform after F.M. developed and music migrated to that spectrum, creating new opportunities on both bands.
Repositioning radio again will not be a simple task, but it is one the industry needs to begin undertaking now. If radio managers do not start thinking ahead about the negative trends appearing in their industry, they will soon experience the alarm and fear that is pervasive in the newspaper industry. It is better for companies and industries to act before crises develop fully because they can respond to and help direct the course of change rather than merely experience its negative effects. Whether decisive action will emerge in the radio industry before we reach that point remains to be seen.
Tuesday, January 22, 2008
RECORD COMPANIES SURRENDER TO CONSUMERS ON DOWNLOAD DRM
A quiet victory of music consumers has occurred now that Sony BMG Music Entertainment has become the final major recording company to drop digital rights management protection on its digital downloads.
Major recording companies starting placing protection software on downloadable files in 2005 and 2006 to protect the music files from being passed on to other listeners. The digital rights management software, however, often blocked consumers who had purchased downloads from moving files to portable music players or even to new computers and from making compilations discs of their favorite music.
The software incensed many consumers because it forced consumers to purchase multiple copies or forced them to illicitly bypass the software if they wished to use music they had purchased on more than on platform. Many felt it was unfair that one did not “own” the download in the same way as a CD, a book, or a DVD and voiced their frustration in blogs, music forums, and to the record companies.
Opposition grew so strong among consumers that consumer rights and competition authorities in both the U.S. and Europe soon began to investigate and question the practice.
In 2007 EMI and Universal Music Group dropped the DRM measures and Warner Music Group and Sony BMG Music Entertainment have now followed suit in 2008.
Although the recording companies would still have preferred that consumers only be able to "rent" music and never own it--giving them the possibility to limit the number of times a download could be played before an additonal payment would be required, they ultimately gave in to consumer oppostition and are recognizing that consumers view music purchased in whatever form as substitutable.
Major recording companies starting placing protection software on downloadable files in 2005 and 2006 to protect the music files from being passed on to other listeners. The digital rights management software, however, often blocked consumers who had purchased downloads from moving files to portable music players or even to new computers and from making compilations discs of their favorite music.
The software incensed many consumers because it forced consumers to purchase multiple copies or forced them to illicitly bypass the software if they wished to use music they had purchased on more than on platform. Many felt it was unfair that one did not “own” the download in the same way as a CD, a book, or a DVD and voiced their frustration in blogs, music forums, and to the record companies.
Opposition grew so strong among consumers that consumer rights and competition authorities in both the U.S. and Europe soon began to investigate and question the practice.
In 2007 EMI and Universal Music Group dropped the DRM measures and Warner Music Group and Sony BMG Music Entertainment have now followed suit in 2008.
Although the recording companies would still have preferred that consumers only be able to "rent" music and never own it--giving them the possibility to limit the number of times a download could be played before an additonal payment would be required, they ultimately gave in to consumer oppostition and are recognizing that consumers view music purchased in whatever form as substitutable.
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