CS155b: E-CommerceRevolution in Content-Related TechnologyRevolution in Content-Related Business?Three Major “Enforcers” Support a Content-Distribution BusinessProduct- or Service-Developer’s GoalSlide 6Dual Doomsday ScenariosBest TPS is a Great Business ModelHoly Grail: A Great Business Model for Internet Music DistributionExisting Business Models for Information ProductsLess Traditional Business Models for Information ProductsRealNetworks: An Internet Media Delivery SolutionRealNetworks OverviewRealNetworks Stock Chart (source: Quicken.com, market close 1/28/2003)RNWK Quarterly Revenues (source: SEC Filings, Forms 10-Q and 10-K)RealNetworks Business ModelCompetition in the MarketRealNetworks Maintains Dominant Market ShareThe Importance of Consumer SubscriptionsRealNetworks: Important StrategiesResponding to Technology“Daft Club” Model“Napster++ as Superdistribution” Model (Napster--??)“Street Performer” Model“Street Performer” Model (continued)“Hum A Few Bars” Model (K. McCurley, Financial Crypto ’00)Notable Business-Model ComponentsReading for February 4CS155b: E-CommerceLecture 6: Jan. 30, 2003Introduction to Online Content DistributionRevolution in Content-Related Technology•Computers and digital documents radically change content creation.•WWW radically changes content publication.•Internet radically changes content distribution.Revolution in Content-Related Business?•Plenty not scarcity?•Anyone can be a publisher?•Disintermediation and reintermediation?Three Major “Enforcers” Supporta Content-Distribution Business•Legal Protection•Digital-Rights Management* Business ModelProduct- or Service-Developer’s Goal•Choose the right ingredients and weave them together into an effective end-to-end technical protection system (TPS).•Ingredients must be “right” w.r.t. business model and legal and social content as well as technical context.Notoriously Difficult!Known RisksUnknownRisksTPSCopyright LawResidual RisksA.Rubin & M. Reiter – used with permissionDual Doomsday ScenariosToday’s Rights Holders and Distributors: TPSs won’t work. Copying, modification, and distribution will become uncontrollable.Fair-Use Advocates and (Some) Consumers: TPSs will work. Rights holders will have more control than they do in the analog world.Best TPS is a Great Business Model“The first line of defense against pirates is a sensible business model that combines pricing, ease of use, and legal prohibition in a way that minimizes the incentives for consumers to deal with pirates.”Lacy et al., IEEE Symposium on Industrial Electronics, 1997.Holy Grail: A Great Business Model for Internet Music DistributionHal Varian (quoted in C. Mann’s “Heavenly Jukebox” article): “Maybe Coke will find a way to integrate itself directly into the shows. Or they’ll release the music free on the Internet, except that it will be wrapped in a commercial.” What’s the difference if the Spice Girls are marketed by Coca-Cola or by Virgin Records, soon to be a subdivision of AOL-Time Warner?2000 Sales by RIAA members: $15B2001 Coca-Cola Net Operating Income: $20.1BExisting Business Models for Information Products•Fee models: Subscription purchase, Single-transaction purchase, Single-transaction license, Serial-transaction license, Site license, Payment per electronic use•Advertising models: Combined subscription and advertising income, Advertising income only•“Free” distribution models: Free distribution (no hidden motives), Free samples (e.g., coming attractions), Free first version, Free information when you buy something else (complementary products, bundling).Less Traditional Business Models for Information Products•Extreme customization: Make the product so personal that few people other than the purchaser would want it•Provide a large product in small pieces, making it easy to browse but difficult to get in its entirety•Give away digital content because it complements(and increases demand for) the traditional product•Give away the product, sell the service contract•Allow free distribution of the product but request payment (Shareware)•Position the product for low-priced, mass market distributionRealNetworks: An Internet Media Delivery Solution•Full Name: RealNetworks, Inc.•Employees: 1,000 (2001 report)•Stock Price (NASDAQ:RNWK):–$3.31 (at close 1/28/2003)–52-week range: $2.68 to $9.28•EPS: -$0.02 (qtr), -$0.24 (year)•Provides client and server software for streaming multimedia content over the Internet.RealNetworks Overview•Founded by Rob Glaser (as Progressive Networks) in 2/1994.•Acquired Vivo Software in 3/1998, Xing Technology in 8/1999, and Netzip, Inc. in 1/2000.•Went public in 11/1997; reached an all-time high (adjusted) price of $93/share in 2/2000•Over 200 million registered users as of 1/2003; RealPlayer is installed on 90% of home PCs(note: down from 95% in 2001).RealNetworks Stock Chart(source: Quicken.com, market close 1/28/2003)[S] = Stock SplitRNWK Quarterly Revenues(source: SEC Filings, Forms 10-Q and 10-K)RealNetworks Business Model•Roughly 60% of RealNetworks’ 4Q2002 revenue came from consumers. (13% in 2001)–The basic RealPlayer software is free. Users may pay a small fee (~$20) for an advanced version with more features.–Users also pay for subscriptions to premium content. •Roughly 5% of its 4Q2002 revenue is from services and advertising. (35% in 2001)•Roughly 35% of its revenue stream is from charging broadcasters of streaming data for the RealServer software. (50% in 2001)•In summary, business model is (slightly exaggerated): give away the player, sell the server and content!Competition in the Market•Microsoft’s Windows Media Player (WMP) has become a competitor, as it now offers functionality similar to RealPlayer.•Microsoft has been very aggressive in its attempts to gain market share:–By bundling WMP with Windows, users are more likely to use it instead of RealPlayer; it’s one less program to download.–By signing Windows-only deals with various radio stations (including Boston’s WGBH and New York’s WNYC), Microsoft is forcing users to use WMP if they want to access these resources.RealNetworks Maintains Dominant Market Share•RealNetworks has successfully maintained a dominant market share: over 85% of the streams on the Web are RealNetworks-encoded.–This fact has held true since (at least) 2001.•Many independent websites
View Full Document
Unlocking...