Top Innovators in Media

Over the past few years, it seems as if the media industry has expanded more during this generations than it has at any other time in history. Throughout every field in the media industry there has been a select group of innovative leaders who have revolutionized their fields. In social networking, we have the like of Mark Zuckerberg (Facebook), Jeff Weiner (LinkedIn), and Jack Dorsey (twitter), who have completely changed the ways in which people network. In enterprise and cloud computing, perhaps the most prominent leaders are Sergey Brin with Larry Page (Google), Padmasfree Warrior (Cisco), and Andy Stanford-Clark (IBM) who have simply created a metamorphosis of how people communicate with each other. As for the News category, innovative leaders such as Rupert Murdoch (News Corp.), Fiona Spruil (NY times), Arianna Huffington (Huffington Post), and Kim Walton (CNN) are constantly finding new and creative ways to deliver the news to the public. While in the digital entertainment category Eddy Cue (iTunes), Chad Hurley (YouTube), and Reed Hastings (Netflix) have dramatically transformed how we watch videos and listen to music.

Google enters the competitive landscape...again

With countless numbers of companies aiming to provide consumers with entertainment, media can be quite a competitive industry. In such a wild competitive landscape, it takes true entrepreneurship to set you apart form the competition. Google is a perfect example of a company that seeks to be involved in competition. Just when we thought Google couldn’t get more involved in the services they provide, they somehow find a way to surprise us. Google has put up several headlines over the past year. First it was the revealing of their social media website, Google +. Then it was revealed that Google would be entering competition with Apple and Amazon’s music services by starting Music Beta. Now, Google appears to be entering competition with Apple’s Apple TV services.

This past Friday, Google announced an update to the software for Google TV. Google stated that they simplified the product to allow users to access the Internet and search for online videos through their TVs. Google TV will also offer on-demand shows that are normally available of services such as Netflix and Hulu. Google has recently reached a deal with various chipmakers, device makers, and TV makers, such as Vizio and Sony, which will bring new Google-powered TVs into the market next year.

Google plans to separate itself from Apple TV in that Google TV will provide access to all content available on the Internet, instead establishing a narrow amount of offerings formatted for use on TVs. Some analysts are viewing Google TV as potential threat to cable/satellite companies. Google on the other hand stated that Google TV isn’t meant to replace TV and cable, but rather to complement it. Google seems to be on the right track. They seem to be doing a great job in entrepreneurship seeing as how they are involved in almost every aspect of media's competitive landscape.

Incoming Revenue Among Key Entertainment Companies

When looking into the movie and entertainment industry, perhaps no name is bigger than Walt Disney Co. With fields in media ranging from music to sports, they seem to hold a strong presence everywhere in the industry. From 2007 to 2010, Walt Disney Co. brought in the most revenue among its competitors. In 2007, their annual revenue was $35.510 billion, which increased to $37.843 billion, dropped to $36.149 billion, and then increased again to $38.063 billion in 2010. Throughout this four-year span ranging from the beginning of 2007 to the end of 2010, Walt Disney’s closest competitor was News Corp. News Corp’s respective revenues from 2007 to 2010 were $28.655 billion, $32.996 billion, $30.423 billion, and $32.778 billion.

While Time Warner dominated in terms of revenue from 2005-2008 (bringing in over $40 billion each year), they took a turn for the worse during the recession. From 2008-2009, Time Warner’s revenue nearly cut itself if half, dropping from $46.984 billion to $25.785 billion. Like other companies in the industry, Time Warner was able to bounce back in 2010, increasing its revenue by $1 billion.

Google Ceases to Amaze

Google seems to be getting involved in everything these days. Google recently entered the social networking industry with Google+ and now it seems they will be entering the world of online music stores. Google is now entering competition with Apple and Amazon in a race to create services that combine retail sales and remote music storage. Google's cloud service, Music Beta, and Amazon's Cloud Player both let users store music online, but neither of them have licenses from all the music companies. Due to this, users must upload most of the music that they want stored on their system. Google, though, is talking to three major music companies, Vivendi SA's Universal Music Group, Sony Corp.'s Sony Music and Access Industries Inc.'s Warner Music Group. Music Beta currently allows people to upload up to 20,000 songs. Apple is at this moment leading the race with their recent release iCloud. However, Google's Music Beta is still in an invitation-only testing mode, so we can expect it to become much larger threat to Apple and Amazon.

Pricing Trends in Media

The book Entertainment Industry Economics: A Guide for Financial Analysis by Harold L. Vogel provides great insight into how the entertainment industry works. Starting on page 292, the book gives an analysis of how pricing works when comes to advertising. When it comes to communicating with potential customers, perhaps the most efficient means is through advertisements. As one would expect, pricing for TV spots can vary depending on where a business is trying to receive airtime. While some prices can be found through research, many of the transactions between businesses and local stations have unpublished prices. The price for an ad spot can depend on multiple concepts. Broadcasters usually sell air time to businesses using the concepts of gross rating points (the sum of all the ratings figures), frequency (the number of times an ad is used), and reach (the number of households exposed to the message). Advertisers assess the expenses of delivering a message on the basis of cost per thousand households (CPM), which indicates how much half a minute will cost during a specific time of the day. The image above shows, the CPM trends for network TV compared to newspapers over the past 30 years.

Netflix, Are You Serious!?

Perhaps no other company in the media industry is receiving for attention at this moment than Netflix. 2 months ago, Netflix announced that they would be changing their price, resulting in outrage among numerous customers. Fast-forward two months and the price change has resulted in the loss of many subscribers. Just when current customers thought they couldn’t get any angrier, things got a lot worse. Netflix CEO Reed Hastings recently sent out an overnight email to the company’s 23 million subscribers, notifying them of Netflix’s plan to separate its movie services.

Hastings plans to rename the DVD business from Netflix to Qwikster. Qwikster will have its own billing system, website, and list of movies. Current customers are infuriated by this move. Stating how now they will not only have to play a lot more, but they will also have to access to different sources. Angry customers are even threatening to cancel their Netflix subscriptions, arguing that the selection of titles available for streaming is very limited compared to the DVDs.

In my opinion, things are not looking so great for Netflix’s future. Not only are their fans becoming infuriated, but there is also an increasing amount of movies and videos becoming available throughout the Internet. Netflix’s shares have already dropped 7.3% on Monday according to the Nasdaq Stock Market. Hastings says he is willing to endure through the downfall because his long-term belief is that people will become less dependable on DVDs and eventually streaming will take over and make DVDs obsolete. While Hastings remains confident and envisions a successful future, I for one would not recommend investing in Netflix for a while.

-Nayef Halloun

Let's Make Some Money

What are the basic economics of the industry? How do companies make money? What are their costs?

When it comes to media, revenue and costs come about in many different ways. In the constant quest for view counts, different media companies are constantly competing with each other to see who can attract the most viewers. Danny Brown, co-founder of Bonsai Marketing, explains it best in his article, "The Real Cost of Social Media." Companies in the media industry tend to make their revenue in several different ways. One method is through the application of user fees and subscriptions. Usually if you want access to the media, you will have to offer up some sort of payment. From newspapers, to magazines, to cable, to the Internet, viewers will have to pay an access fee. Another way companies involved in the media make money is through advertisements and sponsorships. Companies want people to know about their product/service and are willing to pay media outlets in order to achieve this. Now when it comes to costs, media companies are constantly going through high production costs. For companies involved in television, a major cost is paying for airtime. If they want to receive revenue, they need viewers, and it promotions can cost a hefty sum.