Media Convergence- Part 1
CPS 181s
Nov 20, 2001
MEDIA CONVERGENCE
 Media
convergence and its synergistic benefits are
key drivers behind mega-mergers in media companies
 America
Online (AOL) and Time-Warner
 Viacom and CBS
 The Walt Disney Company and Capital Cities/ABC
 Increased
possibility to increase access convenience
and new innovative services
 Fragmented
media usage in households
 Changes in federal communication laws
 Advances in digital technology
1
MEDIA CONVERGENCE
…..
CONVERGENCE…..
 Media
content refers to the content of the communication, not
their infrastructure
 Media convergence occurs when different types of media
content found across types of media form will be accessible in
digital form in digital devices
 Content includes: text, audio, and video
 Devices include: wireless telephones, personal computers,
PDAs, and interactive television desktops
This chapter reviews the implications of that
convergence for the old and new economy, on various
media platforms, and public policy issues
QUESTIONS
c What is media convergence?
d What conditions make media convergence possible?
e How do new media companies leverage off traditions media
channels?
f What are the reasons for media megamergers?
g What public policy issues must be addressed with digital
convergence and media convergence?
2
WHAT CONDITIONS MAKE MEDIA CONVERGENCE POSSIBLE?
 The
use of a CO-der-DECoder (codec) enabling analog signals and digital
signals to be converted
 Continued Advances and Decreasing Cost of Digital Technology
 Most media content originate sin digital form
 Digital is easily manipulated, stored, combined, and transmitted
 Low-Cost Digital Network Infrastructure
 Use if the non-proprietary network protocol (IP), transfer protocol (HTTO),
and hypertext language (HTML) allows an unencumbered environment
 The World Wide Web became a low-cost digital network infrastructure
that experienced an explosive growth in users and sites
 Media Proliferation
 From newspapers at the turn of 1900 to cable in the 1980s and satellite
reception in the 1990s, the number of media choices continue to grow
WHAT CONDITIONS MAKE MEDIA CONVERGENCE POSSIBLE?...
 Media
Usage Fragmentation in American Households
 Increased fragmentation of media shows a decline in
traditional television news viewing in America
 The dwindling television news audience was greatest
among younger people who spent more time with their
computers
 Broadcast and entertainment showed a steady decline
as well, as basic cable subscriptions increased
 The percentage of households with alternative forms of
media entertainment and information increased
3
A Technographic’
’s View of New Consumer Internet Adoption
Technographic
Technographic’s
Mainstream
Number of new
on-line
customers
Early Adopters
Laggards
Time
Source: Mary Modahl, “Now or Never: How Companies Must Change Today to Win the Battle for Internet Customers” Harper Business, 2000
Primetime Viewing Shares of Free and Cable
Television Networks -1985 to 1998
1
Year
Network Affiliates
Ad-Supported Basic
Cable
All Other Television
1985 - 1986
69.3%
7.5%
23.2%
1989 - 1990
58.1%
16.4%
25.5%
1990 - 1991
55.1%
19.3%
25.6%
1991 - 1992
54.9%
19.8%
25.3%
1992 - 1993
52.9%
21.1%
26.0%
1993 - 1994
52.4%
21.3%
26.3%
1994 - 1995
48.7%
24.3%
27.0%
1995 - 1996
46.0%
26.7%
27.3%
1996 - 1997
42.1%
29.7%
28.2%
1997 - 1998
39.6%
32.5%
27.9%
For all television viewing Monday-Sunday, 8-11pm EST. Due to multiset use and independent roundings, totals add up to more than 100. 1Includes the
FOX network, UPN, WB, other independent stations, pay cable and public television
Source: Cable Advertising Bureau, Cable TV Facts (1999)
Note:
4
Primetime Viewing Shares of Free and Cable Television Networks
Primetime Viewing Shares of Free and Cable TV Networks
1985-1998
100%
90%
80%
70%
60%
All Other
Basic Cable
Network Affiliates
50%
40%
30%
20%
10%
0%
1985
1990
1991
1992
1993
1994
1995
1996
1997
1998
Note:
For all television viewing Monday-Sunday, 8-11pm EST. Due to multiset use and independent roundings, totals add up to more than 100. All Other
includes the FOX network, UPN, WB, other independent stations, pay cable and public television
Source: Cable Advertising Bureau, Cable TV Facts (1999)
Children Were Found to be Immersed
in Media Usage
 Television
 Music
 Reading
 Watching
 Using
videos
a computer
5
Statistics From Kaiser Foundation Report
Kids and Media
Results of a study measuring how much media children are exposed to . Times are in hours and minutes.
Amount of time kids spend each day on average:
Watching TV
2:46
Listening to music
1:27
Reading for fun
:44
Watching videos
:39
Using a computer for fun
:21
Playing video games
:20
Online
:08
Percent of kids who have a TV in their room:
All kids 2-18
53%
2-7 year olds
32%
8 and older
65%
Percent of kids who have a computer in the home:
All kids 2-18
69%
2-7 year olds
62%
8 and older
73%
Lower income
49%
Upper income
81%
Percent of kids who have a computer in their bedroom:
All kids 2-18
16%
2-7 year olds
6%
8 and older
21%
Parental oversight - Percent of kids…
With no rules about TV
49%
In homes where TV is usually on during meals
58%
Percent of time parents watch TV with their kids:
2-7 year olds
19%
8-18 year olds
5%
Source: Kaiser Family Foundation
Forecasted Continued Media Proliferation
and Media Usage Fragmentation
 Experts
predict that over the next ten years
technological advances in wireless, digital
compression, two-way networks, the Internet, and
high-definition television (HDTV) will present even
more choices
6
Media Fragmentation, 1960
’s
1960’s
to 2010
’s
2010’s
TV
TV faces
faces the
the
worst
worst audience
audience
fragmentation
fragmentation of
of
all.
all. Here,
Here, News
News
Corp.
Corp. tracks
tracks and
and
forecasts
forecasts the
the
explosion
of
TVexplosion of TVviewing
viewing choices
choices
available
available in
in any
any
given
given hour.
hour.
Once
there
were
Once there were
three
three options;
options;
soon
soon there
there will
will
be
be1,000
1,000
1960s
Most Americans
watch the Big
Three Networks
every night
Source:
1970s
UHF Stations bring
more choices, and the
fledging cable industry
intoduces a few new
channels like HBO and
Turner’s TBS
Superstation
Business Week, February 16,1998
1980s
The VCR becomes
commonplace, letting
consumers watch
recorded shows and
movies whenever they
want. Cable explodes,
with new networks like
CNN and MTV.
1990s
Direct-broadcast satellites are
introduced offering hundreds of
channels. Cable systems are
slowly upgraded with more
channels
2000s
Digital compression and two-way
networks allow cable companies to offer
even more channels and services. DBS
services grow more entrenched. As TVs
are linked to the Internet, new
programming delivered via the Internet
takes hold. Result: 300 choices at any
moment.
2010s
Broadcasters may use high-definitionTV
spectrum to launch more channels.
Internet chat evolves into networked virtual
reality games, interactive movies, and
other activities being hatched by MITs
media lab and others. News Corp.
forecasts 1,000 channels, now called
“context windows”.
13
How Offline Media Drives Online
Media
7
How Do New Media Companies Leverage
Off Traditional Media Channels?
 The
New Economy is quite depend upon the traditional
new outlets of the Old economy
 Online presence is using traditional media to build an
audience for the new media
 In 1999, an estimated 28 percent of all American
households were online, a threefold increase from
almost 9 percent just four years earlier
 Build brand awareness among Internet users, dot com
companies spent an estimated $3 to $4 billion in
advertising in 1999
Media Companies
 90
percent of those dollars were on traditional media
outlets
 Online news users say they still read newspapers and
listen to radio news about the same or at a higher
rate than online
 The Internet has emerged as a mechanism for
supplementing, not replacing traditional media
sources
8
Dot-Com Spending in Traditional Media
Dot-com and online services
spending in traditional media ($
in thousands)
1/99 – 6/99
%Chg YoY
Network TV
129,218
910%
Cable TV
83,105
323%
Magazine
81,233
206%
Spot TV
63,828
136%
National Newspaper
56,835
180%
Spot Radio
50,149
318%
Local Newspaper
24,066
238%
Network Radio
18,348
71%
Outdoor
5,865
521%
Sunday Magazine
1,662
375%
642
22%
514,951
273%
Syndicated TV
Total
Source: Advertising Age
Top Dot-Com and Online Service Advertisers
Top Dot-com and online
services spending in local and
national newspapers
1. Value America
1/99 – 6/99
1/98-6/98
19,778
5,499
2. E*Trade
9,053
4,218
3. Dow Jones (Online OPS)
7,648
6,438
4. Cheaptickets.com
4,147
2,112
5. Priceline.com
3,153
1,006
6. Charles Schwab (online)
2,887
0
7. AltaVista
2,281
0
8. Lowestfare.com
2,261
0
9. BankOne (online)
1,648
0
10. Amazon.com
1,333
0
54,190
19,273
Total
Source: Advertising Age
9
U.S. Advertising Expenditure, All Media
Top 100 Daily Newspapers in the United States by Circulation, 1998
2
1997 (Millions)
Percent of
Total
1998
(Millions)
Percent of
Total
Percent
Change
$41,341
22.1
$43,925
21.8
6.3
5,322
2.8
5,721
2.8
7.5
• Retail
19,257
10.3
20,331
10.1
5.6
• Classified
16,762
8.9
17,873
8.9
6.6
9,821
5.2
10,518
5.2
7.1
36,893
19.7
39,173
19.4
6.2
7,237
3.9
8,301
4.1
14.7
1
Daily newspapers total
• National
Magazines
Broadcast television
Cable television
Radio
13,491
7.2
15,073
7.5
11.7
Direct mail
36,890
19.7
39,620
19.7
7.4
Yellow pages
11,423
6.1
11,990
5.9
5.0
23,940
12.8
25,769
12.8
7.6
Business papers
4,109
2.2
4,232
2.1
3.0
Outdoor
1,455
0.8
1,576
0.8
8.3
Internet
600
0.3
1,050
0.5
15.0
Total – National
110,538
59.00
119,285
59.3
7.9
Total – Local
76,662
41.0
81,942
40.7
6.9
$187,200
100.0
$201,227
100.0
7.5
Miscellaneous
3
Total – All media
*
America Online Welcome Screen
10
Case Example: America Online
 Founded
by Steve Case in Northern Virginia, America Online
(AOL) first sought partnerships with established media
brands (Apple, MTV, San Jose Mercury News, and NBC)
 Newspapers had retreated from electronic media back to
print and allowed third-party online services to emerge as an
uncontested market
 By 1995, America Online would surpass Prodigy and
CompuServe as the largest online service company in the
United States
 America Online achieved a market value of over $138 billion
and would also acquire CompuServe, Netscape, and TimeWarner
Monster.com Home Page
11
Case Example: Monster.com
 Founded
by Jeff Taylor in Massachusetts,
Monster.com was reaching 3.5 million unique users
as of January 2000
 By January 2000, Monster.com build brand
awareness largely through the combined use of
broadcast television commercials
 Monster.com created a pre-emptive lead against its
competitors and an effective barrier to entry
Monster.com User Statistics
Monster.com
Key Metrics — December 1998 to January 2000
U.S. Internet Users
visiting Monster.com
Direct Traffic
(non-alliance)
December
1998
March
1999
June
1999
September
1999
January
2000
1.4%
3.4%
4.2%
4.1%
5.3%
81.0%
90.0%
94.0%
95.0%
NA
Page Views
48 Million
82 Million
122 Million
146 Million
158 Million
Paid Job Listings
186,000
204,000
252,000
255,000
315,000*
Resume Database
1.0 Million
1.3 Million
1.6 Million
2.0 Million
3.0 Million
NA
2.5 Million
3.6 Million
4.2 Million
6 Million
Registered Members
Note:
*As of December 1999
Source: Bean Murray Institutional Research, Monster.com, Media Metrix
12
CBS Marketwatch Home Page
Driving
Traffic
CBS Evening News
Driving
Traffic
CBS Marketwatch Weekend
Case Example: CBS Marketwatch
 Founded
by Larry Kramer, the San Francisco-based
financial news vertical, utilizes the resources of CBDS,
its minority equity owner and broadcast partner to build
brand awareness nationwide
 As of March 2000, the site had become the fortieth
most visited site n the web with 5.5 million unique users
 By utilizing its content on broadcast news, there is
reference to the site daily
 Rather than using the Web to enhance their core
business, CBS Marketwatch has as it focused purpose
to build a great website
13
What are the Reasons for Media
Megamergers?
 Media
companies have been using mergers to develop
vertical integration for content and distribution across all
media: print, video, and audio
 Media merges have increased with the increase of
broadband
List of Recent Mega-Mergers
1995
Disney and Capital Cities / ABC
1995
Time-Warner and Turner Broadcasting
1995
Westinghouse and CBS Inc.
1996
SBC and Pacific Telesis
1996
NYNEX and Bell Atlantic
1996
US West and Continental Cable
1996
Thomson and West Publishing
1998
America Online and Netscape
1999
AT&T and Comcast
1999
Viacom and CBS Inc.
2000
America Online and Time-Warner
2000
Tribune Company and Times Mirror Company
14
Top Multiple Systems Operators
Top 10 Multiple System Operators, Data in Millions, 1997
Rank
System operator
Number of
Subscribers
Pay-cable
units
Homes passed
by cable
1
Tele-Communications Inc.
14.4
14.3
23.8
2
Time Warner Cable
12.3
8.2
19.0
3
US West Media Group
4.9
3.8
8.3
4
Comcast Cable Communications Inc.
4.3
3.7
6.9
5
Cox Communications Inc.
3.3
2.0
5.1
6
Cablevision Systems Corp.
2.9
4.8
4.4
7
Adelphia Communications Corp.
1.8
0.8
2.6
8
Jones Intercable Inc.
1.5
1.2
2.3
9
Century Communications Corp.
1.3
0.5
2.1
Marcus Cable
1.2
0.7
1.9
10
Source: TV Digest, May 12, 1997 by permission from Warren Publishing
Point - Counterpoint on Cross Media Ownership
Relax/Eliminate
Relax/Eliminate Media
Media Ownership
Ownership Rules
Rules
zzExisting
Existing Federal
Federal laws
laws prohibiting
prohibiting crosscross-
ownership
ownership of
of aa television
television station
station and
and aa
newspaper
newspaper in
in the
the same
same market
market or
or limiting
limiting
the
the number
number of
of television
television or
or radio
radio stations
stations
that
that aa single
single media
media company
company can
can are
are
outdated.
outdated.
zzWith
With the
the individuals
individuals having
having increased
increased
access
access to
to other
other sources
sources of
of media,
media, such
such as
as
cable
cable channels
channels and
and Internet
Internet sites,
sites,
concentration
concentration of
of media
media in
in single
single market
market
cannot
cannot be
be achieved.
achieved. Media
Media usage
usage is
is much
much
more
fragmented
today
than
ever
more fragmented today than ever before
before
Maintain
Maintain Media
Media Ownership
Ownership Rules
Rules
zzExisting
Existing Federal
Federal Laws
Laws need
need to
to be
be maintain
maintain
to
to ensure
ensure the
the public’s
public’s interest
interest and
and to
to keep
keep
competition
competition
zzLocal
Local newspapers
newspapers and
and television
television stations
stations
continue
continue to
to dominate
dominate the
the media
media in
in local
local
markets.
markets. Allowing
Allowing cross-ownership
cross-ownership will
will
reduce
the
number
of
choices
for
viewers,
reduce the number of choices for viewers,
readers
and
advertisers.
readers and advertisers.
15