Describe the Business Models and Challenges
Learning Objectives
After completing this unit, you’ll be able to:
- Illustrate typical media revenue models that help business operations.
- Identify challenges in the media space.
- Explain how the media industry can transform.
Global Media Revenue Models
You've read a lot about how media companies are adapting to the new age of disruptions and responding with innovation. As is often the case, companies are finding ingenious ways to maximize their customer lifetime value and the resulting revenue. If you’re thinking about YouTube and Spotify ads, you’re right. But you may be surprised to know that ads aren’t the only options for monetizing subscribers. In fact, media companies today use four types of revenue models to accommodate all-that-is-media.
Subscription Services
Media companies offer weekly, monthly, yearly, and other kinds of subscription services for consumers to access all types of content and experiences. This includes audio, video, news, articles, and much more.
Based on subscriber interactions and preferences, businesses can personalize services and increase engagement with their subscribers to up-sell and cross-sell products.
For example, a media company offers a subscription to the streaming service, Disney+. Along with the service subscription, the company can personalize the experience across other segments of the business, for example:
- To provide discounts or free tickets to a Disney theme park
- To advertise shows and other live events on the website
- To sell Disney-themed T-shirts in shops and on the website
Advertising Sales
A lot of planning goes into designing ads and targeting them to customers. Media companies offer inventory to advertisers to help the brands reach their target audiences.
Depending on the demand, relevance, and reach of the ad space available, media companies price the ads differently and collect revenues.
For instance, an agency that represents both online media companies and retail companies may offer ads for sale on a wide variety of sources—from Facebook to bus stops to grocery store endcaps.
Media Commerce
Media companies offer platforms where customers can purchase both physical and digital products, content, and experiences.
They connect revenue streams throughout the customer lifecycle by offering easy access to products and services and seamless customer transactions.
Look no further than Amazon for an example of a company that merchandises its own and others’ physical products. Plus, Amazon produces and sells its own digital content, hosted on Amazon Prime.
Licensing
Companies that own or control media intellectual property (IP) can gain revenue via global licensing and contracts, while encouraging additional revenue from content syndication and distribution.
Examples of this type of media company come from sports industries like FIFA or even traditional companies like Disney. They license their brands for physical products, content rights, and digital likenesses, for instance, gaming avatars.
You’ve learned a lot about media, from cave paintings to the printing press and from there to the complete transformation of the industry. You examined the resilience of the media industry to adapt to constant disruption and to drive success, not just through revenue but through customer loyalty.
What does it signify? It sounds cliché, but change is the only constant. And with change, new challenges arise. The only way for media companies to tackle the challenges is through innovation.
So what are these challenges? Let’s take a look.
Media Industry Challenges
Due to the ever-changing business environment, media businesses and their operations undergo constant disruptions and restructuring.
Let's look at some examples of disruptions faced by different types of media companies and how they overcame the challenges.
Media Industry Transformation
Have you heard of the phrase, The Paradox of Choice? Or read the book? In essence, it means that giving people too many options can cause stress and hamper decision-making.
Think about it. Consider the media consumption options available today, such as streaming services, apps that provide easy access to music and podcasts, and websites that offer free video streaming, blogs, and articles. When companies offer too many choices and customers have limited time, the competition isn’t just between two media companies over the type of content they’re creating. It becomes a battle for customers’ limited attention and time. The COVID-19 pandemic in 2020 and 2021 and subsequent stay-at-home measures only accelerated the consumption of media through direct-to-consumer services across the globe.
With so many options available, it’s essential to keep the users happy through a superior experience and diverse content. A slight disappointment in the service can send users into the arms of competitors. Then what’s the solution? In a word, it’s personalization.
Media businesses must keep the customer at the heart of every innovation and deliver user-centric solutions that appease the masses. To do this, companies need a single and comprehensive, 360-degree view of each customer. In turn, companies must elevate relevance and drive engagement—which means higher customer retention.
On the entertainment side, physical experiences are shifting to virtual experiences. This shift to digital media consumption is the driving force behind the accelerated transformation in media—let’s move on to the next unit for a closer look.
