Seth Shapiro's presentation on the Future of Media Business Models during the Media Future Week (MFW12) in Almere.

1. Media Future Week:
The Future of Media Business Models
9 May 2012
seth@sethshapiro.com | @sethrshapiro
Los Angeles | New York | Amsterdam

2. Business Models
... a business model is the method of doing business by
which a company can sustain itself... The business model
spells out how a company makes money.
– http://digitalenterprise.org

3. seth@sethshapiro.com | @sethrshapiro

4. Agenda
Brief History of 20th Century Media
Media Business Models Made Simple
TV and the Beginning of Future Media
The Future of Media: The Content Brand Conversation
Conclusion
2010 New Amsterdam Media LLC

5. Agenda
Brief History of 20th Century Media
Media Business Models Made Simple
TV and the Beginning of Future Media
The Future of Media: The Content Brand Conversation
Conclusion
2010 New Amsterdam Media LLC

6. Publishing
Content: News, magazines, books, trade pub
Distribution: Presses, delivery
Film
Content: Motion Picture Production
Distribution: Exhibition, regional/platform windows
Music
Content: Programming
Distribution: Broadcast, cable, satellite
Television
Content: Recordings and performances
Distribution: Replication, delivery
2010 New Amsterdam Media LLC

7. Publishing

9. “Many of his writings were originally published serially, in monthly
installments or parts, a format of publication which Dickens himself helped
popularise at that time.
Unlike other authors who completed entire novels before serialisation, Dickens
often created the episodes as they were being serialised. The practice lent his
stories a particular rhythm, punctuated by cliffhangers, to keep the public
looking forward to the next installment.” – Wikipedia

11. + =?

12. The Secret Business Model of Early 20th Century Media

13. The Secret Business Model of Early 20th Century Media

14. “Dickens fought with his various
publishers and, at different points in
his career cut a deal with a printer,
pushing the printer towards a
publishing role and cutting out his
publisher altogether; self-
published his work by paying for
copies of his books to be printed;
and self-published his work by setting
up and part-owning periodicals
whose main attraction was that they
carried his work.
He even, towards the end of his life,
read his books aloud to paying
audiences – an entirely new business
model.”
– http://nosycrow.com

15. Film

17. “In 1893, Thomas Edison
patented the first efficient
motion picture viewer, the
kinetoscope. A customer could
drop a penny into the
kinetoscope... and enjoy a
short movie loop. In the 1890s
and 1900s, kinetoscope parlors
spread like crazy across the
country... ”

18. Edison misjudges the market
“As he had with the phonograph,
Edison misjudged how the
market was to develop. He
thought the money was in the
kinetograph and the
kinetoscope; he didn’t think
people would want to sit in
audiences...
– Edward Samuels

19. Edison misjudges the market
“As he had with the phonograph,
Edison misjudged how the
market was to develop. He
thought the money was in the
kinetograph and the
kinetoscope; he didn’t think
people would want to sit in
audiences...
– Edward Samuels

21. The biggest misconception of the
transition to sound [is] that it was rapid
and completely disrupted the movie
making process. Nothing could be
further from the truth. The transition took
years to take effect and was a much slower process
than many film historians have suggested.”
– Francesca Miller

22. Music

24. “These talking machines are going to ruin the
artistic development of music in this country.
Today you hear these infernal machines going night and day.
We will not have a vocal cord left. The vocal cord will be
eliminated by a process of evolution, as was the tail
of man when he came from the ape.”

25. “These talking machines are going to ruin the
artistic development of music in this country.
Today you hear these infernal machines going night and day.
We will not have a vocal cord left. The vocal cord will be
eliminated by a process of evolution, as was the tail
of man when he came from the ape.”

26. Over time...

27. Publishing
Books
• A la carte sale of “permanent” printed work
Newspapers and Magazines
• A la carte (news stands)
• Subscription
• Advertising (Brand, Help Wanted, Real Estate et al)

28. Publishing Business Models
Books
• A la carte
Newspapers and Magazines
• A la carte
• Subscription
• Advertising

29. Film Business Models
Ticket sales
Ala carte sales
Intellectual Property
(No subscription or advertising)

30. Music Business Models
• A la carte (major focus)
• Ticket sales
• Intellectual Property
• No Subscription
• No Advertising

32. The Big Six
Walt Disney Company
Disney Pictures Buena Vista Pictures Touchstone ESPN ABC WDInternet Group Disney Parks
Time Warner
HBO Warner Bros Turner Networks Warner Music New Line (formerly) AOL
Viacom
CBS Paramount MTV Networks Showtime Nickelodeon BET CMT Comedy Central
News Corporation
FOX Companies FX Networks FOX News Foxtel Wall Street Journal NY Post London Times
Comcast/NBC Universal
Comcast Cable, NBC, MSNBC, CNBC, Universal Parks Telemundo, USA Networks, Bravo
Sony
Columbia Tri Star Sony Pictures Sony Music Sony Computer Sony Electronics

33. Agenda
Brief History of 20th Century Media
Media Business Models Made Simple
TV and the Beginning of Future Media
The Future of Media: The Content Brand Conversation
Conclusion
2010 New Amsterdam Media LLC

34. Media Business Models
1 Advertising
2 A la carte purchase
3 Subscription
4 Intellectual Property
5 Enterprise Value
6 Ticket Sales

35. Media Business Models
1 Advertising (TV Spots, ads, auction)
2 A la carte purchase (DVD, Download to Own)
3 Subscription (magazines/news, cable, Over The Top)
4 Intellectual Property (Licensing Star Wars toys)
5 Enterprise Value (being acquired or going public)
6 Ticket Sales (Movies, concerts)

36. Agenda
Brief History of 20th Century Media
Media Business Models Made Simple
TV and the Beginning of Future Media
The Future of Media: The Content Brand Conversation
Conclusion
2010 New Amsterdam Media LLC

37. What is television?

38. What is television? [1950-1995]
Terrestrial Cable Satellite Telco
3 Networks 4 Networks 6 Networks 100s of Networks
Household Appliance

39. What is television? [1995-2005]
Big screen in your living room
A community experience
Delivered by a big provider (cable etc.)
Professionally produced entertainment

40. What is Television?

41. What is Television?
An ecosystem

42. What is Television?
An ecosystem
that allows for evolving business models

43. Brief History of Television
c. 1927: Philo Farnsworth invents his prototype
c. 1941: FCC adopts NTSC
c. 1948: CBS and NBC begin regularly scheduled broadcasts
c. 70s: Satellite (B2B) – Birth of Basic Cable Network Industry
c. 70-80s: Niche High-End satellite (MDS/MMDS/SMATV/TVRO)
c. 94: DBS – Birth of MSO Competition
c. 99: Internet as a platform
c. 00s: Increased bandwidth, iTunes video, IPTV, Torrents

44. TV 1.0: Broadcast Television
• Very limited choice
• Very broad audience
• Free to User
• Primary Business Model: Advertising

45. Broadcast Business Model
How is success measured?
• Massive volume
• Ratings driven
• Advertisers pay per spot
• Ratings point = 1% of HH (1,159,000 HH for 2010–11)
• Share = % of TVs in use that are tuned in

46. The Grey Flannel Golden Age
Ratings point = 1% of HH (1,159,000 HH for 2010–11)
Share = % of TVs in use that are tuned in
1952-53 I Love Lucy 67.3r
1980-81 Dallas: 34.5r
2005-06 American Idol : 11r
Arguably, the Broadcast TV Era peaks w ‘83 M*A*S*H Finale:
60r/77s (28 year record)

49. TV 2.0: The Cable Era

50. TV 2.0: The Cable Era
Broadcast Cable
• Very limited choice (4) • Greatly expanded choice (100s)
• Very broad audience • Smaller audiences: Power of Niche
• Free to User • Expensive to user
• Primary rev: Advertising • Primary rev: Subscription fees
• Secondary $: Device sales • Secondary $: Advertising

52. Cable Business Models
• Subscription
• Advertising
• A la carte
• Enterprise Value
• Intellectual Property
Cable Creative Models
• Broadcasting ---> Narrowcasting
• Monthly fees = funding for LOTS of programs
• Allows for mass and niche audiences

53. 2002 2009
Text

55. TV Economics
$.13 sub/m
x 12
x 99,700,000 HH
$155,532,000
Conservatively, a low-price cable network yields over
$155 million in subscription revenue per year
15 cable networks x avg $.20 per month = $3.6 billion.
Top price network ($5) = $6 billion.

56. MEDIA ECONOMICS
By far, the most valuable assets in media are cable networks.
US MSO Subscriber Revenues = app. $135 billion per year.
(GOOG 2010 = $28B)

57. Agenda
Brief History of 20th Century Media
Media Business Models Made Simple
TV and the Beginning of Future Media
The Future of Media: The Content Brand Conversation
Conclusion
2010 New Amsterdam Media LLC

58. The Future of Media: The Content Brand Conversation
Case Study 1: Harnessing Business Models for Art
Case Study 2: How Old Media Morphs Online
Case Study 3: New Platforms Change the World
Case Study 4: New Art Creates New Models
2010 New Amsterdam Media LLC

59. American Movie Classics
AMC is a cable television channel that primarily airs movies, along with a limited amount of original
programming. The letters originally stood for American Movie Classics; however
since 2002, the full name has been deemphasized as a result of a major shift in
programming. AMC is owned by Rainbow Media Holdings ... AMC was originally a premium cable
channel that aired classic movies...
It was not uncommon for the channel to host a Marx Brothers marathon, or show
such classics such as the original Phantom of the Opera.
-­‐-­‐
Wikipedia

60. Source: Kagan

61. AMC is in app 88 million US households
$.23 sub/m
x 12
x 88,000,000 HH
app. $155 million

63. 1. Pro Producer X has $30 million show idea.

64. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys

65. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys
3. “I need $30 to make a great show”

66. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys
3. “I need $30 to make a great show”
[US$2.3M x13 episodes = $30M]

67. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys
3. “I need $30 to make a great show”
[US$2.3M x13 episodes = $30M]
4. Network: “Who are the stars?Is there sex? Does it
appeal to 18-24?”

68. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys
3. “I need $30 to make a great show”
[US$2.3M x13 episodes = $30M]
4. Network: “Who are the stars?Is there sex? Does it
appeal to 18-24?”
5. Producer: “Not really - it’s a period drama.”

69. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys
3. “I need $30 to make a great show”
[US$2.3M x13 episodes = $30M]
4. Network: “Who are the stars?Is there sex? Does it
appeal to 18-24?”
5. Producer: “Not really - it’s a period drama.”
6. Network: “Get out of my office.”

70. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys
3. “I need $30 to make a great show”
[US$2.3M x13 episodes = $30M]
4. Network: “Who are the stars?Is there sex? Does it
appeal to 18-24?”
5. Producer: “Not really - it’s a period drama.”
6. Network: “Get out of my office.”

71. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys
3. “I need $30 to make a great show”
[US$2.3M x13 episodes = $30M]
4. Network: “Who are the stars?Is there sex? Does it
appeal to 18-24?”
5. Producer: “Not really - it’s a period drama.”
6. Network: “Get out of my office.”

72. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys
3. “I need $30 to make a great show”
[US$2.3M x13 episodes = $30M]
4. Network: “Who are the stars?Is there sex? Does it
appeal to 18-24?”
5. Producer: “Not really - it’s a period drama.”
6. Network: “Get out of my office.”

73. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys
3. “I need $30 to make a great show”
[US$2.3M x13 episodes = $30M]
4. Network: “Who are the stars?Is there sex? Does it
appeal to 18-24?”
5. Producer: “Not really - it’s a period drama.”
6. Network: “Get out of my office.”

74. 1. Pro Producer X has $30 million show idea.
2. He goes to HBO, SHO, NBC, CBS... all the big guys
3. “I need $30 to make a great show”
[US$2.3M x13 episodes = $30M]
4. Network: “Who are the stars?Is there sex? Does it
appeal to 18-24?”
5. Producer: “Not really - it’s a period drama.”
6. Network: “Get out of my office.”

75. Broadcast model re narrowcast model
Goes to AMC: "You get .23 cents a house..."
"... what if we can double that?"
I will build you:
- Higher Subscription Fees
- Higher Advertising Fees
- Intellectual Property...
"Small rating.... but will
build you a brand!"

76. Broadcast model re narrowcast model
US $2.3 million
x 13 episodes
US$30,000,000 (est.)
"period drama"
1.9 rating = No Way

77. Broadcast model re narrowcast model
US $2.3 million
x 13 episodes
US$30,000,000 (est.)
"period drama"
Build brand to increase license
fee = "OK"

79. Playing Old Game vs. harnessing New
US $2.3 million
x 13 episodes
US$30,000,000
1.9 rating = “No Way”
Build You a Content
Brand = “OK”

80. Rainbow's Sapan: Streaming Cable Shows 'Devalues' Product
... "We don't think it's wise for the industry to Napster-ize itself," said Rainbow CEO Josh Sapan,
referring to the site that famously became a popular hub of free music.
Sapan said Rainbow is angling for AMC to receive 50 cents a subscriber
per month from distributors in its next round of negotiations.

81. Rainbow's Sapan: Streaming Cable Shows 'Devalues' Product
... "We don't think it's wise for the industry to Napster-ize itself," said Rainbow CEO Josh Sapan,
referring to the site that famously became a popular hub of free music.
Sapan said Rainbow is angling for AMC to receive 50 cents a subscriber
per month from distributors in its next round of negotiations.
On $3M business model change:
$.23 to $.50
$155M to $310M

82. Matthew Weiner is the creator, executive producer, head writer, and
show runner of the AMC television series Mad Men. Weiner has received
eight Emmy Awards and three Golden Globe Awards for Mad Men. Mad
Men has won the Emmy Award for Outstanding Drama Series three
consecutive years (2008, 2009, 2010). Weiner was named one of the
2011 Time 100 Most Influential People In The World. -- Wikipedia

83. Mad Men

84. The Future of Media: The Content Brand Conversation
Case Study 1: Harnessing Business Models for Art
Case Study 2: How Old Media Morphs Online
Case Study 3: New Platforms Change the World
Case Study 4: New Art Creates New Models
2010 New Amsterdam Media LLC

85. Subscription 3.0

86. Website and subscription service offering ad-supported on-
demand streaming video of TV shows, movies, etc.
Owned By:
Competitors:
Advertising Subscription

93. The Future of Advertising = Data
• Are you buying diapers in the morning, or your third BMW?
• Advertising moves from Broadcast to Narrowcast
• Advertising metric changes from audience size to a measure of customer value
• Know your customer like never before
• Target your customer like never before

94. Hulu

95. • Advertising
• Subscription
• Intellectual Property
• Enterprise Value
• Precise Customer Data
• Intellectual Property (originals)
• Economics of Community
Media Business Models
1 Advertising
2 A la carte purchase
3 Subscription
4 Intellectual Property
5 Enterprise Value
6 Ticket Sales

96. The Future of Media: The Content Brand Conversation
Case Study 1: Harnessing Business Models for Art
Case Study 2: How Old Media Morphs Online
Case Study 3: New Platforms Change the World
Case Study 4: New Art Creates New Models
2010 New Amsterdam Media LLC

99. … viewership on [tablets, mobile and CTV] doubled
from Q3 '11 to Q4 '11.
Tablets led with 22% growth in quarter-over-quarter
growth in time watched per play.

100. Seventy percent of tablet owners and 68 percent of
smartphone owners said they use their devices while watching
television.
CONNECTED TV AND CONSUMERS –
HILVERSUM, NETHERLANDS – FEBRUARY
7, 2012

102. The Future of Data:
• Since
last
year:
• Sharing
via
mobile
was
up
500%
• Overall
sharing
up
143%
• Shares
to
and
from
TwiAer
up
116%

103. The Future of Data: Audiences Talks Back

108. The Future of Data: Audiences Talks Back

110. “Turner
is
looking
to
establish
itself
as
a
leader
in
adopEng
smart
TV
technology”
–
Ad
Age
“We
are
trying
to
understand
the
consumer
marketplace
“People
react
to
adver8sing
differently
on
different
screens,
and
we’re
trying
to
figure
out,
‘What
is
the
next
evolu8on
of
TV?’
David
Levy,
TBS
President
Sales,
DistribuEon
and
Sports
Turner Embraces Social TV, Interactive Ads via 'Conan' App
By Mike Shields on February 8, 2012
... As part of a major push by Turner’s entertainment networks to embrace second-screen
viewing...
... users of the new Conan app (which is being sponsored byAT&T) will be periodically greeted
with pop-ups within the app featuring information relevant to the show, such as facts about a
guest’s movie career. And soon enough, viewers will be able to buy tickets to those guests’
movies via the app.

111. CONAN

112. The Second Screen...
102

113. The Second Screen
points to the future of media business
• Hypertargeted advertising
• New subscription products
• More items for purchase
• Intellectual Property
• Enterprise Value
• Customer Data and Preferences
103

114. The Future of Media: The Content Brand Conversation
Case Study 1: Harnessing Business Models for Art
Case Study 2: How Old Media Morphs Online
Case Study 3: New Platforms Change the World
Case Study 4: New Art Creates New Models
2010 New Amsterdam Media LLC

118. Jenna Marbles

120. Jenna Marbles

121. Epic Meal Time is a YouTube cooking show known for creating extremely
high-calorie meals from meat (with emphasis on bacon)
and alcohol (especially Jack Daniel's). It is... represented by Brillstein-Grey
Entertainment, and... Internet television network Revision3.

122. Jenna Marbles

126. Agenda
Brief History of 20th Century Media
Media Business Models Made Simple
TV and the Beginning of Future Media
The Future of Media: The Content Brand Conversation
Conclusion
2010 New Amsterdam Media LLC

127. Conclusions: Future of Media Business
• Community is the new network
• Customer data is the new currency
• “If you’re not paying, you are the product being sold.”
• Media moves from a monologue to a dialogue

128. Media Business Models
Current Future
1 Ticket Sales
2 Advertising 2 Customer Preference Data
3 A la carte purchase 3 Always On: Power of the Cloud
4 Subscription 4 Digital Delivery, cross device
5 Intellectual Property 5 Economics of Community
6 Enterprise Value 6 Self-sustainable small businesses

129. Media Business Models
Current Future
1 Ticket Sales 1 “Live” Digital Events
2 Advertising 2 Hypertargeted
3 A la carte purchase 3 The Cloud = Always On
4 Subscription 4 Digital Delivery, cross device
5 Intellectual Property 5 Economics of Community
6 Enterprise Value 6 Self-sustainable small businesses

130. “Nobody knows anything.”
- William Goldman
2010 New Amsterdam Media LLC

131. "Anything new, anything worth doing, can't be recognized."
- Picasso
2010 New Amsterdam Media LLC

132. Thank You
seth@sethshapiro.com | @sethrshapiro
Los Angeles | New York | Amsterdam