online vs. offline media in the u.s
TRANSCRIPT
David WatermanDept. of Telecommunications, Indiana University
Visiting Fellow, Oxford Internet Institute, University of Oxfordwith
Sung Wook Ji, Dept. of Telecommunications, Indiana University
Online vs. Offline Media in the U.S.
EuroCPR 2011March 27-29, 2011
Ghent, Belgium
T-2
Professionally produced copyrighted commercial mediaproducts
A long term historical perspective
Part of a broader project on economics of media development in the US and UK
Focus
T-3
How is online media affecting…
Some questions harder than others…..
media industry revenues and employment?
the balance of advertiser vs. direct pay support?
the quality and variety of media products? ….or….is offline + online media a negative or positive sum game?
in theory, could be + or --
Some questions
T-4
Overall, media revenues steadily declining since about 2000
An increasing shift toward direct pay support
Several possible reasons (consumer habits, copyright issues, business models, greater efficiency…)
Some evidence of increasing media production(a positive sum game)
Overview
1
Total Revenue of US Commercial Media as % of GDP 1950-2009. (Internet lower bound*)
2,1%2.2%
2.0%
2.6%
2,0%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
% G
DP
Multichannel TV
Video
Broadcast TV
Radio
Theater
Internet*
Books
Newspapers
Magazines
Rec Music
* includes: newspaper websites; digital music/movies; television station/network websites; Internet radio; e-booksSources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
3
Total Revenue of US Commercial Media as % of GDP: 1950-2009 (Internet upper bound*)
2.1%2.2%
2.7%
2.1%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
% G
DP
Multichannel TV
Video
Broadcast TV
Radio
Theater
Internet*
Books
Newspapers
Magazines
Rec Music
* includes all Internet advertising except search and e-mail + all Internet Publisher revenues exc. adv. (US Census)Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
T-5 ab
Steady fall in media revenues as % of GDP since 2000
Statistical summary
4
Advertising vs. Direct Pay Support as % of GDP: All US Media, 1970-2009
Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
1.1%
1.4%
.8%0.9%
1.2%
1.2%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
% G
DP
Advertising(% GDP)
Direct pay(% GDP)
5
Advertising vs. direct Pay Support: % Balance All US Media, 1970-2009
56%53%
42%44% 47%
58%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% B
alan
ce
Advertising(% total)
Direct pay(% total)
Sources: Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
T-5 ab
Steady fall in media revenues as % of GDP since 2000
A shift toward direct pay support, especially since 2000
Statistical summary
6
Newspapers: Total Revenue by Categoryas % GDP, 1970-2009
.8%
.6%
.3%
0,0%
0,2%
0,4%
0,6%
0,8%
1,0%
% G
DP Subscription
Internet
National
Classified
Retail
Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
7b
Recorded Music: Total revenue by categoryas % GDP, 1982-2009
Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
Part I
.11%
.17%
.14%
.05%
0,00%
0,05%
0,10%
0,15%
0,20%
% o
f GD
P
Physical
Digital
8
Television: Total Revenue by Category,as % of GDP, 1970-2009
.38%
.93%1.06%
0,0%
0,2%
0,4%
0,6%
0,8%
1,0%
1,2%
1,4%
% G
DP
Broadcasting
Internet
Cable TV
DBS/Telco
Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
9
Movie Theaters/Video: Total Revenue by Category as % of GDP, 1970-2009
.14%
.23%
0,00%
0,05%
0,10%
0,15%
0,20%
0,25%
0,30%
%G
DP
Theater
Video
Internet.27%
Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
12a
Advertising vs. Direct Pay Support as % of GDP:All Internet Media*, 2000-09
.030%
.003%
0%
.034%
0,00%
0,01%
0,02%
0,03%
0,04%
0,05%
% o
f GD
P
Advertising(% GDP)
Direct Payment(% GDP)
•Internet “lower bound”•Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
12b
Advertising vs. Direct Pay Support: % Balance: All Internet Media*, 2000-09
100%
47%
0%
53%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% B
alan
ce
Advertising (% total Internet Rev.)
Direct Pay(% of total Internet Rev.)
*Internet “lower bound”Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
T-5 ab
Steady fall in media revenues as % of GDP since 2000
A shift toward direct pay support, especially since 2000
Major individual media since about 2000
Statistical summary
Revenues consistently falling (or flattening) especially newspapers and music
A shift toward pay support, including online media as a whole
T-6
Four possible reasons for the recent trends
1) Consumers turning away from professional media Time use studies suggest not a major factor
2) Appropriability I: More difficult IP protection Significant factor at least in music and news
3) Appropriability II: Online business model shortcomings Advertising, but not direct support
4) Internet distribution is cheaper, more efficient Examples: movies, news
T-7
“Brick & mortar” DVD rental (2002) vs. Online “rental” (2010)
Internet cost reductions I: Movies
Rental price Studio share*
2002 $3.25 33%
2010 $4.41 70%
* Before duplications/distribution cost
Sources: author calculations from Kagan Research and Adams Media dataPreliminary data (Waterman/Ji, March, 2011)
T-7
Distribution of printed newspaper costs (33,000 circ. paper, 1994)*
Classified advertising
Internet cost reductions II: Newspapers
News-editorial 16%
Advertising 11
Production/printing 39
Circulation 11
Building/depreciation 32
Total 100%
Decline of print newspaper classified revenues, 2000-2008: $9.6 bil.
Total Internet classified advertiser spending, 2008: $3.3 bil.
Sources: Inland Press Association, NAA, IABPreliminary data (Waterman/Ji, March, 2011)
T-7
The economic bottom line is what happens to media production investment
Evidence in some media of increasing (or stable) production
End result
14a
Media Industry Employment *as % of Total Employment: 1990-2008
1.3% 1.2%1.1%
1.2%1.1 %
.9%
0,0%
0,5%
1,0%
1,5%
2,0%
Tot
al (%
)
All Media except Internet Pub. and Cable distribution
All (10) Media
categories
Sources: U.S. Census; IBRCPreliminary data (Waterman/Ji, March, 2011)
Part I
14c
Employment in Media Production Categories as % of Total Employment; 1990-2008
.11%
.14%.15%
.05%
.064%.062%
.008% .009% .009%
0,00%
0,05%
0,10%
0,15%
Tot
al (%
)
Motion picture and video production
Cable and subscription program production
News syndicates
Sources: U.S. Census; IBRCPreliminary data (Waterman/Ji, March, 2011)
rt
I
14b
Media Industry Payroll as % of Total Payroll, 1990-2008
1.6%
1.4%1.4%
1.2%
0,0%
0,5%
1,0%
1,5%
2,0%
Tot
al (%
)
All media except Internet Publishing and Cable distribution
All media categories
1.5%
1.4%
* Total includes Newspaper, Periodical, Book, Motion Picture & Video, Sound Recording, Radio, Television, Cable & other subscription, News syndicates, and Internet publishing and broadcasting.
Sources: U.S. Census; IBRCPreliminary data (Waterman/Ji, March, 2011)
-
extra
14d
Media Production Payroll as % of Total Payroll, 1990-2008
.22%
.26% .26%
.06%
.10% .10%
.014% .017% .020%
0,0%
0,1%
0,2%
0,3%
Tot
al (%
)
Motion picture and video production
Cable and subscription program production
News syndicates
Sources: U.S. Census; IBRCPreliminary data (Waterman/Ji, March, 2011)
Part I - extra
T-7
The bottom line is what happens to quality and variety of media to consumers, or media production investment
Evidence in some media of increasing (or stable) production
More analysis under way
End result
Part I
Part I END
Part I
17
Broadband and Dial-up Adoption
.
Sources: Pew ResearchPreliminary data (Waterman/Ji, March, 2011)
Part I - extra
13
Leisure Time Use in the U.S., Hours per Person per week, Major Media 1970-2009
.
* newspapers, magazines, leisure books** including digital in 2005 and 2009
1970 2000 2005 2009TV 23.5 30.7 33.2 34.0
Radio 16.7 20.4 20.2 19.9
Print media* 8.7 6.2 5.7 5.1
Recorded music** 1.3 6.1 3.8 2.9
Theater/home video 0.2 1.3 1.1 1.1
Video games -- 1.5 1.9 2.9
Cultural/sports events 0.1 0.4 0.4 0.5
Total except Internet 50.5 66.7 66.3 66.4
Internet -- 1.0 1.2 14.5
Total per week 50.5 67.6 67.4 80.8
Sources: U.S. Census; IBRCPreliminary data (Waterman/Ji, March, 2011)
13a
US Census: Employment/Payroll:Media Industry Categories
.
NAICS code NAISC title (2000)
51111 Newspaper Publishers
51112 Periodical Publishers
51113 Book Publishers
5121 Motion Picture and Video Industries
5122 Sound Recording Industries
5151 Radio and Television Broadcasting (except Internet)
51521 Cable and Other Subscription Programming
5161 Internet Publishing and Broadcasting
5175 Cable and Other Program Distribution
51911 News Syndicates
Sources: U.S. Census; IBRCPreliminary data (Waterman/Ji, March, 2011)
Part I - extra
3a
Total Revenue of US media as % of GDP, 1970-2009. (Internet upper bound; inc. video games)
2.1%2.2%
2.0%
2.6%2.7%
2.2%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
% G
DP
Multichannel TV
Video
Broadcast TV
Radio
Theater
Internet*
Books
Newspapers
MagazinesRec Music
Video Game
Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
Part I - extra
10
Books: Total revenue by category as a % of GDP, 1970-2009
.24%.22%
.26%.28%
.17%
0,00%
0,05%
0,10%
0,15%
0,20%
0,25%
0,30%
% G
DP
E-book
Books, print only
Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
Part I - extra
11Advertising vs. direct pay support
as % of GDP:Television, 1970-2009
Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
.35%
.55%
.47%
.03%
.43%
.60%
0,0%
0,2%
0,4%
0,6%
0,8%
1,0%
% G
DP
Advertising (% GDP)
Direct Pay (% GDP)
Part I - extra
12Advertising vs. direct pay support
% balance: Television, 1970-2009
Sources: U.S. Census; trade associations; industry analysts; 10-K reports; author estimationsPreliminary data (Waterman/Ji, March, 2011)
91%
59%
44%
9%
41%
56,0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% B
alan
ce
Advertising (% of all TV Rev.)
Direct Pay (% of all TV Rev.)
Part I - extra
16
U.S. Music Industry Trends, Available Data
2000 2003 2008 2009
Songwriter royalties ($Mil.) N/A $1.1 $1.6 $1.7
Concert ticket sales –Popular music ($Mil.) $1.7 $2.5 $4.2 $4.6
Attendance –Total live popular music (Mil.) N/A 48.6 48.7 40.4
.
Sources: National Arts Index 2011Preliminary data (Waterman/Ji, March, 2011)
Part I - extra
Online Television Timeline – UPDATED BY SW
• YouTube Launch
• Free broadcast network TV programs posted2005
• Network “takedown” orders to YouTube /lawsuits2006
• Fox, NBC launch hulu.com
• CBS launches tv.com2007
• ABC joins Hulu.com2009
• Comcast/TW launch Everywhere TV
• Hulu.com revenues: $240m + 2010
19Part II-extra
U.S. Broadcast TV case: Reasons for industry optimism
Compared to music, easier control of intellectual property Fairly strong U.S. copyright law Low incentive to steal programs that are already “free”
Basic business model of in-program advertising transfers to Internet CPM ad rates good (though # ads low)
Direct payment potential (hulu, iTunes)
Much lower cost than standard broadcast TV delivery Clumsy system for signal distribution to 200 local stations
Networks have mass audience and advertisers want that!
20Part II-extra
U.S. Cable TV System Case
Very efficient, successful technology and business model
but Internet is a long term threat to cable TV business model Similar to newspapers, cable TV sells packages of program
networks, which can be sold separately on the Internet
21Part II-extra
Figure 9: Trends in Advertising vs. Direct Payment SupportTV services (1965-2007)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Adv
.& D
irec
t Pay
men
t %
Dir
ect P
aym
ent a
s a %
of G
DP
Advertising Revenue %
Source: Motion Picture Investor. Kagan Research, US Census Bureau: The 2008 Statistical Abstract, FCC: Office of Plans and Policy, OPP Working paper series, TVB: Universal McCann, NCTA
Direct Payment %
31Part II-extra