Research critique

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cooking ideas and reputation, is it enough?

In our hypothetical tribe, however, people give what they have into the pot with no guarantee that they’re getting a fair exchange, which smacks of altruism……. But on the Net, a cooking-pot market is far from altruistic…… Your effort is limited to creating one – the original – copy of your product…… but millions of unique goods made by others!

I guess the cooking pot markets make sense to me in that this is what I see on the Internet, especially through my everyday life. The model makes sense, but probably not enough for media companies who wish to make money, or cash in reputation. Each individual on the Internet might be producing their work for fun, only asking for ideas in exchange or gain some reputation, but media firms want to find a fast way to convert bits and bytes into real world currency. Subscription model does not work and online advertising is increasing, but uncertain where it is going.

Google creates new ways for ad methods, such as AdSense, with complicated equations, but what else? Cumulating reputation and then cash in the reputation is similar to your cash return credit card: before you reach a certain amount of credit (reputation), it cannot be cashed in (maybe a little with advertising). But if you cumulate enough reputation, one day you can cash in whatever you have at hand for millions or billions, if lucky enough.

So media companies buy Web sites that already have a good reputation and a good audience base, such as Google bought YouTube. In addition to this, after investing in a Web site and since nothing can be cashed in immediately, how can media companies survive if the cash flow keeps being negative? Media companies cannot just do it for fun, can they? (so far I guess only Google say they do?)

The cooking pot market

Using the cooking pot market to explain the free online product and services seems purely genius at the first glance, but it only accounts for one part of what is really going on in the dual online media market.

If we look at the participatory media from users’ perspective, it is simply true that--

If a significant part of your needs are for information products themselves, you do not need to trade in your intangible earnings from the products you create for hard cash, because you can use those intangibles to "buy" the information you want.

Consumers would like to create content for reputation or exchanging for other valuable information provided by their peers. It explains why Bloggers.com, YouTube, and MySpace can exist and keep on expanding over the years. It will be hard to put a price tag on the value of user generated content online, but it is possible to quantify the utility of it with the measurement of how people perceive its usefulness.

From the media company’s perspective, the idea of cooking pot market offers a way to manage the supply of the content and maintain the audience base. But eventually, they will starve without cashing out the information resources they possess online. One common way to do it is through ad selling. Many new media platforms, which establish success in a cooking pot market, still have hard time to finance themselves. For example, YouTube, as the future for television, is considered to have a lot of buried treasure in term of making ad revenue.

The smartphone and you

Gutenberg’s movable type had its financial glitches in the beginning. It then went on to revolutionise the printing world. I guess you already know where this thought process is going. Like the printing press figured out a way to thrive, so will online advertising. And with the future of the world being online, advertising will slowly figure out its place in the whole scheme of things. Till then, I guess the world has to be content in being prophetic about the future of the Internet.

In his article, Weblogs and the epistemology of the news: some trends in online journalism, Donald Matheson spoke of the line being blurred between journalists and readers when readers adopt current technologies. The current trend of the Internet, in my opinion, seems to be social networking sites (SNSs) and blogging. This indicates how much people want to be a part in the creation of the content, rather than being passive consumers of online content.

Blogs allow for news to be in a democratic and interactive space. They (news blogs) may be biased, but if this is what I want to read, I know where to go. For instance, I follow my friend’s blog for goings on in Bangalore, where I come from. This helps me keep track of a very niche interest. And we just learnt how The Rantings of a Sandmonkey got popular!

Industry pundits have redefined the ‘digital divide’ to be more of how to use the technology you own than haves and have nots. Mobile devices are more common than computers. And recent developments like the iPhone and G1 (Google Android) could probably herald a new era where a smartphone will replace your computer. This brings me back to my point that the future will be online, be it blogs, SNSs or even checking mail.

web 2.0 and online newspapers

After reading Gauntlett’s article called “Media Studies 2.0,” I was wondering how web 2.0 could change online newspapers in future. Web 2.0 emphasizes the interactive feature between internet users. For example, it is very easy to see many comments posted by readers under news articles on online newspapers. In fact, these comments are my favorite feature of online newspapers. I always read users’ comments after reading an article. It is very interesting to see how people react to certain issues taking advantage of their anonymity.

In fact, this became kind of serious problem in South Korea in recent years. Internet users sometimes post very offensive comments to some controversial articles to attack reporters and sources. These comments, which are really the direct product of web 2.0, became so powerful in Korea that online newspapers started to censor many of its comments. Some major newspapers in Korea started to force internet users to use their real names when posting comments, not nicknames. What’s ironic about these comments is that many online newspapers also started to put these comments into news articles as valid sources for stories. Reporters often times put these internet users’ ID and comments to reflect what public thinks about certain issues. I find this very controversial. I don’t know if I can consider these random users as valid sources. But then, these comments are indeed what people are honestly thinking, so I can’t ignore these comments either. Is there similar issue like this in America, too? If not, do you ever think these comments will be used in online news article just like Korea?

economist audience thoughts

Reading the article, I wondered if having Semel lead Yahoo hurt the company in some irreparable way. Yes, Semel learned a lot from his daughters and others who taught him about the internet and new media. But are competing companies doing better because or in part because they're led by techier people?

The talk about the Long Tail reminds me of something I've heard about musicians in the new media economy. I don't recall where I heard it first, apologies. Anyway, the statement was that, to make a living, all a band needs today is 1000 "true fans." These people are die hards and go to any show in their area. They buy the CDs and shirts and really enjoy the music. Today, with the advent of the internet, bands can more easily find these true fans and communicate with them more directly, ensuring that they get more of the proceeds of their own works.

As the article was talking about how companies like Google are very different from traditional media companies, especially in that they don't create content, I was reminded of a few videos on this subject. They're kinda old but I'm not sure if y'all've seen them so I'm including links here:

EPIC 2014
EPIC 2015 (an updated version

There is another that I have in mind too. I'll have to try to find it back. But those two are probably more on target for our purposes.

Update: The second one I couldn't remember is: Prometeus

the future of media landscape?

I really like the article in terms of how it can be related to what we are doing here: having a blog and act/write as bloggers. We are a small group indeed, but “such small number is common in participatory media.” We have similar interest (at least to some degree?) and exchange thoughts and opinions here. Each of us benefit from this blog by reading others’ posts and comments.

Having a personal/group blog is more common now than three or five years ago, and just as the reading suggested, maybe in five years, everyone is going to have a blog, just like everyone has (at least) an email account now. How many email accounts do you have? How many blogs do you have? Compare with what you had five years ago, what is the percentage of growth? So where does this technological development or growth take us to?

Of course I cannot foresee the future, but somehow I believe in the potential of mobile devices. Something similar to iPhone or GPhone. I do not mean mobile devices will replace our desktop or laptop computers (even though it is possible), but I think a great amount of people want to be connected, either by phone or by the Internet, or both. They might not want to talk to a real person all the time, but they want to be connected to the (cyber?) world more often, especially those who grew up with broadband Internet and their sidekicks.

Here's a blog post of the next Internet.

How the “head” survive in the economics of long tail?

Two comments from the Economist article intrigued me to think: what will be the traditional media’s strategy to survive in the era of participatory media?

First, Rupert Murdoch said,"[the newspaper] have to become the place for conversation. The digital native doesn't send a letter to the editor any more. She goes online and starts a blog. We need to be the destination for those bloggers.

Second, “it's not content until it's linked,” said Jeff Jarvis, a former journalist and newspaper consultant, “and bloggers will not link to articles that require logins and subscriptions to be viewed.”

Those ideas are related to the long tail rationale, which argues that the creation and consumption of the large continuum of niche content can become a successful business model in the new media environment. As seen on the graph that shows “links from blogs to sites”, the mainstream media as the “head” in an economics of long tail still much needed as the source of information especially with its expertise in terms of gathering and packaging the news. I think the “head” have a chance to success only if it finds a good way to connect with the long tail or even become origin of the long tail.

Another thought I have is that the long tail argument may solve the mystery that we saw from the readership data Dr. Chyi presented in class. Why would Yahoo become such a hot place to get news? Maybe because the portal sites offer so much things to do, which create a long tail of audience with diverse reasons to be there. And this long tail happens to contribute to the news viewing for the site. However, the news viewing may just be a by product of something more fun to do.

Redefining media economics in an era of participatory media

For class discussion Monday, I'm pulling out some key points made in the Economist chapter that asks, "So what is a media company?"

... unlike in television, say—“you don't need hits”. Many small audiences are as good for advertisers as few large audiences, and indeed may be better. This has huge implications for content, turning it into one long continuum—from professional to amateur, from blockbuster to subculture niche. Chris Anderson of Wired magazine calls this stretched statistical distribution “the long tail”. In his forthcoming book of the same title, Mr Anderson argues that old-media economics, which are biased toward the hits at the “head” of this distribution, are being replaced by new-media economics, which allow creation and consumption along the entirety of a much longer content tail.

(Speaking of Chris Anderson, he was quoted in this series talking about the importance of having "liquidity" in the marketplace of ideas online ... and in other places we saw hints of this notion of "liquid life" (think: Zygmunt Bauman) ... just found that interesting, that the defining way in which we talk about this era of participatory media is to emphasize its instability and uneasiness.

The analogy to marketplaces has another important implication: network effects. The value of networks (such as the telephone or postal systems) and exchanges (such as eBay or the New York Stock Exchange) increases dramatically as the number of participants rises. Once achieved, network effects also become barriers to entry by rivals. If they are looking for an exchange, for instance, both buyers and sellers will gravitate towards the market with the greatest liquidity in a given share or bond.

This is why a lot of new-media companies are now hurrying to create marketplaces with network effects before somebody else does. YouTube, a start-up launched about a year ago, lets people upload and share their own videos. It already transfers more data each day than the equivalent of an entire Blockbuster video-rental outlet. It goes without saying that Time Warner's AOL, Google, Yahoo!, Amazon and other internet companies are also working to exploit network effects.

This race to become the most liquid media marketplace has just started, and the winners are not yet obvious. But the giants, Yahoo! and Google, do have a head start. They already have network effects in their advertising, and emerging network effects in some types of media (text-based blogging, say) that can be transferred to other types (such as video). That is because the distinctions between different types of digital files are becoming increasingly unimportant (assuming a good broadband connection). To savvy teenagers, it's all just stuff passed around among friends.

Also, I thought this was an interesting concluding statement:

Some people worry about what the new media will do not only to democracy but also to brains, thoughts, grammar and attention spans. These concerns usually arise out of encounters with teenagers in their native habitat—ie, in front of screens with several simultaneous instant-messaging “threads” (“cu2nite bfz4evr”—“see you tonight and best friends forever”), besides iTunes and a video game running in the background, blogs in the foreground, and homework in the small window to the bottom right.

Other people are not worried at all. Steven Johnson, the author of “Everything Bad is Good for You”, argues that the very things about new-media culture that scare older generations actually make younger generations smarter, because participatory media train kids from an early age to sift through and discard clutter, thus “enhancing our cognitive abilities, not dumbing them down”.

Linda Stone, a former executive at both Apple Computer and Microsoft and now a consultant, argues that the affliction of “continuous partial attention” is in fact a hallmark of the era that is now ending, not the one that is starting. For the past two decades, Ms Stone thinks, many people have felt overwhelmed and anxious, constantly afraid that they could miss out on social opportunities if they concentrate on any one thing. This is now producing its own backlash, Ms Stone argues, because as people “long for protection and meaningful connections, quality over quantity”, they are “discovering the joy of focusing”.

Many new-media companies understand this, she says. Just as Google calms the chaos of the web with a clean white page, other companies are working on the filtering technologies that could—counter-intuitively, perhaps—make the era of participatory media more serene than the era of mass media.

My stock portfolio

I'd like to do this assignment too!

My picks:

(with confidence)
Amazon: 50 shares x $72.41 = 3621

(with trust and some excitement)
Google: 9 shares x $447.44 = 4027

(based on perceived potential)
Baidu: 8 shares x $267.7 = 2142

(with curiosity only)
NYTimes: 14 shares x $14.72 = 206

Total: $9996

Current status: US ad spending in steepest drop since 2001

http://www.reuters.com/article/marketsNews/idINN2437097620080924?rpc=44&sp=true

This may change many of the assumptions made regarding newspapers' online and print revenue projections.

My stocks and points for discussion

First, some links that might be useful for our discussion today ....

Google Trends for websites


On web statistics

... also, because we're talking about advertising, one of the best places I've found for following trends at the intersection of new media and advertising/economics is iWantMedia.com. Check out their daily e-mail update.

Now, for my stock picks:

UPDATE: It looked pretty ugly before ... let's try again:

Google: 10 shares, $4,393
Apple: 27 shares, $3,496
Amazon: 30 shares, $2,139
Total: $10,029

Stock choice

Who knew that 10K is so little to invest in stocks? Perhaps it is my choice in stocks. I decided with the new unveiling of the Google phone and the phenomenal Google presentation by Kim, to invest it all in Google. I only could buy 23 shares and spent $9890.00. As of today, I've already had a 2.3% increase in my shares.

rss ads

The Business Week article mentioned RSS feeds as a factor which decreases the number of page views on blogs and other sites. This skews visitor stats and thus ad rates and the like.

However, RSS has also had a couple other impacts on the online advertising world.

Many RSS feeds actually include ads at the end of each entry. This seems like an important detail that the Business Week article neglected altogether. Furthermore, experts have also noted some interesting distinctions about RSS users vs normal site visitors.

RSS feeds can either consist of the full content of articles or just teasers for articles. Some groups even just use RSS to list headlines, neglecting any body text at all. (I would argue that these people are using the technology improperly but that's really outside the scope of this discussion.) Anyway, at least one RSS expert declared use of teaser text as a kind of ad. These "ads" serve to drive readers to the site to read the full article.

final stocks

symbol shares price/share total cost
atvi 1160 $15.82 $18,351.20
goog 145 $438.23 $63,543.35
nflx 580 $31.18 $18,084.40

$99,978.95

EDIT: Eeek! I can't do math.
Revised:

symbol shares price/share total cost
atvi 116 $15.82 $1,835.12
goog 14.5 $438.23 $6,354.33 <-- can i have a half share on account of the fact that i can't do math?
nflx 58 $31.18 $1,808.44

$9,997.90

Stock Choices

SOHU.com X 50
Baidu.com X 15
DreamWorks Animation X 97

investments

Baidu.com = 15
Walt Disney = 70
Sohu.com = 60

baidu.com = $263.50 = $263.50 x 15 = 3952
sohu.com = $58.90 x 60 = $3534
disney = $32.53 x 70 = $2277

Total = $9763

online advertisements

After reading “Web Numbers: What’s Real?” from Business Week, I wanted to talk a little about the effectiveness of online advertisements. Personally, I find online advertisements to be one of the most ineffective advertisements. Surely, it could reach a lot of people, but reaching doesn’t mean it gets users’ attention.

I think the main reason for the ineffectiveness of online advertisements is the “skip” button. Unlike TV ads, which I basically have no control over, online ads make it easy for us to avoid it by simply providing the “skip” button. Don’t get me wrong here. I am not claiming to remove the skip button on online ads. It will certainly make a lot of people mad if we are forced to watch or read ads on internet and have no control over to simply skip it. What I want to emphasize here is this: it is probably very difficult to give our attention to online ads especially when we are surfing the internet to find information of our wants.

Let me talk a little bit about an advertisement strategy of a Korean Web site called “mncast.com.” This Web site is like a Korean version of Youtube. What’s interesting about this Web site is its method of putting advertisements. In order to watch a video, you have to see a 30 sec video ad at the beginning of the video. You don’t have skip button for these ads. All you can do is either watch the ad, or look elsewhere for the 30 seconds. These advertisements, however, don’t happen for every time you view videos. It happens randomly. From my experience, I would say the ad appears about once in eight videos I watch. I thought this wasn’t too bad. Besides, since the ads are videos, I usually pay more attention. I don’t pay any attention to ads that are basically banners with a skip button on it. Surfing this Web site made me curious about Youtube. Will Youtube try to put ads in this kind of system? If this happens, will this system work for American people? Or could there be better ways to put effective advertisements on big video Web sites like Youtube?

stockes decision

google: 16
disney: 30
deutsche telekom: 60

logitech: 40

Web advertising 2.0

Google showing me advertisements that pertain to my mail is something I don’t think I’ll ever get over. Has it spooked any one else, or am I just paranoid? But apart from getting spooked, I don’t think I ever bothered to click on any advertisement. I guess it’s the same with everyone else because all we look for is the ‘skip’ button when advertisers try to get past passive advertising and fill up your screen with an advertisement. So this doesn’t really say much about online advertisements.

While it can be a bad thing when people look for the ‘skip ad’ button, I guess it is also a good way of marketing because you remember the advertiser for being annoying. Also, advertisers are making new models with online advertising. From the ‘per click’ model to spamming, marketing experts have figured out a way to the bank.

But for all its popularity, online advertising seems to be relatively fickle as compared to advertisements on traditional media because finding target markets is elusive. Google CEO, Eric Schmidt has spoken several times about online advertising, saying that Google is looking for the holy grail of online advertising – a model that will rake in the money.

Like an article in Publishing 2.0, said:
"Search advertising is probably the most scalable advertising platform in the history of advertising and marketing. But ten years into the promise of the web and new media to transform advertising into an ROI-driven marketing engine, the success of keyword-driven pay-per-click text ads is the exception, not the rule.

The problem is scalability."

With online advertisements picking up on tag words, showing the same ad might not work out. Advertisers need to make different advertisements for different tag words. So is it going to be an era where online advertisements will be all about text and no images?

online news and relevant advertising

I was thinking how news Web sites can make the advertising showing up on their Web pages relevant to their users.

It is hard. When we see an (full screen) ad on a news Web site like the other day in class, what we did was to look for the x button. We do not like being interrupted by advertising, especially irrelevant ones. But making advertising relevant to a specific user requires sufficient knowledge of that specific user. We rarely give out adequate/true information to news Web sites. This is where portal sites such as Yahoo, AOL, and especially Google can gain a great chunk of the pie. They profile their users.

Here is a post describing with google phone, how google will profile each individual user precisely. Another thing not in the post but I saw on another youtube video is (unverified info) when a user use google phone to take a photo and with 3g network, the phone tags the current location to the photo automatically. 

Anyway, as we see in class on Monday, google devotes 70% of its effort to search and advertising, 20% to something and 10% to the rest. No wonder google news does not have a user friendly interface, yet. It's probably not yet on the to-do list. As we see google plans to start digitizing print newspapers, I do think google has an interest in news, or an interest in constantly updated information. With it devotes 70% of its effort to search and advertising, when they profile each individuals precisely, would the combination of the three make most users use google news and make most advertisers reluctant to spend money on any other news Web sites? 

Google does not produce any news products. Will there be new business models or partnership between google and a news organization? similar to the partnership between google and t-mobile for the google phone? 

Google, Ads Monopoly?

The search engine ads seem to be the buzz word for online advertising nowadays. I find this recent NYT article particularly interesting: it points out when placing ads on Google, not the advertisers who paid the highest price received the most displays.

Google does better supplying search ads partly because it has a larger inventory of ads. But it is also the result of the algorithms Google uses to select which ads are displayed. The auction systems at all the search engine sites incorporate some complexity. They don’t simply award places to the advertisers with the highest bids. They also factor in “quality scores,” based on the advertiser’s prior history and the relevance of the advertiser’s own destination page to the search term. The higher the quality score, the lower the price that the advertiser must pay to be chosen to appear on a page. It’s widely acknowledged in the advertising industry that Google’s software comes up with matches more likely to bring customers to advertisers who will complete a purchase than do systems used by other search engines. Advertisers pay more to bring in those customers.

What would this add to the recent anti-trust litigation against Yahoo and Google? Would Google become the “evil monopoly” who can set the ad price as high as they want?

Reinvestment and newspaper companies

"Reinvestment is the return of profits to a firm to further develop the company and its activities. If profits are continually taken from a firm without reinvesting an adequate portion in the company, it is denied resources needed to help it improve its operations, grow, and remain competitive." (Picard, p. 236)

Hmm, is there a better description of the present demise of newspaper companies in an era of unbundling?

As we learned in the readings this week, media companies (including newspapers) need thriving financials to justify further capital investment ... and yet, during the 1980s and 90s, when newspaper profitability was stratospheric (20% margins were practically the norm), there was precious little investment in R&D, innovation, and other creative measures that would have better insulated newspaper companies from the catastrophic disruption created by Web economics.

Perhaps in something of an update from Picard, in 2006 he warned of dire days ahead for newspapers with little investment in innovation:

"... But if any of these newspapers are to survive, capital investment will be essential to their ability to function now and to innovate for future growth. To warrant investors' dollars, new revenue streams must be found; keeping revenues stable will not suffice. Achieving this, however, will call upon levels of creativity, innovation and entrepreneurship infrequently found in newspapers in recent years."

Market indications

The industry has been up in arms about the state of traditional media and the rise of Internet news media. But the changes in demand have pushed these media companies to respond to these shifts in demand. And like Picard pointed out, large-scale demand changes can be caused by the age of the users. So they brought out their own Web sites.

With the number of people going online for their news feeds for the day, it is obvious to foresee where the Internet is taking us. And if this becomes a trend for the next generation, where does this leave power-houses like the New York Times and Washington Post? Maybe with just their online presence?

But I digress. If it is safe to assume that there will be a permanent change in demand, then where does this leave newspapers? They have tried to be a 'constant-cost industry,' where there is no change in price of the product. Apparently, this hasn't worked either (refer the case of the Austin American Statesman).

Advertising online seems like a cheaper option for many advertisers, streamlining the workforce and cost cutting can only be done to a limit. So what next?

Media firms' financial indicators

This NYTimes article compares Google and Microsoft across several indicators:
http://bits.blogs.nytimes.com/2008/09/04/google-at-age-10/

A recent article on how Tribune Co. measured journalist productivity:
http://www.ajr.org/Article.asp?id=4594

financial health indicators

As we see in the reading that there are indicators for economic health and financial health (Picard, p.230), I think it is harder for me to identify financial health indicators now. The numbers are very overwhelming. Here's why I started looking at GOOG's balance sheet:

In Business Week's Best Brands of 2008, Google ranks the 10th, a huge jump from the 20th of 2007 ranking.The brand value is $25.6 billion, which is a 43% increase from 2007. After reading the chapters, I want to know what does this $25.6 billion mean, so I started looking through GOOG's balance sheet.

For me, economic indicators seem to be more straightforward. For example, for economic health, when ComScore reported that google's search engine share increased from 61.9% to 63% within a month, it seems to me to be a growth in market share: an indicator for economic growth.

Picard's chapters are helpful in terms of explaining financial indicators, such as the definitions of assets, liabilities, and debt, but applying those to real world is difficult.

In Millions of USD (except for per share items)	As of 2008-06-30	As of 2008-03-31	As of 2007-12-31	As of 2007-09-30	As of 2007-06-30
Total Current Assets	16,316.84	15,464.93	17,289.14	15,733.76	14,857.52
Total Assets	29,179.79	27,604.98	25,335.81	23,340.65	21,423.88

The table is obtained from Google Finance. As you can see for GOOG, there are total current assets and total assets. I am not exactly sure which one to look at when or which one is more important when deciding if a company is financially healthy. There are some ups and downs for total current assets and the total assets grow constantly. I think overall it looks pretty good? But I still did not find where the $25.6 billion (in Business Week) come from......

Media Financing

The credit management part of the reading reminds me of the rationale behind investing in the mobile phone message service by portal websites in China shortly after the year of 2000. Since the number of cell phone users has grown rapidly during that time, the portal sites think that asking consumers to pay a small amount of fee for weather forecast, IM, music downloading, playing online games etc will be very profitable. The risk to collect the credit is limited because all the fees are charged instantly through the cell phone bill (In China, people use pre-charged cards instead of service plans to pay the phone service). So far the cell phone message service (included text, images, audio or video) has proved to be the major contributor to portal sites’ revenue.

One recent article on NYT, asked a very interesting question:” How Many Web Services Can One Person Use? It fits into the discussion of “changes in demand”, in which the new media is often regarded as having advantages of generating new demands. But according to this article, it may not necessarily be the case, since ““The biggest chasm is no longer between early adopters and mainstream users. It is about finding and retaining the early adopters to begin with…”. When we are excited about the large number of users of a particular new media, the right question to ask might be: will the number still be the same or grow when another wave of newer media is coming into the market? Or the truth might be “to get someone to use a Web service now you have to get them to replace something else in their life”.

Picard's reading

In class, we discussed a little about R& D and how newspapers do not like to conduct research because they do not feel the need to. They are a monopoly in an area so they find it unnecessary. In Picard's reading of chapter eight where it states that research is unpopular because there is a highly negative cash flow since there is nothing sold and cost being occurred, perhaps this is part of the multiple causation attributed to the decline of print newspapers. For a long time, newspapers have been almost the gospel of towns. What the newspaper reports is important, worthy of your attention and is the voice of authority but that no longer is the case. With newspaper companies shunning research, they have contributed to their decline today. They haven't kept up with the happenings of a rapidly changing world and now they've awoken to an audience who no longer welcomes them. Perhaps they should alter their perceptions and view research as a form of investment that will pay off in the long run? Could this be possible?

Stocks

Discovery channel

National Geographic

www.sina.com (is this publicly traded ?)

My stocks

I changed my initial stock choices from Time Warner and CBS corporation to two big Korean corporations. So here are my new choices:

1. NHN corporation. (I changed my third choice from CBS Corporation.) NHN corporation is a Korean corporation that owns a biggest search engine in Korea called "naver." This Web site is like a Korean version of google + yahoo.)

2. Daum.net (The second largest search engine, and the biggest e-mail provider in Korea.)

3. Walt Disney Co. (Owner of ABC and ESPN)

This article from New York Times explains a breif history about naver.com and how it operates.

my picks

I'll take the major newspaper companies (can I have more than three?):

NYT (New York Times Co.)
WPO (Washington Post)
GCI (Gannett)
MNI (McClatchy, my former employer!)

and Morris Publishing Group, if they're publicly traded (appears they're not?)

stocks

Apple
Amazon recent activities

Yahoo

media stock investment plans

Here are the three companies I would like to invest in:

Thomson Reuters

I want to invest in this company just because they bought over one of the worlds most trusted news agencies - Reuters. Thomson Reuters is currently the world's largest international multimedia news agency, on video, mobile, and interactive television platforms. It would be interesting to see what the company is going to do after this merger.

In April 2008, The Thomson Corporation bought over Reuters Group for nearly 16 billion dollars. In the first week of September, JP Morgan named Thomson Reuters as a top pick in the European publishing sector. According to Forbes Magazine, Thomson-Reuters is the largest entity in the financial data area with approximately 34 per cent of the market share. Bloomberg, a privately held information service, has 33 per cent of the market with about 20 other firms splitting the rest of the market.

Warner Music Group

The company went public in May 2005, and operates through two businesses: Recorded Music and Music Publishing. Its Recorded Music catalog includes albums including The Eagles and Led Zeppelin IV. Its Music Publishing business holds more than one million copyrights.

The company announced today a series of corporate management appointments, effective immediately, to further drive progress on the company's strategy to identify and exploit growth opportunities in the evolving global music business.

News Corporation

News Corporation is a diversified global media company with operations in several media industry segments including television, cable network programming, newspapers and book publishing. The company is operational in the United States, Continental Europe, the United Kingdom, Australia, Asia and the Pacific Basin.

The company recently acquired MySpace, one of the fastest-growing entertainment sites with 15.5 million unique visitors in May, according to comScore Networks. That's up from one million in June 2004.

my stocks

I'd like Google (GOOG), Activision Blizzard (ATVI), and Netflix (NFLX).

If any of these aren't appropriate for our purposes, please let me know.

Google, a small web search company that you might've heard of, has recently been pursuing an advertising partnership with Yahoo. They recently bought a Korean blogging company, TNC, and have added "follower" features to their current web-based blogging software. One news columnist says that this kind of community creation put Google "On a Collision Course with MySpace and Facebook." Google is also about to release the much anticipated Android phone.

Activision Blizzard is set to release the second World of Warcraft expansion in November. The company releases Guitar Hero World Tour in late October. Barron's recently predicted that game "Game Sales May Power Up After Slump."

Netflix has recently secured permission to run applications on the Yahoo site. Goldman Sachs Asset Management, an institutional investor, just doubled its stake in the company.

Media companies

My three media companies:

Baidu.com which is the number one search engine in China and more...

Sohu.com is a portal site in China like Yahoo.com.

I also want to talk about News Corporation.

Is Google a monopoly?

It's a question worth considering this week as we examine market structures, and consider where media companies and products fit in the context of the theory of the firm. Jeff Jarvis takes this up in a blog post titled "Google: Monopoly or Marketplace?"

... the issue isn't that Google is a monopoly. It’s that Google has become the marketplace. It where we all go for information. It’s where advertisers go for us.

It’s no different from a newspaper. Even when there were two papers in towns, one of them was the marketplace for homes, cars and jobs. That allowed the paper to set rates as high as the market could bear, which was very high. Google would say the difference is that it doesn’t set rates, the market does in auctions for keywords. Except in this case, by punishing Sourcetool, Google did set the rate. And it has the power to do that.

craigslist is also no different, except that Craig Newmark set most rates at zero. He’s the marketplace now and now that he has us by the neck, he could raise rates — as eBay did once it dominated the marketplace it created (though that invited competition from Amazon, Etsy, et al).

In his Guardian column on the subject, Jarvis writes:

But the problem with going after Google is that - unlike typical monopolies - it didn't steal its booty like a pirate in the night. It didn't win by being closed and proprietary. Google won by being open and distributed - which is not the image of the monopolist. The rest of the marketing universe, from media companies to advertising agencies, handed Google its dominance on a silver platter.

In other words, Google has become a monopoly of sorts, and remains that way, because consumers and advertisers have made it that way (e.g., newspaper companies spend big money and time optimizing headlines and keywords to win the SEO wars). ... Just something for us to chew on during class.

local newspapers

Reading about product competition inspired me to think about newspaper businesses in South Korea. The United States has only few national newspapers while it has numerous local newspapers. It was my impression that Americans liked to get news from local newspapers as much as national newspapers. However, South Korea has completely different issues. It has many national newspapers and these national newspapers are what most people get the news from. On the other hand, people seem to care much less about local newspapers. I know that many local newspapers are dying because they simply could not compete with national newspapers. The amount of content and quality of the local newspapers are almost incomparable to national newspapers unlike the United States.

I wonder, can there be ways for these local papers to become competitive in the local area at least? Focusing on local issues do not seem to have the strongest asset in Korea unlike the local papers in the United States. Since South Korea is such a small country, the national newspapers cover a wide variety of local news in great details.

I guess what I really want to ask here is “how can these local newspapers differentiate their products from national newspapers other than merely focusing on local news? Is there a way to save these local newspapers from disappering?”

Online product differentiation

After reading about product competition, I was wondering how it really applies to the news market. In my opinion, I have several sources I get my news from and it really does not matter which one its from. But what I’m interested in is: With more media companies establishing an online presence, is it safe to assume that the online entity is another product?

Newspapers, radio stations and television channels are looking for ways to establish a larger online presence – complementary to their traditional medium. But since most of the content online has been ‘shovelled’ from the traditional medium, it is still another product? I prefer following news on CNN’s website more than on the television. So does this mean that I still like the same product? To what extent is the product differentiation?

September 15 readings

In chapter 9 that discusses product competition, the success of the VCR reminds me of the current iPhone applications. With Sony's Betamax, Sony did not permit other manufacturers to improve upon the Betamax standards whereas JVC encouraged others to improve the VCR's standards. With the iPhone applications, Apple has allowed others to sell their applications to iPhone customers and it is up to these outside manufacturers what they would like to charge or how their applications work . As long as it's compatible with the iPhone, all is good to go (am I correct in this assumption?) This move from Apple reminds me of JVC's strategy. Although it is not an exact similar situation, Apple has allowed outside manufacturers to tout/sell their products (applications) which are only useful in the iPhone. So - is this a brilliant move by Apple? Now the manufacturers of these applications will inevitably be working towards the success of the iPhone as well because the success of the iPhone will mean the success of the applications.

Market structure in the era of convergence

By reading the chapters on market structure, I do understand the differences among four types of market, however, I think it will be hard to identify the characteristic of news media market at least not as clear-cut as those are described in the textbook. Especially in the current trend of “multimedia journalism”, which converge text, video and audio together to present news. When the news products are a bundle of services, it is increasingly difficult to argue whether the product differentiation can keep the traditional news outlets separately in the markets of newspapers, network TVs, Cable networks, etc.. Or it may bring all the news media to the same play ground to form a single “news market”. (Isn’t it already happening?)

In this line of thinking, I am wondering the product differentiation, the entry barrier and whether the media firm is sensitive to the price changes of other competitor in the market, all those hard lines can define the market either as Monopolistic competition or Oligopoly or else may become blurred. Just looking at the data in Jacie’s post, would the news on Yahoo or on CNN.com make a difference to online news users? Would Yahoo or MSN be considered as competitors (in terms of online ad revenue) by CNN.com? Also, would CNN.com and Yahoo have the same entry barrier as an online news organization?

concentration of online news industry

HMF is making me really really dizzy, so I decided to start with Picard's piece then a little on HMF…

If we wish to measure market concentration or measure the degree of market competitions, both according to HMF and Picard, what we need to do first is to define our industry (market) and identify firms that comprise the industry. For a news Web site, name it MSNBC or nytimes.com, what is the industry and which companies comprise the industry? Can they answer this question or can we answer this question (I cannot……)?

Picard argued there is seldom direct competition among media, such as newspaper versus newspaper, but different media compete with each other for audience time and expenditure (p. 139). Competition among and between media can be understood as: intermedia competition and intramedia competition. These two take place simultaneously, and I guess this is one of the reasons why we find so hard to define the industry of online news.

To define online news industry, we can first start with U.S. based English news Web sites. Then second, in terms of intramedia competition, we include all U.S. traditional news media (TV, print, radio, etc). Third, in terms of intrmedia competition, we include all U.S. based new Web sites, which are countless. Fourth, we cannot ignore portal sites (in PEW's 2008 news audience survey, Yahoo was name the most frequently visited news site, p.22). And fifth, if the competition is for news users' time, how should we account for multitasking?

Here are the top eight most frequently visited news Web sites from Pew's news audience survey
Yahoo—28%
MSN/Microsoft—19%
CNN—17%
Google—11%
MSNBC/NBC—10%
AOL—8%
Fox—7%
NYT—4%
Local news Web site—4%
(other Web sites are 2% or lower)

But if we look at online news only at this point and ignore the traditional media (TV, print, radio) just for a second, using Pew's data, we can roughly see how concentrated online news industry is (even though it is survey data instead of industry data). Adding up the percentage of the second table on p.22 of Pew's report, it is added up to 122% because multiple responses by a user were accepted. Adding up the percentages of the first four (from yahoo to MSNBC), we have 57%. If we manipulate the numbers proportionately, we have CR4=49.72 (122%: 57% = 100%: 49.72%). Using the same method, CR8 would roughly be 65.57%. We have both CR4 and CR8 for online news to be moderately concentrated. They are higher than the CR4 (42%) and CR8 (48%) of print newspapers Albarran and Dommick have in our HMF text p.147. What does this mean is… this moderate (or almost highly concentrated for CR4) concentrated online news industry is consistent with oligopoly I guess?

iTunes and iPods

As I was reading HMF this weekend, I kept thinking of iTunes and iPods and the market dominance that they've had. At the start of the year, iTunes sold about 80% of legally downloaded music according to Wired magazine. iPods, meanwhile, accounted for about 70% of mp3 players sold by units and 84% when measured in dollar volume according to Fortune magazine. Clearly they have huge market shares which are relatively close to being monopolistic. They blow the concentration ratio measures out of the water.

In section 7.2.1.1 of the HMF reading, we learn that if the sum of the percent market shares of the 4 largest companies are greater than 50% (CR4 >/= 50%) or the sum of the percent market shares of the 8 largest companies are greater than 50% (CR8 >/= 75%), then the market is considered highly concentrated. According to the Wired and Fortune numbers, then, even if iTunes and iPods were divided up between 8 different companies, they would still compose a highly concentrated market. (This is untrue, of course, for the unit sales of iPods, however, the fact that even this number is close to making this statement true in part proves my point.) the Hirschman-Herfindhal Index can't be applied to this case because I don't have the market shares for all competing companies readily available.

There have been some questions, as mentioned in the Wired article, of whether iTunes will lose market share as other services are able to offer more Digital Rights Management free files, songs, music and albums. So far, Apple says that iTunes market share has only gone up since the release of more DRM free songs by other services, but I find it interesting that the New York Times article doesn't include any specifics; Perhaps Apple didn't go into substantive details?

Also, I wonder exactly how these markets would be characterized? Are mp3 players and digital music monopolies or oligarchies? (Or maybe neither?) There is really only one firm to speak much of in each market but in reality there are a relatively large number of not so well known firms as well. Also, there are barriers to entry in that it's hard to break into Apple's market share and well known state. Which is it? (Apologies if the text addressed this question at some point, my eyes started glazing over at the game theory section. I haven't had good experiences with game theory.)

Applying econ to today's (digital) journalism

Something I'm thinking about as we talk economies of scope, economies of scale and the like: I'm having difficulty envisioning these traditional econ concepts within the framework of contemporary journalism? How do we put them in the context of "liquid" journalism? What is the short run, the long run, and the *very* long run ... when everything feels like a hyperactive, rush-rush race to find a business model online? What happens when the supposed "long-run" technological changes feel very short-term, dizzying in their speed and precarity?

These are just random musings, I realize, but I hope we can discuss further in class ...

riaa

Section 5.4.4 Returns to Scale in Media Goods talks about the increase in sharing and downloading files.

"With digital downloading from the Internet available, or becoming available, for all these goods, the marginal cost of additional copies is fast approaching zero. This has resulted in a huge piracy problem for recorded music and is becoming an issue with movies. To counter this, the RIAA has instituted legal action targeting the makers, and very recently users, of share-swapping software."

First, I had some issues with the way the text approached this. When talking about the advent of VCRs, there was little discussion of the legal implications of how people were using them. People were recording TV shows and sharing them with others. Did not this threaten the entertainment industry at the time? Did the industry not try to put a stop to it? Please tell me if I'm inaccurate in this, it was a little bit before my real cultural awareness set it.

Anyway, those issues not withstanding, I did think this was an interesting view of the phenomenon of file sharing. I guess it was kinda implicit or understood but I never really thought of file sharing from quite this economic perspective. The reason it's so easy to share files is because of the very very low marginal cost.

print vs. online newspaper

After reading the textbook and classmates’ posts, I’ve come to realize that newspaper business is having one of the most severe transitional times of its history. Due to the fast development of various technologies including internet and mobile access to the news, newspaper businesses are probably busier than ever to analyze consumer behavior and the market to produce the most revenue at the lowest production cost possible.

However, as some of us have already mentioned, it is extremely hard to figure out the equilibrium point or the most efficient production cost when value of every variable costs are changing so fast. Since it is so hard to predict the future of print newspaper and online newspaper, would it be better to focus short run rather than long run for the production cost?

Also, it may be too early to tell, but I think there is a possibility that print newspaper could disappear in future if it keeps diminishing just like it has for the last 10 years. I remember reading an article that says newspapers in general are making more money from advertisements on online than ads on print newspaper. (I am talking about same newspaper, say, NYT online ads vs. NYT print ads). I could be wrong about this since I don’t remember the specifics about the article. But, let's assume for now that my memory serves me right. This could suggest that online newspapers are becoming more valuable for reaching maximum revenue, considering that about 70~80% of newspaper income is coming from advertisements, not subscribers.

This means online newspaper has lower production cost and higher income from advertisements than print newspaper. If this was true, would it be wise for newspaper businesses to focus more on online newspaper? Or should they keep trying to bring the popularity of print newspaper back to way it used to be about 20 years ago?

Newspapers n demand

The newspaper industry has been undergoing a(n) (r)evolution, if you will, fighting against the big bad world of the Internet. Not that the newspaper industry did not have a threat from other media like television and radio, but simply because the Internet is free and unlike television or radio, newspapers are in a rut as to how to increase supply.

Various newspaper companies are pumping huge amounts of money into the research and development of new ideas that will revolutionize the print industry. But so far, none of the “theories” seem to be working. Apart from well-established names like the Washington Post, New York Times and local newspapers like the Austin American Statesman, newspapers are struggling to keep their heads above the water. To increase supply, they need to radicalize their approach. They can’t slash prices to increase supply because this would further injure their revenue. And even their marginal increase in subscription (if at all), does not seem to be helping increase revenue. Also, advertisers would rather spend more and get a spot on television or radio and get heard, rather than place an ad in a newspaper and risk minimal exposure. And streamlining the industry and cutting costs in the newsroom is not going to increase profits: it would only bring down productivity and the overall quality of the product. Either way, it seems to be a lose-lose situation for the newspaper industry.

However, I would like to bring to your notice that there are several new newspapers springing up in all corners of India. There, the newspaper industry is flourishing like never before. Severe competition is forcing newspapers to introduce new sections and more innovative content. And it is not like India does not have Internet. It does. And a lot of people do go online for news. So I guess, what I am trying to say is: Why is it not working here?

Production and Revenue

Two recent news of New York Times have illustrated how the newspaper industry tends to reduce its fixed cost in order to survive the financial hardness. To reduce the sections printed in the NYC metro area, NYT executives promised that “Given the business challenges we face, we are constantly looking for ways to reduce costs that do not affect the quality or quantity of the journalism we provide to our readers”. Also, the reduction to four section is only used to ease the cost of printing paper, but it does not affect the online version. Another recent incident of reducing production cost from NYT involves the cut on distribution cost, which shut down a subsidiary that distributes in the NYC area. In the long run, when the equimarginal principal applied, what kind of input mix should the media firm like NYT choose to maximize its output? Would the choices inevitably harm the quality of production?

The economies of scale can explain why many traditional media moves online. By reproducing the same content on the Internet, media companies can achieve a larger scale. Especially, as the example given on page 97, the television program can benefit a lot from selling additional copies. As the TV station posted their news videos online, the news may be consumed by a larger population, which includes those who can not watch it when the program is broadcasted on TV. However, the problem may occur as Picard (yes, the one who wrote the other text book used in this class) wrote in his blog post “how to obtain revenue for content distributed by digital media and how to share revenue from those downloads.”

ch 5 & 6

I never gave too much thought on the supply side, at least not until now. So, being an ignorant amateur, let me try to articulate what is on my mind now. Do bear with me.

Newspaper companies have fixed costs and variable costs, fixed costs being their printing machine, computer servers; variable costs being the paper and ink, the staff members needed for news production. When newspaper companies are making less profit now, they gain less in terms of total revenue from subscription number (or subscription fee) and advertising revenue. Since from the economics perspective, profit equals total revenue minus total cost, if the newspaper companies are saying they are not making profits, this should mean their total cost is bigger than their revenue.

There are two ways a newspaper company can do to make the total cost to be smaller than total revenue: decrease the total cost or increase the total revenue. I think I see newspaper companies worry about their total revenue more than worry about their total costs. They ask why people (especially young adults) do not read newspapers anymore and worried about their advertising figure decrease year by year.

They do worry about the total cost, but more often I see them cutting off staff members, which is a reduction of a variable cost. The other variable cost is the ink and paper, which the newspaper companies are not yet willing (or willing but not yet ready) to give it up. And indeed, the ad revenue and subscription fee obtained from the print might still be bigger than the total revenue gained form their Web site, but if I remember it right, the total ad revenue for print newspapers in the U.S. is decreasing and the total ad revenue for their Web sites is constantly increasing over the past year. I will look into that and possibly bring the number tomorrow.

However, what I feel is it is not the newspaper companies’ fault. With the new technologies and new platforms, the equilibrium point is not yet reached.

The Internet and the law of diminishing utilities

I would like to pick up on the Law of Diminishing Marginal Utility and put it in context to the world of internet news and newspapers.

While I was in India, I read the newspaper and had breakfast – maybe it was a tradition in my household. But that is what you did in the morning – sipped hot coffee and read a crisp and neatly folded newspaper first thing in the morning. But I have to admit that this was at a time when I did not use the Internet at home apart from checking mail and other sundry networking reasons including Linkedin and Facebook. In the first semester I was here, I subscribed to the Austin American Statesman and the New York Times. But somewhere along the line, I forget when, I didn't see the need to read the newspaper - considering I was perpetually online and had news updates popping up from the various feeds. And I doubt I will subscribe to newspapers henceforth. But like they say, old habits die hard, so might pick up a newspaper once in a while.

I also have to agree with Nan that news consumption is built as a habit, where people have several news sources that they usually get their news from. But in the free-for-all circus that is the Internet, how does diminishing marginal utility hold good in terms of newspapers? People have more sources of news online from blogs to news websites. So why would they subscribe to newspapers?

Thoughts on Chapter 4

What I am about to say is probably a dumb question, but this question kind of popped up when I was reading chapter 4.

After reading sections on “The Law of Diminishing Marginal Utility,” I wondered if there could be any exceptions to the law. The authors gave us examples on service goods like long-distance calls and movie tickets. I certainly agree that utility diminishes as more amount of these items stack. But what about necessities such as paper towels, rice(for Asians who always consume rice basically three times a day), or water? Is the Law of Diminishing Marginal Utility still in effect with these kinds of common goods? If the law still applies to these basic goods, how are they different from service goods such as movie tickets?

Also, reading about "Network Externalities" inspired me to think about how same thing can be perceived as completely different depending on public opinion. For example, football is one of the most famous sports in the United States while it is one of the stupidest sports perceived by many other countries. Same thing works for soccer. It is the most exciting game across the globe except for North America. On the other hand, North Americans seem to perceive soccer as the most boring sports ever. This isn’t because football and soccer rules are different in North America and the rest of the world. It is because majority of people in North America and the rest of the world have different expectations and stereotypes about these sports. This indeed shows how powerful public perception can be especially when we think about how DVD and Facebook grew up from who-cares-thing to way it is now in just less than 10 years.

Week 1 Readings

This is my first post on readings, so I would like to say that I am just a toddler in economics field. I didn’t even have the slightest idea about demand and supply until I read the textbook, so I apologize in advance for my lack of basics in economics. If I say anything that doesn’t make any sense, please go easy on me!

Fortunately, I was able to understand the general concepts and laws of economics, thanks to the real-life and specific examples from the textbook. Those examples seems to help even the readers like me chew down the basics easily.

Anyway, of the three chapters, I found chapter 2 to be the most interesting since it covered the basics about demand and supply in detail. Reading page 19, where the authors talk about piracy, kind of sucked me into the readings. It was interesting to see this problem from economics perspective such as how piracy completely ignores the Law of Demand.

I’ve always known that piracy have seriously injured music businesses, movie industries and artists. Most people who use these pirate products probably know it’s wrong. But I have to admit. It could be hard to thrust temptation away especially when you can get a lot cheaper products in nearly good quality. Acquiring other people’s efforts illegally and reproducing it are both illegal, and most people know it. What I see is the problem here is that people don't see this as a serious crime. I just don’t think the law enforcement isn’t strong enough to prevent this from happening. With this kind of fast development of technology in today’s society, I guess even the law needs some adjustment time.


This small section about piracy reminded me of something that recently became a big part of my daily life: Youtube. I know that Youtube has its own censorship to exclude any copyrighted materials, but it just seems like too much burden especially when there are numerous new videos posted in every minute. At least famous American TV shows and movies seem to be protected from free-viewing on Youtube, but many of international shows, dramas and movies are still left for an infringement of copyright on the Web site. I am not here to propose any solutions to this, but I was just wondering if there were any laws regarding copyright materials from other countries. If anyone knows about this, please inform me!


Also, the authors mentioned that it is nearly impossible to measure how much value or profit is lost because of piracy. This is because pirate products are sold at much cheaper price. Therefore, the traditional way of calculating loses due to piracy, which is total number of copies + actual price of a legitimate product, doesn’t lead to the right amount anymore. This dilemma made me want to find out about the right way or the most accurate way to calculate the losses. The authors say the economists still haven’t found a way to get the right amount, but if we can calculate this, maybe we are one step closer to understand the seriousness of piracy.


Sorry for rambling on such a small part from the readings, but I couldn’t help thinking about the issue of piracy while I was reading chapter 2. To me, this issue feels like a potential threat to destroy economics if this problem isn’t solved in near future.

HMF Chapter 4

Early in the chapter (section 4.1), the book says: "Just as the scale on the thermometer is arbitrary (there are two common scales, Fahrenheit and Celsius), so is the scale for measuring utility." This gave me pause. I get that with both temperature and utils, you just kinda gotta pick unites and stick with them, but the comparison doesn't extend much beyond there for me. For temperature, the 0 point is more random. Yes, Celsius using the freezing point of water but this isn't practical for all applications of temperature measurement. Whereas, with utils a negative/positive distinction would be more critical. You can't really set that randomly. Though, I wonder, can you even have negative utils?

Later in the same section, the authors talk about how diminishing marginal utilities have less of an effect on children watching children's movies. while this makes sense when you spend any time thinking about it, I was left wondering what other examples of this there were. What other groups/activities are less quickly impacted by diminishing marginal utility? Any thoughts?

Section 4.6 talks about demand when there is a access fee but no charge for usage. I am the worst about this. I'm subscribed to Netflix but when I get swept up in grad school work I often go months at a time before cycling fully through my 3 DVD at a time plan. I'll be very interested when we talk about flat-fee pricing further.

Section 3.8 discusses how media and arts are unlike other goods because they can be addicting or habit forming. For example, if you really get into the plot and characters of a show, you're more likely to keep watching and find out what happens. I wonder what effect Tivo, streaming video from network web sites and illegal downloading of programs has had on this. It seems likely that the increased supply (discussed earlier) has led to more people consuming these goods. But it would be interesting to find detailed studies one way or the other.

misc thoughts from week 1 readings

Overdue, but here are some thoughts.

Section 3.3.1 of the HMF reading discusses substitute goods. For example, it mentions different brands of televisions. While not the same product exactly, they perform essentially the same function, almost identically in fact. However, I was wondering in our current world of synchronicity if the ability to distinguish between substitute good was declining. Many cell phones today come with cameras, mp3 players, and advanced web browsing built in. So they are in some ways substitute products for digital cameras, portable mp3 players, and perhaps even computers or laptops on some level. However, cell phones might not take as high quality pictures, play music as well, or display web pages quite properly. So can they be considered substitutes after all? Do people buy cell phones for these features or are they just added bonuses on a product they'd already have bought? I'm not sure about the answers to these questions but I think they're probably worth considering.

Section 3.6.2 touches upon how "the internet is a new information technology that offers many opportunities to increase the supply of information based entertainment or cultural products." It mentions how Amazon has brought "consumers more books at lower prices" and how iTunes is having a similar effect on music distribution. Another site that could be listed in this section in an updated version of the book is Hulu.com. It was founded about a year and a half ago by NBC Universal and News Corp but claims to "operate independently." The site is effecting the distribution of TV shows and movies in a way similar to what Amazon did for books and iTunes did for music. With or without creating an account, users can watch pretty good quality streaming video for free with some commercial breaks, which are shorter and sometimes fewer than if you'd watched the show on TV. In this way, the site is on a different model than the pay-for-content sites previously mentioned. However, it is still a good example of existing media adapting new business models and the change in media supply as a result of technology.

jacie's chapter 4

I have been interested in utilities for a while, but in chapter 4 I found Attribute Theory to be rather interesting. So let me raise several inquiries here regarding Attribute Theory and news media.

I see news consumption to be a combination of habit forming and attributes provided by the product. Of course were this statement to be, my vague and nonscientific assumption would be the content and information offered by different media company to be rather similar, if not identical. By drawing a table of news consumption, I put habit or non-habit in the first column and in the first row I put the utilities consumer obtains from consuming the product is either from the product itself or from the attributes provided by the product. Thus we have four kinds of combination here.

	utilities from the product itself	utilities from attributes provided by the product
habit	A	B
nonhabit	C	D

I do agree with Nan that news consumption is built as a habit, meaning users have one to several news sources that they usually get their news from. In this case, we focus on cell A and B in the table above (of course we can discuss about it if you think accessing news media is not a habit).

What I see news consumption fits Attribute Theory is the utility news consumers get is not from the product (the media itself), but is from the attributes provided by the products, making the demand for the product (i.e.: a print newspaper) a derived demand. I argue the attributes are the information and opinion pieces in the news media. Take a print newspaper again for example, after a reader read the newspaper once, obtained the utility from the information (which is the attribute), the media itself does not have too much value left, as well as a second copy of the day's newspaper does not have much more value than the first copy (unless the paper is wrapping my lunch today).

I see online news to be the same case, even though we do not pay for it. The product itself might be the bit and bytes in our computer's short memory or in our computer's temp storage, but the attributes are still the information and the opinion. Once we read/watch/listened to it all, we got it all. It is not like I just had a piece of cheese cake before I started writing this response and I want another piece now.

Chapter 4 readings

(I must post a warning to others before proceeding with this blog. I am quite the alien in economics so if my thoughts are trite to fellow economists here, I do apologize in advance!)

Reading Seth's blog about his Facebook experience reminded me about another very similar experience. I know an individual (who shall remain nameless) who HATED Facebook or any other social networking sites. He thought they were pathetic and did not see the point in participating in any of them. Then one day his best friend joined and convinced him that he needed to be a part of this network as well. So he grudgingly joined and his intention to create a membership was merely to view some photos of a recent event and then be an inactive member but long story short, he is now a very active participant on Facebook.

Which brings me to the point of the VHS and Betamax battle in which the VHS won. One of the main reasons the VHS prevailed (which was not discussed in Chap 4) was because the pornography industry selected VHS as their choice for distribution. The astronomical success of the VCR and VHS tapes is truly owed to the pornography industry.

So when creating a new product, be it in media or any place else, is there an understanding that it is not necessary to convince the masses that the product is worthy of their consumption but to only convince a selected few and then rely on the selected few's influence to trickle down to the masses? As a foreigner in the economics field, I am wondering if there is an equation or a similar theory for this 'phenomenon'?

News habit forming

On the consumer behavior, I found the habit forming argument is particularly relevant to the news consumption. Consumers’ appetites for news are built over time. If we imagine a demand curve for news, which is determined by the price of the news product and the quantity of news being consumed, as time goes by, the curve may move to the right for people who always follow the news. Because the marginal utility of the news increases with continuity of consumption (However, another assumption is that the overall news consumption shrinks even within the news habit group.). The opposite trend may be observed in the group that does not have a news consuming habit. Therefore, the media firms may be able to sell the news product with a higher price to groups with increasing news appetite than the group without a consumption habit. Also, if the gap between the two demand curves (group with/without news habits) becomes larger during a longer period of time, it may eventually change the shape of news media market.

As Seth pointed out in last week’s post, when the media content eventually become “free” online, the price of the product will no longer be a factor that affects the quantity of consumption. In that case, what will the demand curve look like? One possible way is to plot the demand curve for the market of advertising. Using the price of online ads and the quantity of the ads purchased, such demand curve will resemble the demand curve of media consumption. Another way to plot the demand curve for free online media product would be replacing the price with people’s time constraint for media consumption. Therefore, the less time people can NOT spending online, the more media products they consume online. This curve also mirrors the demand curve.

Dumb question: how can one measure the utility of a media product? Using Likert scale to assess satisfaction? Or as we know the amount of the products people purchase and the price for the product, the utility can be calculated.

Network externalities

One of the concepts brought up in Chapter 4 of the HFM book is the phenomenon known as "network externalities." It's also called the "network effect," and refers to a basic process best illustrated when we think about the telephone: As individual users join the phone network, their subscription enhances the value of that network for everyone else on it, without them necessarily intending to do that. Thus, the "externality" points to something that's out of the end-user's control—in this case, the positive value created by his or her decision to subscribe to the network.

All of this is pretty obvious, of course, but to extend this thought on network externalities I would like to mention two other examples (since the telephone example is the one so often used to explain this concept). First, I remember when I first got an e-mail address, way back around 1993 or '94 (yes, I was one of the early, early adopters!). While it was a fun curiosity, I couldn't e-mail hardly anyone behind my circle of fellow geeks in the high school computer lab because the network was so limited and the difficulty so great in trying to find friends and family online. Even in 1996, when I began as a college freshman, I remember having to pay for a university e-mail account! How things change.

Moving beyond e-mail, consider the more recent example of Facebook. When I first joined the site just a year ago, there weren't too many of my friends and family on the network because, like me, most of them had grown up before the social networking craze. So, at the time, the network didn't have much value to me personally. I hardly looked at it for at least six months or more. Then, as I returned to it one day this summer, I asked Facebook to plumb my address book for contacts already signed on to the site ... and was stunned to see how the number had grown by at least 100 or more. The site clearly had passed the early-adopter stage of 18-25 college students and moved into the early/late majority hump in the Rogers' innovation curve. And now, at this point, the Facebook network had great value to me—value in terms of warranting my time and attention, if not my actual spending. In joining the network, my friends and family had contributed a positive externality that transformed the site's value for me.

The demand, supply and ways of online news

I’m pretty new to the economics area, so please do go easy!

Like most people in class, I too picked up on the demand, supply and price elasticity from Chapter 2 of Media Economics: Applying Economics to New and Traditional Media by Hoskins, Colin, McFadyen, Stuart, & Finn, Adam.

In a blog entry, Terry L Heaton said: Restricting content is exactly the opposite of what we should be doing, for it's foolish to assume a limited capacity for information in a Post-modern world and arrogant to assume our content commands more attention than anybody else's. The law of supply and demand online is a paradox, and owning a bigger share of the supply is a more likely path to profit.

So clearly, paying for online content or for that matter, certain online news content did not work. If an online media bastion like the New York Times decided to make Times Select free, they obviously got one of the concepts wrong. A year ago, as in my blog entry, I would have vehemently disagreed. But current trends have forced me to change my opinion, So the established point here is that nobody wants to pay for anything online. Point duly noted and taken.

But the point remains: how is an online news site to make any money? Industry pundits have already started writing eulogies to newspapers in the US, so how is a newspaper to survive if it’s losing subscriptions and advertising revenue? Newspapers like the Austin American Statesman have tried hiking the price of their newspaper. But if this will work for them is still too premature to figure out.

Another scenario that has had even less success is trying to get consumer to buy subscriptions for all content online.

So there is a fall in demand when online content needs to be paid for. And although there is a lot of research and development in the area of online advertising and news media, the reality, however, is that we don't know much about how to really leverage online advertising, and we have a lot to learn.

Online publications, just like traditional media, have to develop a business model. In terms of advertising, the goal could be simple that online Web sites have to attract as many users who are the target audience to advertisers as possible. And once that system is in place, then we reach digital utopia.

SeongBae's Web sites

I apologize for the late posting. I didn't know how to activate this blog until today. Here are three Web sites I recommend for the latest news on mobile technology.

1. mobile-weblog.com
- This is similar to blog. People post some newsworthy stories about mobile technology, and they leave some comments underneath the story to discuss the news. It's personally very interesting to see how people react to certain technology issues. (such as the article about a mobile phone that can be used as a computer mouse!)

2. techweb.com/wire/mobile
- Techweb has news stories sorted by company names. If you want to read about the latest technology development for a specific company, this Web site might be the best.

3. Wired
- Although several people have already recommended this Web site, I think Wired still deserves another recommendation. The Web site both covers news stories and blog postings that are usually interesting and controvertial.

Sam's Web Sites

Apologies for being a space cadet and posting on every other blog I write on but this. I can get that way when I'm highly caffeinated.

I usually check Wired, NYT tech pages and for the past two weeks, ThinkGeek.

Kim's Web Sites

Apologies for not posting on readings by last night. (I hopped on a plane immediately after class on Wednesday and was out of cell and internet range until yesterday when I spent all day traveling again.)

Anyway, here are my web sites:

ZDNet
Gizmodo
Wired
(Though this was already listed by another student so maybe BoingBoing instead.)

Seth's response: New media, information, and the price of "free" (Week 1)

Hi, everyone. I missed the first class last week, so I look forward to being with you all tomorrow.

First, I have to mention how interesting it was to read this book and be confronted with terms and concepts once so familiar to me, as I took a Managerial Economics course in my MBA program some four years ago. (Quite frankly, it's astonishing how much you can forget in that span of time!)

Like Nan, I was interested in the discussion of supply, demand, and price elasticity from Chapter 2. I've been thinking about these things lately as we hear more and more about the "economy of free." Wired editor Chris Anderson, he of the Long Tail phenomenon, had a cover story about this recently; in it he wrote:

You know this freaky land of free as the Web. A decade and a half into the great online experiment, the last debates over free versus pay online are ending. In 2007 The New York Times went free; this year, so will much of The Wall Street Journal. (The remaining fee-based parts, new owner Rupert Murdoch announced, will be "really special ... and, sorry to tell you, probably more expensive." This calls to mind one version of Stewart Brand's original aphorism from 1984: "Information wants to be free. Information also wants to be expensive ... That tension will not go away.")

Indeed, that appears to be the trend in the newspaper industry: no charging for online content (of course), but increased prices for the print version. There's good reason for this. As blogger Jeff Jarvis noted upon news of the tear-down of TimesSelect's paywall:

So much for the idea of charging for content — news content especially — online. Too much of it is commodified. There’s no end of free competition. The value is fleeting in time. The cost of charging is too high.

Whether or not content wants to be free, it is free.

Don’t let anyone tell you that this is bad for the content business. It’s only good sense. Having worked in the magazine business, I saw this even at the dawn of the internet: As I said above, a magazine has to pay up to $30-40 in marketing costs to acquire subscribers; it can pay up to $5-7 to print and distribute a copy of a glossy magazine; it has high editorial costs. Add that up, and a magazine can find itself in the hole $60 or more per subscriber in the first year of a subscription. And they get as little as $1 per issue in subscription revenue. Yet clearly, a magazine can make money because that subscriber’s value to advertisers is much greater.

It’s the relationship that is valuable. It’s the relationship that is profitable, not the control of the content or the distribution. That is the essential media moral of the internet story. It has taken 13 years of internet history for media companies to learn that, to give up the idea that they control something scarce they can charge consumers for, but they’ve finally learned it. That is the lesson of the death of TimesSelect.

OK, so back to the main point here: As we go forward examining media economics in the digital age, it's important to consider the emerging economies of "free" — or, better yet, recognizing how free offerings of services or information create value and profits in more subtle, behind-the-scenes sort of ways. (Ask Google how this is done.)

Of course, "free" is nothing new to the media industry: It's how radio, TV, and newspapers have long made their money, providing content for free (or at very low cost) and selling the mass audiences to advertisers to pay for their efforts. But as the Web extends this media business model to a wide range of industries — see Anderson's piece on this — it's a good time to step back and reconsider what these trends mean for the future of media (and media economics). How do these notions fit into previous conceptions of supply, demand, price elasticity, and so on? In what ways do they reinforce traditional economics ... and in what other ways might today's currents cause us to rethink old assumptions? What happens when the Internet is simply a copy machine? (As Kevin Kelly writes: "The digital economy is thus run on a river of copies. Unlike the mass-produced reproductions of the machine age, these copies are not just cheap, they are free.") If scarcity is connected with value, then what is of worth in a sea of free-and-easy copies?

Food for thought. See you tomorrow.

... Oh, and as for useful sites to follow the new media biz, I like some of those mentioned already (especially Wired), but here are a few others of interest:
-- The New York Times' sections on media/advertising, tech, and its Bits blog.
-- IWantMedia.com covers the latest headlines on the business of new media.
-- Jeff Jarvis of BuzzMachine fame is well worth reading. He's a media biz veteran who really understands Webenomics today.

jacie's short response (week 1)

When something gets cheaper, we often take it for granted that the people will buy more or more will be sold. Often times it seems to be the case, but the three chapters illustrate that there are indeed more economic principles behind such a general statement. Even though demand and supply interact with each other in a market and the combination of the two determine the market price, here I find demand to be really interesting since I am interested in audience/users more than media firms.

From the chapters we learned that there is “change in quantity demand” and “change in demand.” Change in quantity demand is affected by the own price of the product while change in demand is affected by other external factors other than the product’s own price (such as change in income per capita). When the authors explain Law of Demand, they also use empirical examples of how often firms ignore Law of Demand, purposefully or not (p.20).

One thing that came to mind was iPhone (bear with me if you hear this word often enough already). iPhone came out in the summer of 2007 and the latest iPhone 3G was launched on July 11th this summer. One significant difference, in term of economics, is there was a significant decrease in the product’s own price: it dropped from $399 to $199 (for 8G storage space model). After the “better and cheaper” 3G iPhone was launched on July 11th, Apple’s press release on July 14th quoted the CEO Steve Jobs saying, “iPhone 3G had a stunning opening weekend. It took 74 days to sell the first one million original iPhones [in 2006], so the new iPhone 3G is clearly off to a great start around the world.” The comparison here is: a million iPhones, 74 days v.s. 3 days.

Demand of iPhone 3G seems to be much higher, but in what way? Is it merely because it is $200 cheaper? In addition to change in quantity demand (affected by the product’s own price), five factors might cause change in demand: price of a demand-related product, income per capita, number of potential buyers, expectations regarding future price, and tastes. The factor that stands out here in the iPhone case is the number of potential buyers. As the original iPhone was only sold in the United States, the new 3G iPhone is available in 21 countries in the world. As in chapter 3 it says that “the population served by a market is a good indicator of the number of potential buyers,” the greater the population in a market, the greater the demand. When Apple made iPhone available in 21 countries, the market is expanded and the demand is higher, other things being equal. It is not the new iPhone is more popular or merely because it is cheaper, but also because the market is now bigger thus the demand is higher.

I think having an understanding in media economics gives us a great tool to explain and predict social phenomena, as well as seeing through the basic principles of these phenomena. I also think the principles of demand and supply can be applied to users’ news demand, but it is still very vague for me at this point since I feel news products are close substitutes to each other.



As for the three tech sites, I do visit the tech section of major news sites often, including NY Times, Washington Post, CNET, etc. Let me include these three here: digg.com's tech section, Search Engine Watch (cause I like google), and Techdirt.

Nan's Short Response (week 1)

One interesting point I found in this week's reading is that new media technology can change media production in many ways. For example, online publishing reduces the production cost of print media and also makes the distribution cost less affected by delivery distance. Although the online production can reduce the input prices for print products, it is still unsure if the circulation and advertising revenue will remain the same when one publication moves online. Particularly for the newspaper industry, how national and local newspaper will be affected by the online publication trend differently? Also, many major news organizations (i.e.BBC, Wall Street Journal) have started to provide online content in other languages in order to target geographically remote markets. How those news services may shape the international news flow and whether those services meet the marketing goals may worth to study.

The demand for news in the U.S. has decreased in many years. It may due to the increasing supply of demand-related products—the entertainment media content (It is just one hypothesis to explain the phenomenon). It will also be interesting to calculate the cross elasticity of demand with the price of broadband Internet service and the demand of different type of media content. The number may illustrate which type of media outlet is benefiting or suffering through the increasing adoption of broadband Internet, which may become the mainstream distribution channel for media in the future.

Not only the entertainment content and the news may compete for the audience demand, at times it may also compete for investment. For example, traditional media such as Austin American Statesman builds austin360.com, an infotainment website which generate significant income for the paper while reduces its budget to produce hard news. The concern is when the media firms adjust its financial arrangement to respond to the force of supply and demand, what it will do to the quality of newspapers? Would the market force eventually set a bottom line for the content share between entertainment and news?

My three new media sites:
www.cnet.com

www.slashdot.com

www.wired.com