The Internet and the Value Chains of the Media Industry
The Internet has had a significant influence on value creation processes of companies. This applies not only to the electronic communication with suppliers and sales partners, but also to the Internet as a new channel to directly address consumers. While
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The Internet and the Value Chains of the Media Industry Thomas Hess and Christian Matt
Chapter Objectives This article provides an overview of the changes in media companies’ value chains that occurred due to the development of the Internet. In the following, we explain the technological and economic backgrounds and point out various key aspects, which we link to three trends. Each of the trends is further illustrated by practical examples from industry to enable a better understanding of the key issues. Throughout the article, our focus is on content of media products and services that are provided in digital format.
4.1
Background
4.1.1
Conceptual Background: Organizational View on Value Creation Structures
Michael Porter describes a firm as “a collection of discrete, but interrelated economic activities such as products being assembled, salespeople making sales visits, and orders being processed” (Porter 1991). These interrelated activities are common to a wide number of companies and are further referred to as the value chain. Porter originally concentrated on internal organizational processes, but currently a value chain analysis often takes all production and logistic activities into consideration, i.e., from the first sub-suppliers of the product to the distribution to consumers. Value chains are usually specific to the industry in which the firm operates.
T. Hess (*) • C. Matt Institute for Information Systems and New Media, Ludwig-Maximilians-Universita¨t (LMU) Mu¨nchen, Ludwigstr. 28, 80539 Munich, Germany e-mail: [email protected]; [email protected] S. Diehl and M. Karmasin (eds.), Media and Convergence Management, DOI 10.1007/978-3-642-36163-0_4, # Springer-Verlag Berlin Heidelberg 2013
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T. Hess and C. Matt
Content Creation of Content
Bundling of Content
Distribution of Content Media
Fig. 4.1 Traditional value chain in the media industry (Schumann and Hess 2009, p. 12)
The companies in the media industry are also referred to as media companies. This is a class of companies that provides content (whether for entertainment, information, or education) on public media (Schumann and Hess 2009). From the consumer viewpoint, the value proposition comprises the medium and the product or the service. Media companies can be classified according to their fulfilled value creation activities. Thus, in a simplified linear model, they can be grouped according to the value chain stages: creation, bundling, and distribution of content (compare Fig. 4.1). At the creation stage, actual content is produced, which can be a photographer taking a photo, or a journalist writing an article. The resulting product is called a first module copy and usually involves a significant amount of effort and costs. The bundling stage involves the grouping of different content modules, leading to a final product that can be found on the market (also called first product copy). For instance, text and pictures can be combined in a final newspaper article, whereas several articles build a newspaper. Digital technologies have
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