Business models in media industry - 1st part

This short article is inspirated by our participation in the XD Media Hub project and our desire to share topics related to our cluster initiative called Innovation Hub for Creative and Media Industries.

The article presents the findings of research on the business models in the media industry and is based on the report The Innovation in Media World Report. It was found that in general there are 13 business models that media companies can implement in the marketplace. 

In this first part of the article, the first seven of the thirteen business models in the media industry are analysed below:

1. Subscriptions Business Model

The basis of this model is the revenue from subscriptions. It turns out that they not only grow, but also move beyond their original form to include highly expanded niche vertical subscriptions, profitable enterprise B2B sales, conversions to high-end product subscriptions. The most important element in the model is the customer retention, which is why a lot is invested in departments specialized on this work. Subscribers access paid content that breaks down into passion points that micro-subscriptions serve with product mixes that go beyond text and images.

• Client focus: B2C & B2B
• Income collection: Direct
• Income potential: High
• Transaction costs: Medium
• Profit potential: High
• Requirements: Unique, relevant, must have content and systems for rising awareness of that content
• Risks: Customers not willing to pay. High chum rate.

2. Non-profit Business Model

In this model funding is hard to come by. A very small number of these media receive donations from wealthy philanthropists and foundations. Philanthropic funding of journalism does happen, but 93% of such grant money, directed at journalism goes to US-based organizations, only 6% for European based organisations, and only about 1% for media in the rest of world. If the media is not established and a large non-profit organization, the chance of a breakthrough is small. The organizations that apply this model can only survive if they can find other sources of revenue, including individual donors, memberships and e-commerce.

• Client focus: B2C 
• Income collection: Direct
• Income potential: Low
• Transaction costs: Medium
• Profit potential: Low
• Requirements:  Strong funding culture and strong connections to the investment community and wealthy individuals
• Risks: Unless you already get foundation funding the chances to breaking into that world in a subscription way are low.

3. E-commerce Business Model

Media companies’ brick-and-mortar pop-up stores do the same like E-commerce and mobile commerce (m-commerce) - enable both the instant creation of a need and then the instant satisfaction of that need. The media company as a retailer business model can also serve every level of the sales tube. Media companies whose trusted editorial teams give readers expert reviews of products fulfil a consumer’s need for product-purchase information at the beginning, middle, and end of the tube. In both cases, the success of publishers’ e-commerce and m-commerce initiatives proves the power of a media company to deliver results to partners and advertisers while also creating two new and potentially robust revenue streams: 1) Direct or commission revenue from product sales, and 2) Advertising revenue from brands who purchase native ads and branded content around the service journalism.

• Client focus:  B2C & B2B
• Income collection: Direct
• Income potential: High
• Transaction costs: Medium
• Profit potential: Medium
• Requirements: Deep understanding of audiences. Excellent platform. Unique and exclusive product portfolio
• Risks: Lousy logistics and customer service.

4. Events Business Model

According to the FIPP 2019 Events in Magazine Media report, 78% of millennials choose to spend money on a desirable experience rather than a material product. Most media companies do not employ an army of event planners, many don’t even have one event planner on staff. They have almost everything else needed to run a successful event: relevant content; niche expertise; a loyal following in that niche; a targeted mailing list; a niche customer database; existing relationships with potential event sponsors and media platforms with large followings to promote events. Using this model magazine media companies can deepen the company’s connections with its readers, attract new readers and subscribers, attract new advertisers who might not be interested in a print or digital relationship, deliver new revenue from fees and sponsorships, raise awareness and brand recognition, can make news and create content.

• Client focus:  B2C & B2B
• Income collection: Direct
• Income potential: High
• Transaction costs: Medium
• Profit potential: High
• Requirements: Expertise to other irresistible “content on stage”
• Risks: Strong existing competition in any niche. Poor event organising capability. Unappealing content or presenters.

5. Advertising Business Model

Digital advertising is still a growth industry. With the ability to offer compelling content, brand safety, and high-end audiences, savvy publishers are well- positioned to be prosperous. For all the doom and gloom about advertising, it nonetheless remains a growth area. The challenge for every media company is how to how to get its share.  The advertising industry faces an “existential need for change,” according to a blunt report published in late autumn 2019 by research firm Forrester. The media and ad agencies must “disassemble what remains of their out- moded model” or risk “falling further into irrelevance,” the competing for the cash not already taken by the platforms and squandered by ad blocking is to fix the broken online advertising model. The “downward spiral” of the current system is caused by poor digital ad formats that lead to ad blocking, reduction in revenue, more ads per page, and ultimately an awful user experience.  To counter this is needed better engaging, less intrusive digital adverts. Less, but more relevant ads per page that create a better user experience is the task.

• Client focus:  B2C & B2B
• Income collection: Intermediated
• Income potential: Medium
• Transaction costs: High
• Profit potential: Medium
• Requirements: Sales staff adopt to consultative sales, deep data to prove qualified auidences and results, native/branded expertise
• Risks: Inceased competitions from big platforms and from growing native/brnded advertising agences.

6. Club Business Model

The model is based on a membership. A membership model invites audiences to give their time, money, connections, professional expertise, ideas, and other non-financial contributions to support organisations they believe in. In membership, there’s a different social contract or value proposition between the site and its members. Unlike a subscription, where subscribers pay to access the product, with a membership, members join a cause and participate because they believe in it.

• Client focus: B2C & B2B
• Income collection: Direct
• Income potential: High
• Transaction costs: Medium
• Profit potential: High
• Requirements: Good partnership with commercial and other outlets for product/service portfolio. Geographical reach aligned with media coverage
• Risks: Creating membership programme that is just thinly veiled subscription that offers little of value.

7. Data Brokers Business Model

The model is based on the Selling data-as-a-service (DaaS). This model has proven to be very lucrative for some companies. Today data can actually generate serious money. Nevertheless, still few media companies have figured out how to make money in an effective way using this mode. It is up to publishers to not only compete but also thrive in today’s media market pivoting to data as a biggest opportunity in the market today .

• Client focus: B2B
• Income collection: Direct
• Income potential: Low
• Transaction costs: Low
• Profit Medium
• Requirements: Sophisticated data-gathering software and internal analytics competencies to identify potential clients and deliver bspoke data
• Risks: Weak databases, insufficient nalytics capabilities, inability to show results.

To be continued ……