INTRODUCTION
Convergence has been identified since the 1970s as a force that would reshape media and telecommunications industries (Baldwin et al., 1996). The notion is often used in ambiguous ways, confounding technological, economic, social, cultural, and global aspects (Jenkins, 2001, 2006).
Moreover, the focus is often on the homogenizing and integrative aspects whereas the equally present diversifying and differentiating aspects are often overlooked (Greenstein and Khanna, 1997; Bauer et al., 2003). A first wave of technological convergence in the 1960s and 1970s (often referred to as ‘telematics’) contributed to an integration of computing and telecommunications. A second wave starting in the 1990s was intricately related to the emergence of the Internet. Sometimes referred to as ‘mediamatics’ it muddled the boundaries between telecommunications, broadcasting, and media in general (Latzer, 1998, 2009). Krattenmaker (1996, p. 6) stressed the unfolding of ‘a convergence of devices and a plethora of transmission paths’. Convergence and divergence are the outcome of technological developments, policy and regulatory developments, corporate strategies, and consumer preferences.A main effect in the media industries is the blurring of lines between formerly separate media platforms such as over-the-air broadcasting, cable TV, and streamed media. Consequently, content that previously was only available on television can be delivered seamlessly to consumers via personal computers, smartphones, tablets and other mobile devices. Moreover, content that was once delivered via different, specialized technologies (e.g., broadcasting, cable TV) can now be distributed through multiple platforms, allowing easier viewer access independently of time and space. Convergence also provides consumers with new means of accessing entertainment and audiovisual content.
Many converged video services such as Internet Protocol TV (IPTV) and mobile TV have appeared in the market. The most recent development is over-the-top (OTT) video services. The newly converged services have created new markets and have had wide-ranging displacement and complementary effects on traditional media. In response to the emergence of converged video services, media firms have developed new business strategies and revenue models for both new and traditional services. While convergence creates significant challenges and threats it also opens remarkable opportunities for new and innovative business strategies that are often designed to alleviate the competitive impact of intensified competition in converged video services markets.Picard (2000) pointed out that the success or failure of a new communications technology is not only dependent upon its innovativeness, usefulness or desirability but also on whether a business model can be found that generates a sustainable revenue stream while satisfying users and investors. A ‘business model’ refers to how an organization creates
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and distributes value in a profitable manner (Baden-Fuller and Morgan, 2010). It is also described as a mechanism for turning ideas into revenue at reasonable cost (Gambardella and McGahan, 2010, p. 263). As used in the modern communications sector, the notion of a business model looks at the entire value chain by taking into account the resources of production and distribution technologies, content creation, acquisition and aggregation (Picard, 2000).
In contrast, ‘business strategies’ are often described as the art of formulating and implementing decisions that allow pursuing the goals and objectives of an organization. Therefore, the analysis of business strategies needs to be linked to the organization and its external environment. Business models can then be defined as abstract representations or blueprints of an organization’s strategies. While a firm’s strategies may be specific to its particular nature, business models can be generally applied to many different organizations (Seddon and Lewis, 2003; Osterwalder and Pigneur, 2010; Mustafa and Werthner, 2011).
Most of the converged services offered by firms utilize multiple revenue streams. Advertisements and subscriptions are the most frequently used funding models (Huang, 2012; Waterman et al., 2013). With the broader adoption of video-on-demand (VOD) services, pay-per-view (PPV) and pay-to-download models are also gaining. Converged video platforms may also employ a freemium approach, where users enjoy a basic service for free and pay for premium services that offer additional value (Anderson, 2009; Kotliar, 2011) and revenue sharing (Bouwman et al., 2008).
This chapter analyzes business strategies for converged video services, with a focus on IPTV, mobile TV, and OTT video services. It starts with a look at the development of converged video services followed by a discussion of the ecosystem of converged video services. From there, the chapter will proceed to explore the new media value chain. Business strategies and revenue models of converged video services will be addressed in sections 23.4 and 23.5. Section 23.6 provides succinct case studies before conclusions are drawn in the last section.
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