Online Entertainment - Research Paper Example

?It is without question that the Internet has revolutionized the way in which people interact with one another, review pertinent news, as well as entertain themselves. Whereas in eras past, it was not uncommon for an individual seeking a form of entertainment to be forced to the local video store, or even to a local movie theater, it is more and more common that individuals within current society are spending a higher percentage of their time being entertained at home. Naturally, the television itself has existed in widespread usage for over half a century. However, the revolution of the Internet has shifted the focus and the available means by which individuals can entertain themselves within the current environment. As a function of this fundamental shift, realizing that the Internet has a profound effect upon the way in which people are passing their time and entertaining themselves is not, in and of itself, a sufficient level of realization. Rather, the following analysis will explore, discuss, review, and evaluate some of the major trends, segmentation, business models, business practices, as well as perspective challenges that face the online entertainment segment. Seeking to analyze online entertainment as such would necessarily be a monolithic task which could consume the space of several dissertations. However, for purposes of this analysis, three of the major players within online entertainment will be discussed and analyzed. These players are as follows: Netflix, YouTube, Apple TV, and Blizzard Software’s World of Warcraft. Through such a level of discussion, it is the hope of this author that the reader will be able to come away with a more informed and actionable level of understanding with regards to some of the best practices and constraints that defined the way in which online entertainment is presented to the end consumer. Netflix Overview: Firstly, prior to the level of in-depth analysis of these four business entities, it is necessary to discuss the range and extent to which each of these represent a particular industry segment of the online entertainment offerings. Firstly, with respect to Netflix, this is quite obviously a paper usage video streaming service through which revenue is derived via consumer subscription to the service. As half the years have noted, a dynamic shift has taken place and individuals are no longer as willing to go to the movie theater or to view television shows in their traditional format; through regular broadcast (Graham, 2012). Taking advantage of this industry shipped, Netflix is able to edit the original format; removing a litany of advertisements that had previously helped to pay for the respective entertainment’s production costs, and replace this via standardized monthly subscription fee (Vance, 2013). Although an entire section will be devoted within this analysis to key challenges facing the Netflix level of service provision, it must be noted within this introductory level of approach that Netflix has recently been faced with a series of difficulties negotiating the level of fees with both the primary service providers and the end consumer (with respect to the actual amount of money which they charge for the service). However, due to the name recognition and previous levels of consumer utility that Netflix was able to provide, it appears as if the cost structure difficulties that were faced previously will be weathered by the firm without severe loss of income (LaPorte, 2013). YouTube Overview Since its inception in 2005, YouTube has experienced a meteoric rise to prominence and has become a global leader in online entertainment. Conceived originally as an effective means of storing and sharing media content, YouTube now represents over 10% of global Internet traffic. However, regardless of its overall level of success, YouTube shares a very different business model as compared to Netflix, which has briefly been discussed above (Kelley et al., 2012). Whereas Netflix seeks to reduce and outright removed the many advertising spots and commercials that traditional broadcasting had injected into programs and TV, YouTube seeks to include advertisements and other forms of marketing within nearly each and every video that is streamed from their site. Comparatively, this is of course done due to the fact that YouTube is a free service and is not able to garner a level of subscription payment from individuals that engage with its services. A fundamental shift in YouTube’s level of marketing exploitation was noted in 2009 after Google bought the service from its original owners and developers (Delman, 2011). As the Internet giant has done with so many of its other platforms (to include Gmail, Google maps, Picasso, and a litany of other services) Google sought to incorporate a higher percentage of advertising within YouTube as a means of deriving a higher profit margin for each and every video that was streamed. From a psychological standpoint, this is affected in two distinct ways (Szu-Yu, 2010). The first of which is by merely advertising a given good or service that might be related to the topic and/or contents of the video in question prior to the video itself starting. Oftentimes, these advertisements are embedded and cannot be skipped after the first several seconds. Other times, an option to bypass the content allows the user with a degree of mobility with regards to what ads they choose to screen in which they do not. Another approach, and one in which the user has little to no choice but to sustain, is with respect to the embedded advertisements that exists on the periphery of the video itself (Wildstrom, 2013). In much the same way that the prior approach, discussed above, leverages a degree of similarity between the topic of the video and the visual representation of a product or service, this secondary approach leverages the same tactics. Although this approach has been a highly effective in helping to engender a higher degree of profitability for YouTube, and by extension Google Inc., there is yet another ancillary arm of this process that encourages something of a symbiotic relationship between the original of the loaders, individuals within society that had media content that they wish to share, and the advertisers who seek to derive a level of profitability from this (Helft & Mansour, 2013). Ultimately, this symbiotic relationship occurs as an individual who posts a media content that received a very high level of traffic will be paid a certain ratio or percentage with respect to the overall number of individuals that you their media content (Burlington, 2010). In much the same way that television shows are paid for by the advertisers, a similar relationship has developed on the World Wide Web whereby original producers, oftentimes an untrained and amateur video maker, is able to receive a level of profitability based upon the web content that they are willing to look (Percival, 2012). This of course encourages a further level of integration and maximizes the level of video uploads that appear on the site each and every day. One of the most interesting aspects of YouTube is the fact that it has continually evolved; perhaps more so than many of the other online entertainment industries that are currently exhibited within the market. It has been able to derive an incredible degree of profitability based upon the aforementioned models that have been discussed. However, rather than being satisfied with this level of growth and profitability, Google has encouraged and funded and level of original content production directly to YouTube. Attempting to cash in on the fact that digital media, delivered by the Internet, appears to the next shift with regards to consumer demand, Google has commissioned several made for YouTube series. In much the same way that the major television broadcasters promote and develop such shows as 24 or CSI deriving and even further level of advertising profitability from the media content that they offer (Faris, 2008). Although it can be said that YouTube’s approach is highly effective, it must not be considered particularly novel; with the exception of the platform by which it is offered from. This is of course due to the fact that YouTube is utilizing the very same business model that exists existed in broadcast media since the down of such an era. Apple TV Realizing that there was a fundamental breakdown between online media, and the ease of use and application that individuals utilizing it could experience, the visionary founder of Apple, Steve Jobs, sought a way to combine and encapsulate many of the different types of online entertainment that existed within the market. If one considers the fact that services such as YouTube, Netflix, and a litany of others require the individual to be at or near a computer as a means of viewing the content, the major restriction was that such an experience took away from the entertainment value that individuals had previously enjoyed via use of their television and/or remote control. Seeing this is a fundamental shortcoming that digital and online entertainment reflected, jobs, and the Apple firm by extension, unveiled what came to be known as Apple TV (originally released as iTV in late 2006). Just as with Netflix and Youtube, Apple TV has experienced many iterations and change throughout the years. However, the basic operational premise and business model that it has engaged has not altered greatly from its inception until the current time. As compared to YouTube and Netflix, the revenue that Apple TV is able to acquire and it particular business model that they utilized as a means of affecting this is ultimately different. Whereas it is true that the media content made available through Apple TV is run exclusively via the iTunes service, the utilization of a paid download service for media content is only part of the revenue that Apple is able to derive from Apple TV (Necris, 2012). Whereas one might expect that another complement of revenue that could be engaged is with regards to advertisement, this is in fact not the case. Rather, Apple leverages the fact that an initial procurement of the physical hardware itself is necessary prior to the individual being able to link all of the different types of media that they view. Just as with so many of the Apple products that have been exhibited market over the past few years, Apple continually differentiates the product offering and creates new and improved version of their physical hardware seemingly each and every year. Whereas other hardware manufacturers allow for a degree of expansion and user differentiation, Apple has always maintained a business model that does not allow for consumer expansion of the product. In such a way, Apple is able to exhibit a product line that is continually differentiated and improving so that the consumer feels a compunction to purchase a new system so that a further level of utility and stylishness can be derived from such an acquisition. Although it is of course true that all forms of online entertainment are intrinsically “hip”, Apple has long been able to market and sell product lines based upon brand image alone (Agrawala & Berthouzoz, 2012). In such a way, one of the fundamental branches of how the Apple product of Apple TV is able to experience such a high level of success is not entirely contingent upon the ultimate utility that it can provide the consumer; rather, it is at least partially the result of a “cool factor” that Steve Jobs and so many others within Apple leadership have been so keen to develop throughout the growth and expansion of one of the most profitable electronic and software providers in American history. Blizzard World of Warcraft Naturally, one would be remiss not to mention a gaming service with regards to the proliferation of online entertainment within the current era. Whereas there are many gaming applications that have experienced a wide array of success, it is without question that one of the most profitable, as well as most well known, is that of Blizzard Entertainment’s World of Warcraft. The particular approach and business model of World of Warcraft was quite different from what had previously been engaged by Blizzard Entertainment. Prior to offering World of Warcraft, Blizzard, like so many other software manufacturers and videogame producers, had prided themselves with him producing content and selling it directly to the end consumer. Such a business model was neither revolutionary nor particularly successful as compared to the other firms that were already within the market. Realizing that this approach was not going to carry the firm to any great level of success, as compared to many other competitors within the market, something of a mixed approach was adopted. Whereas paid to play platforms had been available for quite some period of time, it was Blizzard Entertainment that took such a concept and maximized it to the fullest of its potential. At its height, World of Warcraft saw 11 million worldwide subscribers to their monthly service. Although subscription prices varied based upon the nation in which it was offered, a general rule of thumb that was observed was that subscriptions to World of Warcraft cost anywhere from $15-$20 on average. However, this $15-$20 monthly average was not reflexive of the fact that an initial purchase of the software itself was required prior to the consumer ever engaging in the game content as such. Accordingly, an initial purchase of the software would typically run around $40 and offer a complementary one month free trial of the paid service. This was of course done as a way of maximizing the number of individuals who would play the game, come to appreciate the addictive content, and continue to integrate with subsequent monthly payments as a means of providing themselves with a form of gaming entertainment. Threats/Challenges Naturally, even though the focus of entertainment has shifted in many of the online entertainment services, some of which have been elaborated upon within this analysis, have experience a great deal of increase profitability, it cannot be categorically said that these firms do not have a series of very real and present threat that challenge the way in which they do business and might be able to continue to provide utility to the consumers (Longo, 2007). With regards to Netflix, the most obvious shortcoming and challenge that faces this media streaming and subscription-based entity is with respect to the changing nature of the legal and business agreements that provide the backbone for the media content that is evidenced upon Netflix. What is meant by this is the fact that any change to the level of agreement and contracts that are evidenced between major production entities and Netflix necessarily impacts upon the profit margin and total cost that is passed on to the consumer. Prior changes in the relationships between production firms and those owning the copyrights to the material in question have caused Netflix rates to nearly double. Although this was able to be borne by the firm due in part to its widespread level of recognition and the fact that it still represented a relatively reasonable cost structure, as compared to alternatives, further changes within pricing structure could ultimately reduce the overall level of competitiveness that Netflix is able to offer and has the tangential possibility of removing any level of profitability and/or profit margins that the firm might be able to reflect. Likewise, a fundamental threat that faces Youtube is with regards to whether or not consumers will come to be frustrated by the proliferation of advertising that is evidenced on the site. As even a cursory analysis due notes, as compared to but a few years previously, the level of advertising that exists upon Youtube has risen exponentially within the past few years. Whereas a fundamental to the point is not yet been reached, is not beyond rationality to assume that in the same way that individuals eventually became frustrated with the proliferation of advertising upon the television sought alternative outlets, namely the Internet, as a means of escaping this, the same level of consumer response may eventually be seen with regards to the level of advertising that exists upon platforms such as Youtube. Apple TV Whereas competitors within the market represent a clear and distinct threat to each of the previously mentioned industries that had been detailed within this analysis, the threat of competition looms especially large with respect to Apple TV. THIs is due to the fact that there are a range of competitors that offer similar consolidation of media services almost identical to what Apple TV offers. In short, the service that Apple TV is able to perform for the user is not distinct or differentiated enough for it to be considered a best practice within the industry and thereby help it to weather the threat of resilient and persistent competition that exists within the field of digital media to home theater offerings. Another key area that must be considered is the fact that Apple Inc. has traditionally been able to operate within its respective markets and enjoy a sizable level of market dominance. However, in the case of Apple TV, and the tangential offerings that it encompasses, Apple does not exhibit any type of market dominance; rather, it is but one player among a litany of others (Segans, 2013). Likewise, when one seeks to analyze some of the weaknesses and threats/challenges that faces Blizzard and games such as World of Warcraft, it becomes patently obvious that continuing to offer the same service to users has a severe diminished return. Whereas World of Warcraft was a runaway success for the firm and helps to rocket Blizzard Entertainment to the forefront of videogame producers, a diminished appeal for the game, despite subsequent re-release, expansion packs, and a variety of other incentives, meant that it continued to shed subscribers at an alarming rate from its height in 2007/2008. Whereas it cannot be said that Blizzard has since struggled to provide further successful games to the consumer, the diminishing returns of such a cash cow as World of Warcraft, it stands as a testament to the fact that the company could not rely upon one particular game to provide all their revenue. For the preceding analysis which has been engaged, it can definitively be inferred that successful methods of conducting business in the online entertainment industry are concentric around finding a particular service that can have a contractual and/or residual return to the company. As is evidenced by services such as Netflix, Apple TV, World of Warcraft, and a litany of others that were not discussed within this brief analysis, the companies which retain the highest level of success are those that are not only able to sell to the consumer, but continue to sell to the consumer. Naturally, such a business approach is not new to the world as firms have always sought a way of encouraging customers to continue to need a good or service. Within the durable goods sector, this is oftentimes been related to the slow but steady erosion of quality that is represented within many immigrants. With the need for consumers to continue to buy and integrate with a particular product, quality has diminished so that the process of repeat buying can be affected. However, within the Web realm, quality in and of itself is not measured upon the same determinants. Rather, the most effective means of encouraging individual to continue to integrate with the product is by offering a type of recurring service that continues to integrate with the user as a function of time. Naturally, there are wildly successful entertainment industries represented within the World Wide Web that do not utilized such an approach; namely YouTube. However, as has been exhibited within the research presented, YouTube something of an outlier and leverages a standard/almost traditional method of business operation as compared to the others which have been discussed. Regardless of this factor, it is abundantly clear that each and every one of these entities, as well as the litany which were not discussed, must continue to bury and develop their service offerings last competition and rapid changes within the environment and technology threaten the very survival of their product. References AGRAWALA, M., WILMOT, L., & BERTHOUZOZ, F. (2011). 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