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Digital video content exploitation by a digital content service : exploring the possibilities of direct versus indirect revenue models

Borghuis, H.J.S. (2009) Digital video content exploitation by a digital content service : exploring the possibilities of direct versus indirect revenue models.

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Abstract:Digital sport content distributed through a digital network is presumed to have advantages due to the nature of digital content. Diminishing or even no marginal costs should allow for exploitation of current economically non-viable (niche) markets. There is an interest within NOS*NSF to examine the viability of digital sport content exploitation for different types of sport unions. As potential profitability (of the Internet) can be understood only by looking at individual industries and individual companies, this master thesis examines the industry around sport content by economically validating revenue models for four types of sport unions. The question answered in this theses is which (combination of) revenue model(s) captures the most economic value for a sport union exploiting digital video content through a website. A global actor view provided an overview of all relevant actors and their interactions with the digital service provider. A process model showed when an actor is involved and which decisions regarding a revenue model have to be made. The result of these overviews is that a distinction has to be made between revenue model dependent and independent actors. These revenue model actors and their relations with the digital service provider provides the „playing-field‟ in which decisions about the revenue model have to be made. The overall playing-field determines the economic viability of a revenue model. A meaningful categorization of revenue models is a categorization that shows the decisions made in the revenue process. Therefore a distinction can be made between direct revenue models where there is a direct financial exchange between end consumer and content supplier and indirect revenue models where there is an indirect exchange. Within these two types, distinctions can be made between on how the processes are modeled. Five revenue models have been identified: subscription, pay per view, self determined pricing, advertising and sponsoring. The comparison between the revenue models takes place based on the number of interested persons needed to break-even. The earnings per interested person determine when a revenue model reaches the break-even point. Solving the break-even equations for the revenue models indicates when a revenue model becomes economic viable. The economic viability is the difference between costs and revenues. The costs of a digital content provider are subdivided into three categories: infrastructure, production and payment costs. The production costs make up 85% of the fixed costs, thereby greatly influencing the viability of the business model of a digital content provider, as all revenue models have to overcome these fixed costs. These high production costs are known as first-copy costs. The specific revenue variables determining the economic viability are: interest in content, price and usage. Our research indicates that the size of a sport union has consequences for the revenue model selection. The break-even validation shows that for sports with little interest sponsoring is the only solution to exploit content in a viable way. The subscription revenue model is currently the best revenue model for large sport unions to capture economic value. Within our current estimates, a subscription model starts making profit with approximately 74,500 interested sportspersons. A combination of this direct revenue model with an indirect revenue model might lower the number of interested persons needed. Concluding, a combination of the direct subscription model with an indirect revenue model captures the most economic value for a sport union exploiting digital video content through a website.
Item Type:Essay (Master)
Clients:
Davinci
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/60122
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