Page 153 - Electronic Commerce

Chapter 3

subscription or a per-view fee for movies increases, media producers will be more
amenable to releasing their product online because they know they will get paid for it.
Finally, video delivery technologies are becoming more transparent. For example,
HTML 5 allows the delivery of movies through a standard Web browser without requiring
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plug-ins or external software. The availability of Web browsers on devices other than
computers (for example, smartphones and tablet devices) has reduced concerns about
technology barriers to video delivery on multiple devices.
Amazon.com sells the right to view movies and television shows on its Web site.
Netflix offers online access to movies on its Web site as part of its DVD rental subscription
plans. Apple’s iTunes service includes video offerings for rent or purchase in addition to its
many free video downloads.
Many television programs are also available online. Three of the major U.S. broadcast
networks (ABC, Fox, and NBC) formed a joint venture to operate Hulu, which offers video
clips of popular television programs and movies. Hulu offers much of its content free
(using an advertising-supported revenue model) but also offers a monthly subscription,
which makes premium content available. The other major U.S. broadcast network, CBS,
operates TV.com, which offers free selected CBS-owned content, using an advertising-
supported revenue model. Premium cable channel providers such as HBO and Showtime
offer online access to their content for customers who have subscriptions to their services
through their local cable company. As HBO, Showtime, Netflix, and other companies
create more of their own content, the traditional distinctions between video content
creators and distribution channels have blurred. Many companies in these businesses
now perform both creation and distribution.
Google’s YouTube has become a leading source of free videos on the Web. These
videos are often used to show trailers and other promotional clips for movies, television
shows, and live performances that are sold elsewhere online, through network or cable
television outlets, or in theaters. Some entertainers, such as comedian Louis CK, are
selling performance videos to fans online rather than using online video solely as a
promotional device.

Advertising as a Revenue Model Element
Instead of charging a fee or subscription for content, many online businesses display
advertising on their Web sites. The fees they charge advertisers are used to support the
operation of the Web site and pay for the development or purchase of its content. Some
sites rely entirely on advertising for their revenue; others use it only to provide part of
their revenue. In this section, you will learn how advertising revenue is incorporated into
the revenue models of various content-providing online businesses.

Advertising-Supported Revenue Models
The advertising-supported revenue model is the one used by broadcast network television
in the United States. Broadcasters provide free programming to an audience along with
advertising messages. The advertising revenue is sufficient to support the operations of the
network and the creation or purchase of the programs. With the exception of the overall
Web growth slowdown during 2000–2002, which you learned about in Chapter 1, Web

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