The Dual Product Media Model

Posted on | January 24, 2011 | No Comments

Digitalization has had a dramatic impact on media industries, causing them to reevaluate their business models and also creating the conditions for new types of media companies to emerge. Media content has always had unique economic properties and the challenge now is to figure out how the dynamics of digitalization and the Internet will change the conditions and options for the new era of digital coordination. Before looking at other models such as those that use transactions, sales or affiliate models; examining the traditional “dual product” media model will provide a point of departure to understand the strengths and weaknesses of the traditional media model and what changes and opportunities digitalization will engender.

The dominant media business model has been based on a two commodity model: content and audience. This “dual product” media model works first by creating content for sale to consumers and then by selling that mass audience to prospective advertisers. Media firms produce content that attracts a general or specific audience and those audiences are then measured, priced, and packaged for sale to advertisers. Television, at least the type I grew up on, relies of the making of a television program, for example, The Green Hornet, to attract a measurable audience, and then sells that audience to an interested advertiser.

Television has depended on the “ratings” of their programs to price the air time for sale to advertisers. TV commercials, interspersed within your favorite shows are priced, according the number of people ratings agencies like Nielsen determine to be watching it. Broadcast television has struggled though with the rise of cable television, the introduction of recording devices that bypass commercials, and then more recently the pressures of the Internet so they are looking for alternative or supplemental revenue models.

Another traditional example are newspapers, a medium going through an even more dramatic transformation. Newspapers make money by charging readers a specific price to buy an individual issue or a subscription to receive the newspaper for a certain length of time. The number of papers sold is of major interest to the advertisers as they look to see how many people will view their promotions. A specific problem in media economics is the calculation of a price considering the competing demands of readers wanting to pay less for the paper and the advertiser who is willing to pay more if the circulation is extensive enough. Determining a price for the paper that will maximize returns is a difficult calculation and add the additional responsibility that newspapers have in maintaining an educated citizenry and it’s not hard to have sympathy for their management.

Other media share this duel product model like radio and magazines but the numbers for most traditional media continue to decline significantly as readers often opt for getting their news and other media content from the Internet.

While this business model is far from being dead, it is being challenged by competition and technological innovation. The traditional dual product model is the starting point for media strategy as digitalization offers new opportunities for personalization, drawing on digital stock, and taking advantage of social media.

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Anthony J. Pennings, PhD has been on the NYU faculty since 2001 teaching digital media, information systems management, and global communications.

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