Anthony J. Pennings, PhD

WRITINGS ON DIGITAL ECONOMICS, ENERGY STRATEGIES, AND GLOBAL COMMUNICATIONS

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 on 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 “ratings” of their programs to price the air time for sale to advertisers. TV commercials, interspersed within your favorite shows are priced, according to 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. Neilsen is a powerhouse in the ratings industry.

Another traditional example is the newspaper, 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 time-based 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.

The advertisers then buy ad spaces in the newspaper based on the profile of these readers. This creates two products and two buyers, making it a dual product market.

A primary 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 complicated calculation, and if you add the additional responsibility that newspapers have in maintaining an educated citizenry, it’s not hard to have sympathy for their management.

Other media like radio and magazines share this dual product model, but the numbers for most traditional media continue to decline as readers 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 stocks of digital content, and the dynamics of social media.


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Anthony
Anthony J. Pennings, PhD is a professor of global media at Hannam University in South Korea. Previously, he taught at St. Edwards University in Austin, Texas and was on the faculty of New York University from 2002-2012. He taught at Victoria University in Wellington, New Zealand and has received several fellowships from the East-West Center in Hawaii.


Category: digital media economics, meaning makers, media strategies
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    Professor at State University of New York (SUNY) Korea since 2016. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, digital economics, and strategic communications.

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