Both Spotify and Soundcloud are generally well known in the western world. They are both distributors of music and offer their service via the online streaming. We are going to give a brief summary of the differences and similarities between the two.
Whilst both make money on the distribution of music, Soundcloud’s business model is based on a fee for the music producing artists and on advertisements alongside of their content of their website. Soundcloud does not charge their music listeners and is based around its growing community of music lovers who help each other in finding the right songs and gain exposure for its musicians. Spotify has two business models, a freemium version and premium version for its listeners and is thus based on both an advertisement model as well as a premium business model. Spotify does charge its listeners and does not rely on a community to build gain a competitive advantage. Even though both companies are innovative and capture a large part of the audio listing market they both still struggle to gain profitability.
The big difference is the targeted audience, whereas Spotify targets everybody who likes music from anytime and in any genre. Soundcloud helps artists gain exposure for their new music and is basically a new music generating platform, competing with record labels. Soundcloud thus target music listeners that want the latest music from their favourite artist or from their favourite genre.
A very interesting distinction between both companies is their cost structure. Soundcloud’s cost of music creation is relatively high compared with its costs of copying music which is typical for an information goods providing company. Spotify pays a small fee for every song that has been listened which means they have an increasing cost account when they gain popularity. Their costs increase when they sell more information which is very atypical for an information goods company (Shapiro & Varian, 1998). This is part of the reason why Spotify is having difficulty in gaining in becoming profitable. The reason why Soundcloud is struggling to become profitable is because they are finally shifting to a more commercial model instead of building a big platform.
Even though Soundcloud has three times more traffic on its website than Spotify has, it is far less valuable. Soundcloud was valuated to be worth $700 million by crunchbase.com in 2014 but Spotify is valued at $4 billion (Bond, 2013). This means that Spotify is able to exploit far more value from its listing audience than Soundcloud does.
Other similarities between the companies are that they both have a strong policy on copyright material. Soundcloud has a software program called that scans for copyright infringing material and automatically deletes it. This mean that mix tapes with content of other artists is a big no-no. Much to the frustration of disk jockeys who heavily rely on their mixing abilities of other peoples work to make a living. Soundcloud suggest that they join a platform that better suits their needs and allows mix-tapes. Spotify pays for every single song that has been listened to and they also complies with copyright legislation.
The biggest threat of their current market share is the possible introduction of Pandora which is a radio streaming application and is only allowed in the US at the moment but has a 52% market share there. If Pandora would be let loose on the entire world both Soundcloud and Spotify could become in trouble.
Bond, P. (2013). Investors Flock to Music Streaming Services as Spotify’s Value Tops $4 Billion. Available: http://www.hollywoodreporter.com/news/spotifys-value-tops-4-billion-659561. Last accessed 28 Sep 2014.
Shapiro, C & Varian, H. (1998). Pricing Information in Information Rules: A Strategic Guide to the Network Economy. Cambridge, MA: Harvard Business School Press.
Sasson, B. (3-6-2014). Soundcloud SEO-based SWOT analysis – Not your mom’s MTV?. Available: http://blog.similarweb.com/soundcloud-swot-analysis-not-your-moms-mtv/. Last accessed 3-10-2014.
Blendle is a combination of a kiosk and a social network, which leads to a digital platform for journalism. Users can buy single articles and like and share them with their friends, for instance on Facebook and Twitter. Blendle has almost every Dutch newspaper and magazine in their database. In this way users can pay and read quality journalism in an easy way. There is no need to register at multiple websites to consume articles from different publishers. Users are able to instantly see what their friends liked or shared and which articles are popular at the moment.
Khan Academy is a non-profit organization that intends to provide a free world-class education to anyone anywhere. The company tries to achieve this goal with an online learning platform that contains videos, which are stored on YouTube. It is a combination of serious gaming, an e-learning environment and a study-tracking system, where teachers can get access to their students data and see which subjects the students master and which subjects they need to give extra attention to. The learning system is available for anyone around the world who has an Internet connection.
Comparing Blendle and Khan Academy
Newspapers and educational systems have not changed substantially before the digitalization era. Both Blendle and Khan academy introduced a new way of operating in an old and conservative industry. They both provide services that used to be part of a bigger product. Both products are easily accessible and available through the Internet. In addition, as for opportunities, Blendle as well as Khan Academy could expand internationally.
However, there are also some differences when comparing the two business models. For instance, Khan Academy is completely free for consumers, while the business model of Blendle is based on paying customers. In addition, Khan Academy bundles huge amounts of information whereas, Blendle makes a selection of significant information. Lastly, a difference is the expiration date of the content provided on the websites. Whereas, education is timeless, newspapers and magazines are getting more and more outdated. This means that Blendle is more threatened by time than Khan Academy is.
Journalists have not had their most optimistic decades . Dubbed “America’s fastest shrinking Industry”, the newspaper industry has seen ad revenue halve since the year 2005. Similarly, the newsroom workforce has been reduced by over 20%. The often mentioned cause for this drastic downturn is the internet. It has changed the way people find information, and maybe more importantly the way information finds people. Newspapers have acted on this revolution by offering their content online, and after initial struggles many have find a membership model that suits their customers. However, a major problem has been largely unsolved; the impact of this reduced newsroom staff on the quality of journalism, and in particular investigative journalism.
Investigative journalism is a type of journalism where one subject or topic is deeply researched. A journalist may spend months or years working on just one of these articles. It can be considered of vital importance for the accountability of both company and government, as its most famous example the Watergate scandal showed. However, such extensive research requires a lot of resources, which is the object that newspaper currently lack. Furthermore, now margins have shrunk to dramatic lows, the desires of advertisers have become central. They do not necessarily want accountability, and as a result investigative journalism has largely disappeared as a priority for traditional media. Does this mean that investigative journalism an art that will continue to lose its resources?
Not if some start ups, such as Yournalism can help it. They have reassessed the journalism business model, and have found a revenue model away from the traditional advertisers. Yournalism believes that the necessary resource can come from the famous crowd. Crowd funding has seen a large increase in interest in the last couple of years, and can be used for a wide array of financing such as movies and books. This increased popularity of crowd funding can for instance be seen in the huge number of blog posts describing one of the various new iterations possible with this method of financing. But how can investigative journalism be funded by the crowd? As mentioned above I will take the example of Yournalism, which is a recently launched (30th of September) Dutch start-up by former Volkskrant employees. On their website various research topics have been posted, such as whether the European Medicine Authority is cooperating with the pharmaceutical industry. When a certain research question reaches the target of €3000, a freelance journalist attached to this question will be able to start working. Besides funding, the crowd can contribute by submitting research topics or offering research tips. Yournalism believes that this platform is the perfect match between information that the crowd wants, and the impartial research that is lost in today’s media conglomerates.
But what do you believe? Do you think that the crowd can fund this type of journalism? The cynic in me would question the actual impact of crowd funded journalism. Isn’t the point of investigative journalism to uncover the stories that people do not even know exist yet. Furthermore, would prepaying the journalist not negatively impact his/her desire to do extensive research, and thus the overall quality?
Benjamin Clymer highlights the best parts of Apple’s newest hardware, as well as critically assesses features of design and software. While the article does not push much information about e-commerce, the author poses the question of whether the iWatch will impact a significant amount of consumers, so that regular watch makers, mechanical and digital, which have products in the same price range, will have to worry. The short answer is: ‘It Depends!“.
While Clymer does predict that only low- to middle-income consumers will be tempted, he does stress the natural behavior embedded into the watch which makes it hard to tell “where the software stops and the hardware begins”.
Perhaps a look at Doug Thompson’s article “Apple Launches an iBeacon [and they call it a watch]” helps turn the discussion to a homogenous view of the industry change. As the market reacts much better to Apple’s designs than their unique technology, it is worth noting that the iWatch is leaving competition in the dust on both frontiers. After multiple disputes concerning the strategy the tech giant, we finally see the answer to the iBeacon in the IOS context.
Young start-up industry leaders, such as Estimote, Kontact and Ifinity have opted-in Apple’s iBeacon standards, which follows compatibility protocol with IOS and OSX devices.
Beacons are mini-computers with a multitude of sensors, from WI-FI and Bluetooth, to Temperature, Database analytics, proximity sensors and others. The implication for B2C companies is two-fold. By augmenting the physical world in-stores, the Internet becomes a medium that serves customers in the digital as much as in the physical. As long as customers are willing to adopt the new technology, business models will gave to be reimagined, as internet-only behavior might be mixed in with traditional brick-and-mortar behavior.
Coming back to the role of iWatch, Apple has predicted the resistance of current customers to adapt new behavior for their mobile phones and have therefore introduced a new gadget, where interacting with iBeacons through your SmartWatch will be the norm. If successful, Apple might once again set the trend in from of its competitors, by targeting customer behavior, usability and context, instead of just throwing a small screen on the wrist and hope consumers will know what to do with it.
With the introduction of touch screen and motion sensors the end of the mouse is coming close. Tablet and smartphones already operate completely without a mouse and the introduction of Ultrabook’s do make them less necessary for laptops as well. But can eye movement recognition completely replace the mouse?
At the moment, the technology is still in development and therefore not yet a substitute for the mouse. Nevertheless, the first test results from start-ups are promising. Forbes named the eye tracking technology the most promising advances in natural user interfaces at the Consumer Electronics Show (CES) 2014. (Forbes 2014) Tobii Eye Experience is a Swedish start-up specialized in this technology, present at CES 2013 they announced the idea and were raising money for development. A year later, they were there for a whole other reason. They were selling development kits at third parties to build applications for their technology, the Tobii EyeX.
Tobii EyeX combines the eye tracking technologies with imput from traditional controls. Users can use their eyes to navigate and select. Executing the commands will be with a key or voice command. The eye tracker sensors eye movement and create information with infrared microprojectors and optical sensors. All those information gathered is processed and with mathematical models calculated into the command the users want
The device would be an extension to a desktop or laptop, putting it on top of the screen and connect it via an USB-port. The device is available for €99,- but still in the beta version and open for developers. A point of interest is that it’s only compatible for windows 8 and that an application will need a special extension in the application to work properly with the Tobii EyeX.
Our group focuses on two online video providers, Netflix and iQiyi, which are selected as representatives of US and China online video streaming industry.
Netflix is an American online streaming video provider, founded by Reed Hastings and Marc Randolph in 1997. The initial business model focused on providing DVDs for a fixed monthly fee, no-late-fee policy and by-mail subscription service. In 2007, Netflix added an online streaming video service, “Watch Now”, which enabled its members to watch movies using computer. In the following years, Netflix also managed to establish partnerships with several consumer electronics companies.
iQiyi is one of China’s leading online video providers, which was launched in 2010, invested by Baidu(the owner of China’s largest search engine). iQiyi exclusively focuses on fully licensed and high definition contents, meaning that all video contents provided by it are licensed from copyright owners. In addition, iQiyi has its own team and studios to produce differentiated programs.
Based on the analysis of Neflix and iQiyi’s products, pricing, promotion and problems, we summarized the strengths and weaknesses of these two companies as below.
(1) First-mover advantage
As a first-mover in licensed video streaming services, Netflix has an advantage that that there is high-cost barrier for new entrants.
(2) Great amount of members worldwide
Netflix has more than 50 million members in over 40 countries enjoying over two billion hours of TV shows and movies per month.
(3) Business network
Netflix cooperates with Amazon, Samsung, Apple, and Google, in cable boxes, which make way for Netflix to millions of TV screens.
(4) Best algorithm in user behavior prediction
It not only helps Netflix to recommend videos to users, but also leads to the success of House of Cards.
(1) Supports from Baidu
Baidu provides sufficient funding and positive brand impacts to iQiyi. In addition, iQiyi can purchase video contents and put advertisements using the searching data from Baidu as references.
(2) Legal copyrights
iQiyi implements its specific business model to guarantee the first-hand legal acquirement of video resources, and eliminates the scruples of breaking the laws.
(3) Innovative products and services
iQiyi has launched TV+ and Super Definition Box, which combine online video with traditional television to create new source of revenue.
(1) Narrow scope of business
Netflix only has two main business segments, namely, DVD rental and streaming.
(2) Reliance on licenses
Netflix has few self-made TV programs and no video uploaded by users. Therefore, they must spend a lot on getting licenses when they enter a new market.
(3) Limited number of popular movies
Because of interest contradiction, movie producers often refuse to sell licenses of popular movies to Netflix. Netflix lacks bargaining power in negotiation.
(1) Late entry to the industry
Prior to iQiyi’s entry, there has been a number of competitors in the market. How to establish differentiation advantages to gain and retain market share is serious challenge for iQiyi.
(2) Burden of high costs of legal copyrights
Though the purchase of legal copyrights is considered as strength of iQiyi, its high costs also cause the difficulty in making profits.
In the time we spent online we are giving companies a lot of information about ourselves. By now Facebook knows who are friends are, Google knows our favorite products and Apple can provide you with your favorite music. The areas where companies can gather information from are declining so they are searching for new field where customer information has value. One of these areas is now being explored: your health.
With the introduction of IOS 8 Apple users are now able to keep track of fitness goals and health-related information and also Google is currently working on Google Fit for Android that tracks similar data across various platforms and wearables. But it seems that soon there will be a new kid on the block, and his name is Facebook.
That’s right Facebook is currently in the early stages of developing a health application. The Facebook we all know from where we connect with friends, post pictures and share video’s of cute cats is now also interested in your health. They are holding meetings with medical industry experts and entrepeneurs and have set up a R&D unit to test the new health apps.
One of the main reasons for Facebook to create the app is to increase engagement with the social networks for the users. This of course besides the increased functionality of the platform. However using an app does not come without its own consequences.
Privacy, an area where the company has faced considerable criticism over the years, will likely prove a challenge. This week, the company apologized to users for manipulating news feeds for the purposes of research. But Facebook already has a few ideas to alleviate privacy concerns around its health initiatives. The company is considering rolling out its first health application quietly and under a different name.
In conclusion, I think Facebook creating a health app it’s another step forward in digitalizing our lives. Something that doesn’t necessarily need to be a negative idea, however the use of such app does come with its costs. The loss of privacy by using the app of Facebook is something I personally would not want, so I’m sticking to independent apps.
Let me know if you’re willing to give up some privacy for a Facebook health app in the comments.
Facebook joins Apple, Google; plots first step into healthcare, The economic Times, Reuters 2014
The last few years have seen a substantial growth in user-generated online content delivered through collaborative internet outlets such as YouTube, Flickr and Slashdot.org. Wikipedia is a prominent example of a collaborative user-generated content outlet. It is a free, open content online encyclopedia created through the collaborative effort of a community of users known as ‘Wikipedians’ . Anyone registered on the site can create an article for publication but registration is not required to edit articles. Thus, the success of Wikipedia is dependent on the contributors. Currently, Wikipedia is in trouble. The volunteer workforce that built the project’s flagship, has shrunk by more than a third since 2007 and is still shrinking. The founder of Wikipedia, Jimmy Wales, stated that Wikipedia needs to attract a new crowd to make progress. The biggest issue of Wikipedia is the editor diversity and he hopes to grow the number of editors in topics that need work.
According to the article of Zhang and Zhu (2011), there is a positive relationship between group size and contributors’ contribution levels. The cause is attributed to social effects: contributors receive social benefits from their contributions, and the shrinking group size reduces social benefits. But what could Wikipedia do to grow the number of Wikipedians? To answer this question it is useful to understand what motivates content contributors, and identify which motivations are associated with high or low levels of contribution. In the article ‘What motivates Wikipedians?’ the following motivations are tested:
- Altruism and humanitarian concerns
- Responding to requests by friends or attempting to engage in an activity viewed favorably by important others
- Chances to learn new things
- Preparing for a new career or signaling knowledge to potential employers
- Addressing personal problems, such as guilt at being more fortunate than others
- Ego needs and public exhibition of knowledge
- Ideological concerns, such as belief that information should be free
They state that user-generated content outlets who seek to recruit and retain volunteering content contributors, need to focus their marketing, recruitment and retention efforts on those motivations that are both high in relative importance and where strong correlation exists between the level of motivation and the level of contribution. Their findings suggest that this is the case for the following motivations: Fun, ego needs and public exhibition of knowledge and addressing personal problems.
Next to these findings, Wikipedia also could examine motivations that are not tested yet. For example, social issues where someone feels he or she benefits from other people having the correct facts (e.g. public health problems and political controversies) and the motivation that people actually have something to say. What do you think Wikipedia could do to increase the number of Wikipedians?
Nov, O. (2007). What motivates wikipedians?. Communications of the ACM, 50(11), pp.60–64.
Zhang, X. and Zhu, F. (2011). Group size and incentives to contribute: A natural experiment at Chinese Wikipedia. The American economic review, 101(4), pp.1601–1615.
With all the years, the war between Sony and Microsoft never stop about the video game. And recently, both of two companies have lunched each new products in order to take over the market share in the gaming industry.
One product which is lunched by Sony is Playstation TV, “PlayStation TV offers access to some of PlayStation’s biggest and best titles, including great games on PS Vita, classics on PS One, blockbuster experiences on PS3 through PlayStation Now, and even PS4 games through Remote Play” told by Mary Taing, Sony Computer Entertainment America spokesperson. Moreover, PlayStation TV creates the in-house gaming ecosystem that it allows for streaming of games from a PlayStation device to a second screen in another room. On the other hand, not only can gamer download the game to the PS TV, but also can insert directly using a PS Vita card; as well as many older PS One, PSP and PS3 games. Besides, remote play is added as a new feature to Playstation TV as well.
the other product is Xbox One which is developed by Microsoft. One biggest advantage is that it is not necessary to connect to enjoy offline features of games except the first time that you need to set up the Xbox One in order to get the latest system before you play the games. The fact is that you can take the Xbox One anywhere and play any disc-based Xbox One game on it. Still, it remains the Xbox 36o’s feature that there are no limitations to using and sharing the game. And it is possible to purchase from Xbox Live and get instant access to playing. In addition, Xbox One made a big progress on voice command that if you want to turn off the Xbox One, you can simple say “Xbox, Turn Off” instead of going to shut it down.
To be honest, both of this two products show their powerful function to the gamers and try to attract consumers as many as they want. So based on the feature above, which one do you think would win the battle this time?
Reading has been revolutionized with the arrival of the eBook. Never before was it possible to obtain books with a few clicks of the mouse. Never before were the production cost per additional copy literally 0. Never before did we encounter so many problems with maintaining copy rights.
A growing number of users is unwilling to pay for these products entirely, yet other costumers feel the need to consume their literature legally. Despite their willingness to pay, most of these customers are becoming unwilling to wait. They want to obtain their books through the internet because of the convenience it brings.
Two different models have been found to satisfy these paying customers. In essence both models are extensions of business models of the physical book market. Amazon’s Kindle uses the classic retail model. Customers can buy books and lend them to others if they want to. The only difference is that this now happens through web interfaces and apps rather than through brick and mortar stores.
Debibliotheek.nl is an extension of existing Dutch libraries. If you have a library subscription you can use this service for free. Just as in the brick and mortar libraries you can choose a book and borrow it for 21 days. A copy of an eBook can be borrowed by only one customer at a time.
We were curious what the benefits and costs were of having these specific business models.
One of the largest differences is that debibliotheek.nl despite being an online entity is still hyper local, while Amazon is very global. Debibliotheek.nl is in fact location dependent, for it requires customers to subscribe to a local library before one can make use of the website. This has two implications: on one side debibliotheek.nl lowers the barrier for customers of libraries to start using the service; on the other hand the cost of joining for non-library members is significantly higher. Debibliotheek.nl has a large assortment Dutch book as well, which suits the needs of their customers. Amazon Kindle is much more globally oriented and has a wide assortment due to their deals with publishers. Unfortunately they are currently unable to enter several European Markets due to their inability to comply with local legislation. For instance, the Dutch market requires (e)Books to comply with a standard price, which Amazon is currently unable to do. This inability means that books in specific languages are unavailable through Amazon.
Another difference is in the pricing model. Amazon charges a price per book and allows you to keep it afterwards. Conversely, deBibliotheek.nl charges a flat subscription fee, for which you are allowed to have 10 books on your account at any given time. If you prefer to have new titles you might be willing to take the premium account for €20,- extra, which gives you access to all titles published within the last three years.
Which model suits a consumer best depends on their willingness to pay and their reading speed. For some people 21 days is too short a timeframe to read a book. Buying the book means buying extra reading time as well.
We do believe that both models will have a place in the Dutch markets and might supplement each other rather than exist in direct competition, rather like their brick and mortar equivalents have done for years.
The crowd. It has been a term we have all heard at some point in our studies. I heard about it first during the BIM and Innovation Management courses in our Bachelor. There I learned what a great force the crowd can be. It can be a huge source of information for companies in developing new products or solving problems (crowd-sourcing). Or it can serve as a source of capital for exciting new start-ups who do not feel like giving up a huge chunk of equity to investors, or who want to generate lots of buzz about their products before they are even developed (crowd-funding).
Recently, a new use of the crowd has been emerging and gaining popularity. It can be seen as a form of crowdsourcing, but is becoming so popular it is becoming a force of its own. Crowd-Writing is when lots of people (mostly amateur authors) come together to read, write or critique each others work. Users may post their work and ask for feedback or they may start a whole new group or community to write poems, novels, articles, blogs or whatever they want. The opportunities are endless.
One of the first start-ups that focused on crowd-writing is called Wattpad. This is an online writing community that allows people to crowd-write online or through the Wattpad app. They launched in 2007, but only really started to take off in 2011, when they received their first $3,5 million investment. This year, their biggest funding has occurred, as they received $46M in a financing round led by OMERS ventures. Today, the app has 25 Million users, 40 Million stories to read and is available on 85% of all mobile devices.
Their success has not gone unnoticed and one of the leading companies in terms of (e)books and (e)readers, Amazon, has launched its own crowd writing community a few days ago. WriteOn, which is how it is called, will serve as a crowd-editing and –writing service and is now in Private Beta, so not available just yet. It is easy to imagine how Wattpad and other crowd-writing start-ups are following this news with great concern. Amazon is the king of eReaders and eBooks so it could very easily implement crowd-writing into its business. Amazon already allows amateur writers to publish their own eBooks on their website, cutting out the publisher as a middle man. So adding a crowd-writing service to this should be no problem. Now that Amazon has joined the crowd-writing game it has the potential to grow from small communities only to the masses and main stream users, which means it may not harm, but could also benefit the growth of Wattpad.
What do you think the future will hold for crowd-writing? Can you see it growing as big as crowd-funding and –sourcing? Or will the combined work of a hundred amateur novelists never match up to a single, great author’s writing?
It is quite common that we connect our devices to exchange files, such as pictures, or that we synchronize our phones with our laptops. This can be done via Bluetooth or a cable. Now MIT Media Lab developed a new technology called THAW, this technology synchronizes your computer screen with your smartphone.
THAW is a novel interaction system that allows a collocated large display and small handheld devices to seamlessly work together. The smartphone acts both as a physical interface and as an additional graphics layer for near-surface interaction on a computer screen. The system enables accurate position tracking of a smartphone placed on or over any screen by displaying a 2D colour pattern that is captured using the smartphone’s back-facing camera. The proposed technique can be implemented on existing devices without the need for additional hardware. To see how this works in practice, watch the following video:
Although most part of the video is about using THAW in the gaming industry, several other possibilities might arise. What if the technology can create one single feed on several phones to allow people to watch a movie together? Another example is to use your phone as a mouse. The possibilities seem endless.
The technology is not commercially available yet, but it probably will be in the future. Can you come up with some ideas of how to use this technology? I think it is already really convenient that you can transfer files very easily, but I am curious about which other possibilities you can come up with.
The topic of this week, Information goods, is a very interesting and popular topic these days. We decided to compare a very famous company in this industry with one which is not so famous in Europe. We all know Netflix as an online streaming company. But you may not have heard of Redbox, an American company which rents out movies through thousands of kiosks around the United Stated and Canada.
The online streaming company Netflix was established in 1997 and in 1999 Netflix started with a subscription service which allowed their customers to rent an unlimited amount of movies for a fixed amount of dollars per month. After their IPO Netflix got more and more users and they reached 4 million subscribers in 2005. In the year of 2007 they started to offer online streaming and three years later, in 2010, they started to offer their service also in Canada and some European countries. At this moment Netflix has over 50 million users worldwide.
Netflix has had several business models throughout the years. In their early days customers paid $20 per month which enabled them to rent 3 movies at a time. The interesting part of this business model was that customers could keep the movies as long as they wanted, but before they wanted to order other movies they should return the old ones. In this way the late fees did not exist in their business model. In 2007 they started the streaming service as we know it today, where you pay a monthly fee and in return you can watch an unlimited number of movies/tv-series online.
The DVD rental company Redbox was established in 2002. It initially started with two different concepts. Their first concept was the offering of several convenience goods through vending machines, and the other one was a DVD rental service through vendor machines/kiosks. Only the DVD rental service still exists. The DVD rental service started with these kiosks which were located in different McDonalds restaurants. As time proceeded, Redbox grew bigger and bigger and started to place the kiosks outside the restaurants as well. Nowadays they have over 40000 kiosks throughout the USA and Canada. Another interesting number shows us that 68% of the US citizens is living within 5 minutes from a Redbox kiosk.
Redbox has had several different business models as well. Their initial business model is the one in which customers go to a Redbox kiosk, put in $2, choose a DVD an receive this physical DVD right away which has to be returned the next day to any of the kiosks. Another business model offers the customer to make a reservation of a particular title in the Redbox database and pick it up right after the reservation was done.
If we compare the strengths and weaknesses of both companies, we see that there are a lot of differences. The strength of Netflix is that they have a very strong brand name and they offer their service for a very low price compared to competitors. They have a huge customer database and offer a very large amount of different titles. The downside of Netflix is that the newest releases are not offered. Only ‘old’ titles are offered and (potential) customers find that very frustrating. Redbox on the other hand is well known for their good quality and low price offers. Also as already said, since the kiosks are so close to the people, the customers are very satisfied with the accessibility of the DVD’s. The weaknesses for Redbox are that the amount of DVD’s per kiosk is limited and the costs are quite high. Redbox faces the threat that the streaming services take over the entire industry, so that the demand for physical DVD’s completely disappears. What might be an opportunity for Redbox is that they focus on other countries outside North America.
Rocket Internet is an internet incubator based in Berlin, only supporting online companies, and they are the biggest player in its market. They are operating since 1999, but only founded the company “Rocket Internet” in 2007, and it just launched at the stock market this week. They have 25 Rocket offices all over the world, covering all emerging markets. They have three main sectors where they work: E-commerce, financial technology and marketplace. Their strategy, next to financial support is to implement other successful companies’ business models into startups. Especially if one model works in one country they try to implement it to other country’s markets. They are receiving a lot of critics for this method, but most of the time, it is working for the m. They pay great attention to local cultures and traditions; and try to implement as many features to a company as they can to help the users accept it more. Rocket Internet has its own infrastructure, private labels, and warehouses which is a competitive advantage, and gives them opportunity to quick action taking and flexibility in order to help business grow. During their operation they helped out and gained shares in such startups as Wimdu or Foodpanda.
Although they are not always successful, they had some very unfortunate projects in 2013. Some examples for that: a German online home furnishing company, where they lost 64 million euros, or the a Russian online fashion retailer, Lamoda, where the loss was 40,1 million euros. Altogether for 2013, the top 11 ventures created a 442 million Euro net lost. But still, their business is very fruitful; they established 75 companies from all over the world (100 countries!), which earned them 719 million euros revenue.
This Thursday Rocket Internet launched at the Frankfurt Stock Exchange. They hoped to raise 6.5 billion euros, but unfortunately their IPO wasn’t so successful. On the next they their price fell 13% in its debut. It is really hard to predict what is going to happen to them, since they are very unique. They offer a lot more than a simple venture capital firm and they usually have bigger stake in start-ups. If they are successful in the stock market they could turn the focus on to digital Germany.
The founders, the Samwers brothers (Oliver, Mark, Alexander) are really committed to the company, and to be successful. Oliver Samwers called himself the “the most aggressive guy on the internet”.
Do you think a relatively small company could have such a big influence in the German Stock Market? How do you see Rocket Internet’s stock in the future?
In this blog my team and I will adress our designated topic for ‘the technology of week’: information goods. Whereas traditional products are valued by their physical components, information goods are valued by their intangible contents. The generally known types of information goods are CDs, DVDs, books, magazines, newspapers, USB-sticks etc. Hence, these information goods still have tangible characteristics to them. Due to rise of the internet information goods are increasingly shifting towards digital products, which focus on internet-based functionalities. One of these functionalities is that digital information goods do not have any physical attributes and thus, do not require physical distribution, which makes way for new markets that are settled on the internet. The characteristics of these markets are quite different than the traditional ones as the internet offers a lot of different possibilities for the settled firms. We have compared Amazon Kindle and Netflix with eachother and seen what impact the digitalization of information goods has had on them.
Amazon Kindle and Netflix Streaming are two ´entertainment´ providers that propose nearly the same value, which is convenience. This comes as no surprise as both firms try to differentiate their products/service due to the high rivalry in their internet based market. Both companies offer recommended digital information goods through their platform, using their own ways to meet customer demand and to gain customer satisfaction. Netflix does this by offering an ‘unlimited subscription’ to their customers, giving them unlimited access to their contend for a monthly fee. Amazon Kindle initially offered a ‘pay per use’ functionality. Further more, both companies make use of the recommendation and merchandising technology in order to recommend their products which is based on their data analysis. This technology is used, in order to give accurate recommendations and to present an automated self-service for their customers.
It also came to our attention that both firms focus on the mass market. However, Amazon Kindle possesses a long tail supply to choose from, whereas Netflix offers a somewhat limited amount of movies and series. This is due to the fact that Netflix has limited access to license and restricting agreements with Warner Bros (content provider).
Thirdly, the cost structure of either of the companies is different since Netflix has the obligation to pay license titles from content providers that are spread out over a finite period of time. This means that the costs can ascertain a negative contribution marge or losses. By contrast, Amazon pays the fixed amount per sale to their suppliers when the e-books are acquired. This means that their contribution marge will always be positive.
Lastly, the channels where both companies make use of to attain their customers are somewhat different. Logically, they both use the internet to connect with their customers. The difference is that Amazon Kindle makes use of the lock-in effect, as the e-books are only readable through the Kindle e-reader. This will force the customers to purchase the Kindle e-reader if they want to make use of their service. Customers that acquired the Kindle e-reader probably will not switch over to competitors, due to the high switching costs. Namely, they already have made an initial investment to read e-books. Currently, the Kindle e-books are now also available through applications that are offered through a mobile or tablet. Meanwhile, Netflix offers their service through every screen with internet, which makes the service more accessible for customers.
Violent video games are often put forward as one of the causes of aggressive behaviour. The effects that these games have on real-world behaviour have long been a hotly debated topic. For example, in testimony before the U.S. Senate, Dr. Craig Anderson argued that “high exposure to media violence is a major contributing cause of the high rate of violence in modern U.S. society”. But is this really true?
According to a recent study published in the Psychology of Popular Media Culture, there is no evidence to support the notion that video games lead to increases in real-world violent crimes. This research found some interesting results: “homicides tended to decrease in the months following the release of popular M-rated violent video games”, apparently criminals were too busy having fun playing their favourite video games. The researches of the study note that “finding that a young man who committed a violent crime also played a popular video game, such as Call of Duty, Halo, or Grand Theft Auto, is as pointless as pointing out that the criminal also wore socks.”
Another study conducted last year, that was funded by the US government, also found the opposite effect: children with ADD or depression actually appeared to be less aggressive after playing violent games such as GTA, Halo or Mortal Kombat. It’s a fascinating finding, children prone to aggression appear to be less-aggressive after playing violent video games.
Despite these findings from academic articles pointing out the insanity of blaming video games for violent behaviour in modern society, governments in Western countries such as Australia and Germany keep banning and censoring video games. Germany’s censorship law specifically prevents material that “glorifies violence” and therefore adults are not allowed to buy the violent video games they like. Recently the new South Park video game called ‘Stick of Truth’ was even censored in Europe as a whole, as several cut scenes were deleted from the game. What do you think? Should governments be able to censor these video games?
Burgess, M. (2014) Censored: Australian videogame ratings versus the world, http://www.gameplanet.com.au/features/g51d5115802299/Censored-Australian-videogame-ratings-versus-the-world/, retrieved October 4, 2014.
Ferguson C.J. & Olson C. (2013) ‘Video game violence among ‘vulnerable’ populations: the impact of violent games on delinquency and bullying among children with clinically elevated depression or attention deficit symptoms’, Journal of Youth and Adolescence.
Makuch, E. (2014) Violent Video Games Don’t Lead to Increases In Violent Crimes, Study Finds , http://www.gamespot.com/articles/violent-video-games-dont-lead-to-increases-in-viol/1100-6422421/, retrieved October 4, 2014.
Moses, T. (2014) Why has the South Park: Stick of Truth game been censored in Europe?, http://www.theguardian.com/technology/2014/mar/05/south-park-stick-of-truth-game-censored-europe, retrieved October 5, 2014.
Our team decided to compare two companies active on the online music market. One of these companies is Spotify, focusing on online streaming, the other is Apple with iTunes, focusing on the actual sale of music. In our paper we have compared the two business models, a summary of this comparison can be found below.
Spotify was established in 2006 in Sweden. As of May 2014 the number of users was 40 million (Spotify, 2014). Their business is based around the concept of streaming music, instead of selling it for download and offline storage. Currently, Spotify offers two types of subscriptions: (1) a free subscription that offers music streaming which is occasionally interrupted with audio advertisements and (2) a paid subscription which offers higher quality audio and is ad-free. Music can only be used offline using a paid subscription, which approximately 25% of the user base has (Spotify, 2014).
Apple launched the ITunes Store on April, 2003. It’s a virtual store providing digital music for people to buy and download. At release, the iTunes store contained 220,000 songs but over the years it became the largest virtual music store in the world with over 43 million songs available. iTunes has diversified its content over the years, by adding movies, TV shows, radio, apps, books and games.
Spotify has a big advantage over iTunes in that it allows users access to all music in its library without restriction for a set monthly fee, allowing users more access for a potentially lower price. You need to keep paying to retain access to the music though. If you only listen to a limited number of songs, buying them might be cheaper in the long run. Spotify also has a free version, which is a big advantage for people who don’t mind the ads.
Spotify has about half the songs available compared to iTunes, but for most mainstream users both have enough to offer. ITunes also has a better relationship with content providers. Many copyright owners are sceptic about Spotify’s business model and complain about relatively low payouts. Some artists, such as Coldplay, have elected not to release their new albums on streaming services, instead only making their music available for purchase. This may be mitigated by the fact that Spotify has been very successful in reducing piracy. Many people have a free subscription, or even a paid subscription, who would have otherwise pirated their music. Audio quality is equal between iTunes users and Spotify’s Premium subscribers. Free users, however, get a lower quality.
Many people agree that streaming will, on the long run, become more popular than downloading music is. iTunes sales are projected to drop by 39% in the next four years (digitalmusicnews.com, 2014). Much of this growth in stream users has gone at the expense of people who used to buy music online. Apple is clearly aware of this trend, as evidenced by their recent takeover of Beats Audio. It will be very interesting to see how Apple will adjust its strategy to accommodate streaming, and how the market will develop in the future.