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Hulu’s Competitive Advantage: Market Channels

Hulu was able to create a superior augmented product in part thanks to the unique advantages of the distribution channels in its ecosystem.

In addition, Hulu’s channel design was near-optimal in its length and breadth: it was able to position itself to be accessible to over 96% of U.S web-audience thanks to distribution partnerships with AOL, Yahoo!, MSN and MySpace (also owned by NewsCorp), with minimal intermediary “layers” – people could view Hulu videos directly on these third-party sites without having to go to Hulu.com itself, or an authentication or login process (through a pop-up window, for example) and users could share and embed Hulu videos onto their own private sites such as blogs, without contractual or technological constraints, thus widening the distribution net. In addition, videos were streamed and therefore the added task of ‘downloading’ was by-passed in preference for immediate product accessibility.

Having such a large customer base (anyone in the U.S with internet access and a desire to watch premium video content) allowed for numerous and diverse channels to the market that built upon both direct (Hulu.com) and indirect distribution (third parties) strategies. Also, the fact that Hulu’s market segment were people who already used or accessed digital products and/or content meant that customer ‘education’ and/or awareness in using Hulu’s intuitively built site was also not necessary, thus the need for a massive sales force to offer pre- or post- technical or service assistance could be eliminated, and Hulu could begin building personal customer relationships using its initial staff of 9 people, plus an intern.

Last but not least, the fact that most of the supply chain – from content producers (studios) all the way to third-party distributors either did not have competing functions or products with Hulu (or were part of the same parent companies) helped integrate a congruence of goals to the whole eco-system that made it a streamlined and highly successful business model to initiate.

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Digital Magazines: Too soon for the Spanish market?

Returning to some of the statistics regarding digital adoption in Spain, I began to question whether the Spanish market at today (2006) truly offers enough market demand  to warrant investment in digital magazine products.

My first concern stems from the fact that only 37.1% of the Spanish population are Internet users, and less than half of the population – 45.9% – actually own a personal computer (Exhibit 1). Although market growth predictions for print magazine hovers at a meager 4% (Exhibit 8) – and thus appears ripe for disruption – and magazine readers in Spain comprise  a more or less robust 48.9% of the total Spanish population, this demographic of readers has been falling steadily for the past decade since it peaked in 1991 with 58.3% of total Spanish readership – reflecting a decrease in demand for print magazines that cannot necessarily be equated with the growth of the Internet use and access in the country (Exhibit 4).  Therefore, if less of the Spanish population are accessing and using digital media and yet simultaneously are decreasing their demand for traditional print magazines, then my question is, where is the shift of attention/ demand moving to – what other media is growing (radio, television?)?  Would we be jumping into a shrinking magazine consumer market that is reflecting an overall decrease in demand for this form of content, regardless of whether it is through print or digital platforms?

I think more research & surveying would be advisable to fully understand the Spanish potential market, beyond just its available market as I am not convinced this latter is enough to sustain our investment and growth at this moment.

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Facing a Personal Myth: A Response to ‘The Myths of Innovation’

‘ An innovator might ask questions like “What else in the world is like this?” and “Who has solved a problem similar to mine?”

‘When an innovation is in progress, there are always competitors.’…
The Myths of Innovation, pg. 11 & 29 respectively

In a chapter intended to inspire and free innovators of what the author believes are mythological constraints to our ideas and their potential to change our world, these were not comments that would fill an entrepreneur with reassurance.

Instead, one is made to face the insecurities that often nag those who carry and incubated their dreams waiting for the ‘right time’ to let them take flight and find root in the world, ie, the haunting feeling that if we do not release our creations into the world, someone will beat us to it and this dream that we have carried, cultivated and protected with our time, labor and sanity or lack thereof, skeptics would argue), will have been for naught. Yet is it is precisely this ghost of fearful urgency that Berkun’s words made me face through these chapters, and in the process, realize that the true strength of an entrepreneur, visionary or innovator is the ability always remain fluid and open: to competitors – they provide the necessary fire and insights that keep you on your toes; to other ideas – they will feed, morph or change your assumptions; and to your environment – nothing can take root without the right soil – the cultural, social or political context of an idea can make or break innovations. One can be so worried about being the ‘first’ in a new market, or have the ‘first’ bright idea, that we do not realize the other fallacy of innovation that Berkun attempts to dispel, and that it is not the ‘firsts’ that matter, but those that make it and survive – because they were built upon the right building blocks, at the right time, with the right luck. Personally, this reading made me realize I must just let go, and allow my dreams to evolve with confidence – and fluidity.
As the saying goes, “Aim for the sky, and you will (invariably) end up amongst the stars”. ..Just work hard &  enjoy the ride!

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Politico vs. the “Voice of God” model

One of the things that most struck me about this well-written & interesting case-study chronicling the founding of ‘Politico’, was Jim VandeHei’s astute observation of a critical point traditional media outlets seemed to miss in their evolution into web-based media platforms, namely, continued reliance on outmoded perspectives of what news media is in the Internet Age.

In my opinion, many traditional media outlets still subscribe to the theories of ‘mass media’ that governed much of the 20th century and influenced content, its production, distribution and – more importantly – the relationships between media institutions and their audience. According to our case-study, VandeHei “felt that the Post was “a newspaper that also happens to be a website”, and that the institution was not equipped to take full advantage of the Web’s possibilities for interactive multimedia material”. This sort of concern has been further expounded upon in an interesting article titled “Crosbie’s Manifesto : The Greatest Change in the History of Media” , which essentially argues that the critical mistake traditional media is making, perhaps unconsciously, is treating the Internet simply as a new communications vehicle, simply a new medium where old concepts of’ “mass media” theory and strategy can simply be transferred onto web-based platforms, instead of realizing that this medium has essentially brought about the emergence of a completely new concept and definition of media itself – from production to consumption to the relationships between and amongst its diverse actors (content producers, managers, investors, audience etc).

The Internet, in my opinion, is defying almost every rule that defined ‘old’ media. It is challenging us to think of new approaches to content production, delivery, readership/viewership etc, beyond just the more obvious and widely discussed challenge of revenue streams. I thought VandeHei exhibited a visionary understanding when he expressed skepticism of joining the WashingtonPost.com model of merely being a web-version of the print edition with a few additions and subtractions, instead of aiming to create a completely new institution that could take into account the unique characteristics of Internet-based media & communication patterns – for example, strong emphasis on personal relationships vs. loyalty to an institution’s brand. Internet users increasingly value and operate on personal accessibility, tone and trends, thanks to platforms like Facebook, YouTube, Twitter etc, that have made once top-down ‘voice of God’ mass-media models incongruous with the proximity, accountability and certain humanity that Internet audiences have come to expect from their media. In the Internet age, with its characteristic emphasis on individuality, people no longer feel, nor want to be viewed/ related to as if they are a “mass”, and it is this point that the founders of Politico identified and capitalized on, I believe, correctly.

I applaud Politico’s awareness of making news more personal, or as their mission statement puts it: “Reading a story should be just as interesting as talking with the reporter over a sandwich or a beer”.

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