TV broadcasters and the emergence of Internet TV

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TV broadcasters and the emergence of Internet TV

Current and future responses

Doctoral Thesis in Business Administration Specialization: Business & ICT

Faculty of Management and Organization & Faculty of Economics University of Groningen, the Netherlands

August 2007

Student: Matthijs Hendriks, m.w.hendriks@student.rug.nl

Student Number: 1227637

Supervisors: Prof. Dr.E.W. Berghout, e.w.berghout@rug.nl Dr. E.Harison, e.harison@rug.nl

Research group: Business&ICT Date of Publication: August, 2007

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PREFACE

This thesis is the result as well as the end of a long Doctoral study ‘Bedrijfskunde’. The whole process of completing this thesis took me a bit longer than I hoped and expected but in the end I am happy with the result.

The emergence of Internet TV has proven to be a very interesting subject to do research on and i am seriously considering finding a job at an organization that is in some way involved with Internet TV.

First of all i would like to express my sincere gratitude towards Dr. Elad Harison for his supervision during the last six months. Without his help I would not been able to write this thesis. His help in writing style, knowledge about the subject and close supervision at times when I needed it was invaluable. I would also like to thank Prof. Dr. Egon Berghout. The weekly meetings we had at the beginning of the research period helped me a lot to get a good grasp of the field of research and provided me with enough information to work with during the last phase of the research.

Finally I would like to thank my friends and family for their support during the whole research process. I especially like to thank my dad for his help during the, often intense, brainstorming sessions we had. These were of great value to the final outcome of this research.

Enjoy reading this thesis. Matthijs Hendriks

Groningen August 2007

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2.7. Models of Financing ... - 16 - 2.8.1 Direct revenues ... - 16 - 2.8.2 Indirect revenues ... - 18 - 3. FIELD RESEARCH ... - 21 - 3.1 Questionnaires... - 21 - 3.2 Respondents ... - 24 - 3.3 TV Broadcaster ... - 24 - 3.3.1 Size of organization ... - 24 - 3.3.3 TV broadcaster type ... - 26 - 3.3.4 Area of broadcasting ... - 26 -

3.3.5 Type of broadcaster and area of broadcasting combined... - 27 -

3.4 Current situation... - 28 -

3.4.1 Type of programs ... - 28 -

4. FINDINGS ... - 30 -

4.1 Attitudes about the future... - 30 -

4.2 List of variables... - 35 -

4.2.1 Organizational variables: ... - 35 -

4.2.2 Content related variables: ... - 35 -

4.2.3 Business model variables:... - 35 -

4.3 Hypotheses:... - 37 -

4.4 Exploring relationships - Correlation... - 39 -

4.4.1 Organizational/content related variables vs. current use of business ... - 39 -

4.4.2 Organizational/content related variables vs. future use of business ... - 40 -

4.4.3 Organizational/content related variables vs. the use of Internet TV applications ... - 41 -

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4.4.4 Organizational/content related variables vs. the use of Internet TV

applications ... - 43 -

4.4.5 Organizational/content related variables vs. the use of Internet TV applications ... - 45 - 4.5 Regression... - 46 - 4.6 Discussion ... - 47 - 4.7 Conclusion ... - 53 - 5 CONCLUSIONS ... - 55 - References... - 61 -

Appendix 1 Cover letter Questionnaire ... - 63 -

Appendix 2 Questionnaire Internet TV... - 64 -

Appendix 3 Research variables... - 72 -

Appendix 4 Correlation analyses ... - 75 -

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1. INTRODUCTION AND RESEARCH

1.1 Introduction

Traditional broadcasters have extended their presence to the internet through their web sites. With the technical advances in streaming technology, their web sites are used also for web casting audio and video content. By compressing the digital signal and enabling the user’s computer to decode and play the signal almost immediately in the correct order, consumers can enjoy video and audio content in quality similar to television and radio. Such web casting technology also enables dot-com web casters to offer web casting services to internet users. Web casting has become a battlefield between traditional electronic media (“clicks-and-bricks”) and the dot-com media (pure plays). Although the extent of their Web casts varies, almost all television networks and stations have a presence on the web to compete with the pure-play web casters.

In the past, television was distributed onlyvia cable, satellite, or terrestrial systems. Today, with the increase in Internet connection speeds, advances in technology, the increase of total number of people online, and the decrease in connection costs, it has become increasingly common to find traditional television content accessible freely and legally over the Internet. In addition to this, new Internet-only television content has appeared which is not distributed via cable, satellite, or terrestrial systems.

1.2 Problem definition

1.2.1 Introduction

This study investigates how television stations perceive and integrate the Internet into their strategy and business models and how they handle the possibilities of broadcasting television over the internet. The research focuses mainly on national and regional broadcasters in Europe.

The exponential growth of the Internet has changed the rules of competition in many industrial sectors. The reach and speed of the development, coupled with the unique characteristics of interactivity and personalization, amplify the need for innovative business strategies from competing media in their attempt to counter or leverage the rising popularity of this new technology and emerging channel for media distribution.

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1.2.2 Problem statement

From the description above, the following research question(s) can be defined:

What factors determine the current and future response of TV broadcasting organizations to the rapid emergence of Internet TV and what does this response look like?

1.2.3 Research questions

The research question can be divided into three main questions that each has their set of sub-questions:

1. What are the strengths, weaknesses, opportunities and threats (SWOT) imposed by the emergence of Internet TV on TV broadcasting organizations?

2. How do TV broadcasting organizations react/respond to the SWOT of Internet TV?

Sub questions:

2.a What should their desirable response to those changes look like? 2.b How do broadcasters respond in reality?

2.c What may be the reasons for the responses of broadcasters and to the ways they differ from the commercially desirable responses?

3. What strategies and business models should TV broadcasters apply to enhance their revenue generating ability and does this change when the properties of their organizations are different?

Sub questions:

3.a What are the relevant organizational properties?

3.b What are the different strategies and business modelsa broadcaster can implement to generate revenues from its Internet TV practices?

1.3 Research design

This section presents the methods that are used to answer the above questions. Furthermore, the structure of the thesis will be discussed.

1.3.1 Methods

The methods used in this research are literature survey and field research. The literature survey is performed in order to determine a) the landscape of the competitive TV broadcasting market, b) the strengths, weaknesses, opportunities and

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threats of Internet TV for TV broadcasters, c) what business models are available to be used in response to the rapid emergence of Internet TV.

The research was conducted by gathering relevant resources in scientific journals, such as: The International Journal of Research into New Media Technologies, Information and the Media, Journal of Broadcasting and Electronic Media, Information Resources Management Journal and The International Journal on Media Management. The results of the literature survey are found in chapter 2. The outcomes of the literature survey provide an overview of the TV broadcasting market, the SWOT of Internet TV for TV broadcasters and categorization of available business models that can be used to fully exploit the new opportunities created by the rapid emergence of Internet TV.

The field study is carried out in several phases. First, meetings with members of the board of Directors of OOG TV and TV Drenthe were held to establish a primary understanding of the market and its relevant conditions. The main goal of this phase was to get general impressions how the TV broadcasting market works and to assess how different TV broadcasters handle the rapid emergence of Internet TV.

Based on the reviewed literature and the gathered experiences from the TV broadcasters, a questionnaire was developed. The aim of the questionnaire is to gain insights in the ways TV broadcasters handle the SWOT of Internet TV, what business models they use and how they see the near and distant future when it comes to the development of Internet as a TV broadcasting medium.

1.3.2 Structure

This paper has the following structure. Chapter 2 describes the literature survey. This chapter describes the important aspects surrounding Internet TV. A list of Internet TV applications is created and a discussion about Internet TV business models leads to a list of possible models. This list of business models is presented in the conclusion of the chapter.

Chapter 3 gives a description of the empirical methods that were used in this research. The build up of the developed questionnaire is described as well as a number of characteristics of the respondents. This is done by the use of descriptive statistics. Chapter 3 concludes with a summary of the most important findings of that chapter. Chapter 4 describes the results of the questionnaire. These are presented in a

structured way, supported by graphs or tables if necessary. The results include information obtained from a number of European TV broadcasters about the current and future use of Internet TV applications and business models to support the use of these applications. Correlation and regression analyses have been performed to find significant positive or negative links between the variables that are used in this research. The links found are discussed in the final part of this chapter.

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2. LITERATURE DISCUSSION

2.1. Emergence of different TV broadcasting platforms

In the recent history of TV broadcasting, one can distinguish several different new platforms for delivery of broadcasting services that have evolved throughout the development of the medium. During the emergence of each of these new platforms the question would rise whether or not the new platform would replace or complement the traditional broadcasting services.

This question was first raised when cable radio and TV services emerged and later when it was decided to use satellite to deliver TV services to the end consumer. At first politicians and incumbent TV broadcasters thought that the new delivery networks could be seen as complementary to the existing ones, cable as a

complementary platform to terrestrial broadcasting and satellite as a complementary to terrestrial and cable TV (Henten, A., Tadayoni, R., 2002).

Those changes occurred where there were very reasonable technological arguments for this view. A view that was also strongly influenced by a political agenda on public service and public interest and the incumbent broadcasters market positions

After the initial emergence of both cable and satellite, history has shown that due to advances in technology and the political liberalisation process the cable and satellite platforms have both evolved from complementary towards becoming viable

competitors to traditional broadcasting services. Furthermore, in the beginning of each period technical and economic arguments suggest that the new platforms were

complementary to traditional broadcasting services (Henten, et. al., 2002). Both platforms also had the potential to compete and replace the, up to that point, leading broadcasting platform. However, political and economic barriers have slowed this process down.

2.2. Technological aspects

In the recent history of media industries, different infrastructures have been used to transmit and deliver specific information and communication services.Few examples are the telephony infrastructures dedicated for transmission of Plain Old Telephony Services (POTS) and broadcasting networks for transmission of Plain Old TV Services (POTVS). These infrastructures have been optimised to meet the specific requirements of these services (Henten, A., Tadayoni, R., 2002).The reasons for this separation and dedication of infrastructures and services can be found in the

technological characteristics of the services, as well as in the historical and regulatory/political parameters that affected their introduction and development. The technology and regulatory frameworks of information and communication services have, however, been subject to radical changes during the last 30-40 years. The technological developments have resulted in the emergence of new

infrastructures and better integration of different services and infrastructures mainly due to digitalisation. This development alongside with changes in the

political/regulatory settings have created a situation where all services, including broadcast TV and other video services, can in theory be offered through different

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infrastructures – a process that in the literature often has been denoted as the convergence process (Henten, et. al., 2002).

A long-sighted vision of convergence can be that all services at end users’ sites will be provided through one integrated network. This requires among other things:

• Availability of very high-speed connections at the end users’ premises. • Efficient organisation of networks and protocols that can facilitate this

integration.

Currently both of these requirements are becoming less and less of an issue. More and more households can easily obtain a high-speed internet connection against a good price.

The organization of networks and protocols that can facilitate the integration has also developed rapidly.

2.3. Different delivery networks for TV

Two types of networks can be distinguished: Communicative networks and broadcast networks. Traditionally broadcast networks do not have the return path necessary for interactive services. Digital broadcast networks implement, however, a return path, either integrated in the network or using other networks.

Communicative networks are built up to provide point-to-point services resulting in a network architecture where the network resources between the user and the first switch in the network are not shared (Henten, A., Tadayoni, R., 2002). This enables service providers to offer customized services to individual users. However,until recently the problem was that the costs of operation and maintenance of these

networks were relatively high and the increase of capacity at the end users’ sites was developing slowly, making it impossible to integrate all kinds of services.Recently, the development in audio/video compression technology and new access technologies made it possible to offer new services in these networks. An example of a

communicative network is the Internet.

In broadcast networks, users are connected to several distribution points in the network and share the network resources. The capacity allocated to a broadcast

service is dimensioned to give a good technical quality of the services.The problem is that the Capacity per User (CpU) is very low.These types of networks are not suitable for point-to-point services, but are good enough for services with common interest. Interactive services can also be provided in broadcast networkswithout using a return path. Regarding the interactivity in broadcast networks, we distinguish between two categories :

1. There is a return path in the network (real interactivity). Real interactive services are services that use the return path in the network or a return path that is implemented using other networks. Using real interactive services, the end-user communicates with the service provider and influences on the service he or she consumes. Here a point-to-point communication is created between the user and the service provider (Ha, L., 2002).

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2. There is no return path (local / pseudo interactivity). Some of the interactive services used in the broadcasting networks do not use the return path. This way it is still possible to give the end-user the possibility to interact with the application and select between different choices. A simple example is

selecting between different programs and text TV services by remote control. All services are transmitted to the end user and the remote control facilitates the choice between them.

2.4. Market aspects

The recent changes in technology and infrastructure, such as the rapid increase of the number of broadband internet connections, have erased major barriers for introduction and implementation of Internet TV. Nowadays, it is not really a question whether or not we will have Internet TV. The questions are rather what the market potentials for Internet TV are and to what extent Internet TV will supplement and complement the traditional broadcasting platforms. These questions can be studied both from the demand side and the supply side.

On the demand side, the focus is on the user, her preferences and behaviour. For the user Internet TV provides a number of advantages (Waterman, 2003):

• Internet allows users to watch programs when they wish, in contrast to traditional broadcasting where the transmission time is fixed.

• It allows for a potentially indefinite number of programs and channels. Much more than the multitude of TV channels available on digital broadcast TV. This includes various real-time events such as sports and shows.

• Broadcasters can produce contents for small communities/groups, either local or global.

• It allows for extended interactivity in the sense that programs can be stopped, different aspects explored, different versions required, etc.

• Internet provides a possibility for users to exchange video programs as music has been exchanged on, e.g., Napster.

All of these features are potentially in high demand. There is certainly demand for professionally produced video content where users can chose what to watch, how to watch and interact with it, and when to watch it.However, this does not mean that there won’t be demand for more pre-packaged services – or rather that the above- mentioned features won’t become part of pre-packaged offers. The most likely scenario is that many different kinds of video services are offered to users,

encompassing both pure catalogue services and more or less edited program packages (Waterman, 2003). Many of these services will be offered on the Internet, yet others will be offered on other platforms, primarily digital broadcasting via cable, satellites or terrestrial networks.

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2.5 Suitable content

Providing suitable content given the limitations of the web is not an easy task. Content needs to be innovative, compelling and suitable for a PC screen as well as have the ability to create a connection that will bring users back to the site. A large part of the audience is at the workplace, so short content, under 15-minute segments might be suitable. Interactivity and nonlinearity work best for Internet TV content. It is therefore likely to appeal to a ‘lean in’ audience, characterized as a one-on-one personal experience associated with a computer in contrast to a ‘lean back’ passive audience associated with television viewing (Einav, G., 2002).

Entertainment

Most of the innovative Internet TV content will continue to come from the entertainment sector (e.g., Big Brother). Internet TV entertainment may become intertwined with advertising-sponsored content.

News

News stories are relatively short and their audience seems to be more forgiving when it comes to the quality of news-oriented video content. News is a natural for

interactivity and has a market of interested viewers who gain the advantage of being able to receive news and updates at their convenience.

Sports

Some Internet TV models provide interactivity and a community around sports. Sports fans are a loyal audience more likely to pay for additional content.

MotoGP.com, for example, has become a very popular sports site averaging many hundreds of thousands visitors per day. The site offers information about all the teams and their riders, race info, track info, etc. To get access to a lot of extra features visitors have to pay a one-time-only or monthly fee. This concept is a big success for that particular web site.

Children’s programming

Children are becoming a natural audience for interactivity because they are accustomed to it from a very young age.

Information-based shows

Information-based programs, such as documentaries, work well with web

enhancements because the internet gives viewers the option to pause a show and look for complementary information. Public television, a natural home for this form of broadcasting, is providing pioneering content.

Education and training

Many educational organizations, including universities, forums, and training programs, offer content on the internet. More and more sites provide a video component of the lesson itself. Distance learning is becoming a popular option for accessing course information unconstrained by geographical boundaries and schedules.

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Corporate communications

Many believe that the future of Internet TV content lies in the business sector and the ability to web cast announcements over private corporate intranets, accessible to employees, investors, customers, and the press.

It is common for companies to have a communications department that creates content for the internal use of the company, including business meetings, and may provide educational and instructional videos.

Pornography

Pornography is by far the largest revenue generating content on the web today and even ‘soft’ sites such as naked news.com are offered on a paying basis.

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2.6 Economic characteristics of Internet TV

The Internet can also be viewed in terms of the economic improvements it can make to cost and efficiency features of the existing media. The Internet’s economic

improvements upon established media can be divided into five categories (Waterman, D., 2001):

1. Lower delivery costs and reduced capacity constraints. 2. More efficient interactivity.

3. More efficient advertising and sponsorship. 4. More efficient direct pricing and bundling. 5. Lower costs of copying and sharing.

2.6.1. Lower delivery costs and reduced capacity constraints.

Media transmission system costs consist of several components: a capital infrastructure for transmission, home premises equipment, and variable costs of delivering the information. Parts of these infrastructures and home equipment have multiple uses, and costs often depend critically on usage rates. Cost comparisons among media are thus difficult. Some comparisons show that Internet transmission of television signals is currently far more expensive than cable and some other media (Noll, 1997; Noam, 2000).

As Internet broadband capacity develops, Internet TV transmission will certainly become cheaper. Internet TV is also more-or-less free of geographic constraints, allowing essentially instantaneous worldwide transmission. A component of delivery costs is the ability of consumers to simply download content rather than to copy in real time off of a cable channel, for example, or take a trip to the video store to buy a product that has been manufactured, packaged, shipped, and maintained in an

inventory. From the latter perspectives at least, Internet-transmission of video is quickly becoming more cost efficient than existing media (Ha, L., 2002).

The implication of these cost and capacity advances is lower prices and especially, greater product variety. That variety provides one ingredient for virtually “true” video-on-demand systems. Also, thinner and more marginal markets can now be served.

2.6.2. More efficient interactivity.

One of the main advantages of Internet is surely 2-way interactivity. Interactivity has been physically possible since cable systems offered it in early years, notably on the QUBE system in Columbus, Ohio in the 1970s. Also, a hybrid form of interactivity is now available with the integration of computers and standard TV transmissions to create enhanced TV. Viewers with a computer in the same room (or a set top box) can simultaneously play along with game shows or sports events. Viewers can also buy products shown on standard television commercials more and more easily with the right home equipment. In some experimental systems, viewers can now choose between several simultaneous feeds of standard broadcast content (such as different camera angles covering a sports event) to control the pictures that they actually view. PVRs (personal video recorders) permit asynchronous control of programming starts and stops.

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2.6.3. More efficient advertising and sponsorship

A big limitation of television advertising has always been waste circulation because of muddy demographic, product interest, or other segmentation. Cable and other multi-channel systems have reduced this problem by making room for more and more sharply targeted programs. Internet television permits the chance to further advance this quest in two ways. First, the virtual removal of capacity constraints should allow still sharper segmentation in the same way that multi-channel systems have improved the broadcast model. Second, the ability of advertisers to track the buying or Internet usage patterns of individual consumers permits different ads to be inserted within (or displayed alongside) the same program, depending on the viewer’s revealed interests or estimated willingness to buy a particular product (Ha, L., 2002).

2.6.4. More efficient direct pricing and bundling

More efficient direct pricing means lower costs in making transactions, but especially the ability to more effectively price discriminate, that is, to extract the maximum amount that each consumer is willing to pay for a product. In several respects, Internet technology promotes these efficiencies.

First, direct payment-supported video-on-demand systems are likely to be at least as cheap and easy to manage by web sites as they ever will be on cable or DBS. Internet payment systems now in development will presumably make payment as simple and secure as adding charges to a monthly cable bill. Micro payments, which allow very small amounts (perhaps only a few cents) to be automatically charged to a user via a credit card or similar means, are a prospective component of true video-on-demand systems. Micro payment systems are now in use for some Internet applications and are reported to be in development for a number of others.

2.6.5. Lower costs of copying and sharing

Attracting increasing attention are the new opportunities for copyright owners created by efficient duplication and file sharing via the Internet. With existing pay-per-view or home video systems, consumers who want to share a copied movie with someone else also have to physically deliver it to the recipient. Peer-to-peer computer transfer essentially eliminates that cost. Fundamentally, the lower consumer costs of copying and peer-to-peer transfer via the Internet create market value. If distributors can manage to appropriate some or all of that created market value, their revenues and profits will rise (Besen, 1986). Consider the “old” system in which consumers have made real time back-to-back copies off of prerecorded videos or off pay-per-view channels to share with others. The copyright owner may be able to appropriate some fraction of the value of that physically shared copy to the recipient, but it is almost certainly lost revenue for the most part.

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2.7. Models of Financing

This paragraph discusses the different business models that can be used to generate revenues to finance a broadcaster’s online activities. In the long run, broadcasters should not be willing to subsidize their internet activities with revenues from their traditional business activities. Broadcasters must strive for their online activities to be a success, a part of their business that yields a positive return on investment (ROI). As a result of the rise of Internet technology new revenue models have emerged. These new models include both direct and indirect proceeds. Direct proceeds are revenues that are paid directly by the customer to the supplier. Indirect proceeds are revenues that are mainly paid by third parties or the general public (Konert, 2002)).

Transaction (pay per use)

Subscription fees (recurring payments) E-commerce sales Merchandising DIRECT PROCEEDS Advertising income Commisions (direct mediation) Consumer particulars and

data-mining Sponsoring INDIRECT PROCEEDS

Licence fee and state subsidy Financial success depends on combinations and individual emphasis

Figure 2.1 Business models for broadcasters’ online activities (Konert, 2002)

2.8.1 Direct revenues

These are the revenues that are paid directly by the customer to the supplier. • Transaction (Pay-Per-View)

Broadcasters can use Pay-Per-View to increase their sources of revenue. Broadcasters can offer special interest content (e.g., live events, documentaries, sporting events) or the access to their video and audio archives as an exclusive pay-per-use service. It is far from easy to persuade users to pay for these services, as long as they can access similar services elsewhere free of charge. It is very likely that this situation changes if a supplier has ‘exclusive’ content that can not be accessed elsewhere free of charge.

At the moment, Public Service broadcasters, who get their income mainly from license fees or state subsidies, are largely prohibited from using pay-per-use services. Reason for this is that such services are usually aimed at special target groups, which

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contradicts with their societal core tasks of free access for the general public. Furthermore, public service broadcasters face considerable resistance from commercial broadcasters and politicians, who fear unfair competition.

• Merchandising

Online merchandising is a potential additional main source of revenue. Merchandising products, offered by broadcasters over the internet, are generally specific to programs or to the broadcasting station itself. An example of this type of merchandising is RTL that sells a collectors edition of the successful series ‘24’

In addition to increasing companies’ sales revenues, merchandising helps strengthen the brand name of the program or station in question.

• E-Commerce sales

Another way online broadcasters can increase their revenues is through expanded e-commerce sales that are not directly linked to their programs. E-e-commerce sales concern cross-marketing products or services, like electronics and travel services. It is very important that the back office functions required for the e-commerce are handled efficiently. Broadcasters usually work with competent, experienced partners from other areas, who know the online business well and are equipped with the appropriate technological and personal infrastructure for processing volume online sales. Of course, transaction and payment systems must be easy to use, transparent, and secure against fraud.

• Subscription fees

Subscriptions as recurring payments for the access to special online services could be one of the main sources of generating proceeds for online business. As in the case of pay-per-use models, commercial success depends on users’ willingness to pay for the services. Users must have a compelling interest in particular content that motivated them to pay for it when they are accustomed to getting online content for free. Internet broadcasters who are primarily general interest suppliers may find it difficult to be successful with this model of financing in a highly competitive environment.

Furthermore, subscription represents a way of bundling the content offered (Shapiro and Varian, 1999). Bundling describes the aggregation of separate goods into a bundle of goods. From a provider's point of view, it increases profits by smoothing the

Demand curve and thus shifts parts of the consumer rent to the producer.

The benefits of bundling increase as the number of goods in the bundle increases. Bundling is especially attractive if marginal costs are low and the customers'

valuation of the goods in the bundle are independent (Bakos and Brynjolfsson 1999; Bakos and Brynjolfsson 2000). Both conditions are fulfilled in the case of Internet based TV. Hence bundling will generally increase the willingness to pay, thereby enhancing revenues (Shapiro and Varian, 1999).

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2.8.2 Indirect revenues

These are the revenues that are mainly paid by third parties or the general public. • Advertising

Third-party advertising is a leading source of revenue. An increase in advertising revenues for online broadcasters largely depends on the state the economy is in. Many users find advertising banners a nuisance because they tend to slow download times and their content is mostly unwanted.

The latest numbers suggest that the click-through rates for banner ads are dropping. Advertising companies try to solve these problems with special interest advertising, adapting to the unique characteristics of online users. To do this they need to develop individual user profiles and more intelligent interactive banner ads. These

developments make Internet privacy a big concern (Waterman, D. 2001).

The importance of banner advertisement revenues will cause problems, especially for those public service broadcasters who are not allowed to generate this kind of income.

• Sponsoring

On the one hand sponsorship is being used as an additional source of income for online services. On the other hand, well-chosen sponsorship might give the sponsors a higher profile than normal banner advertisements would. Sponsors hope that users will more closely associate online services and content with the advertiser.

Like event sponsorships, support of well-chosen online activities might help to heighten brand name awareness more efficiently than other kinds of advertising. Sponsoring is the second most important source of online advertising revenue. Some public service broadcasters are faced with an online advertising dilemma. In Germany, for example, advertising and sponsoring is explicitly forbidden as an additional source of income for public service broadcasters’ online activities. Reasoning behind this is that advertising and sponsorship revenues supporting these Web sites would be unfair competition for commercial Web sites (Waterman, D. 2001).

• Consumer particulars and data-mining

Nowadays online marketers are extremely interested in high quality demographics allowing them to target specific user groups. Advertising partners are interested in page visits, effective user time, and individual users’ sociodemographic data. With today’s sophisticated Internet technology companies have an efficient instrument to collect, store and analyze online activities with user profile data. For broadcasters this data is very useful. When users introduce themselves providing their name and address, personal data can be used to present detailed user profiles to sponsors and advertisers, for target advertisements. The potential for providing valuable tailor-made services that can be offered, observed, and changed quickly is rapidly increasing.

Furthermore, this valuable information can be sold to interested third parties. The fact that companies are able to make a profit using very specific user-related information means there is a major privacy issue. In principle, it should be guaranteed that without

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users’ explicit agreements, systems are not allowed to collect information that can be traced back to individual users. This is often framed as an ‘opt in’ versus an ‘opt out’ debate. The issue is whether consumers are protected from privacy violations unless they voluntarily provide (i.e., opt in) this information or whether information can be collected unless a consumer specifically states (i.e., opt out) that they do not wish them to do so (Alberdingh Thijm, C., 2005).

• Commissions/Promotion of other products

The commission concept is based on a pay-per-sale mechanism, in which a web site supplier, a broadcaster for example, places his business partner’s banner on the broadcaster’s site and receives a percent share for each product sold by the business partner through the banner. In this way, Internet broadcasters can increase their income, and sellers can increase their e-commerce customer base.

• License fee and state subsidy

Public service broadcasters in Europe are primarily financed by a mixed system of license fee, direct subsidies from the state and advertising. The main difference between public service broadcasters who rely mainly on license fees and those who rely on direct government grants is that the former enjoys more stable and predictable system of license fee funding (McKinsey & Company, 1999).

Due to commercial competition with private broadcasters, the increasing costs of purchased programs (e.g., films, series, sports), and the high investments for digital technologies and online services, the economic situation of public service broadcaster is becoming ever more difficult.

Public service broadcasters realize that their traditional sources of income will gradually disappear. When they are not able to attract younger audiences, potentially with complementary online services, their public service role may be in danger in the long run. This is why public service broadcasters will have to become more actively involved online. This means that they have to find a way to make their online activities commercially viable. This can be achieved through traditional means such as license fees or public funding. If these prove to be insufficient, they should be allowed to exploit other ways of financing their online activities. These alternative finance models could call into question the public service broadcasters’ very legitimacy.

According to Waterman (2001), Internet television is disproportionately reliant on advertising or e-commerce related business models. At the time Waterman wrote his article none of the investigated TV broadcasters had claimed their models to be profitable yet.

A shift toward direct-payment models already seemed underway, and as bandwidth capacity improved, that trend was likely to continue for two reasons. One is that intense competition among web distributors to establish themselves in the market during the internet’s growth stage has surely inhibited many firms from charging directly. The second reason to expect more direct pricing is that higher bandwidth capacity will mean that products of greater consumer value, namely feature length movies and sporting events, can be attractively presented.

Other than pornography, consumers have never been willing to pay directly for much audio/visual entertainment besides movies and some sports. Historically advertising

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has mostly been used to support content watched by low value viewers who are unwilling to pay enough to outdo the few cents per viewer that advertisers will pay for an exposure. Although more efficient advertising and e-commerce related systems are likely to increase the value of internet exposures to advertisers, it seems unlikely that these improvements will overcome the basic economic forces guiding high value viewers toward direct payment systems.

The next chapter describes the empirical methods that are used in this research. The build up of the developed questionnaire is described as well as a number of

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3. FIELD RESEARCH

This chapter describes the empirical methods that are building upon the literature survey. In paragraph 3.1 a build up of the questionnaire is given. Paragraph 3.2 discusses some general characteristics of the TV broadcasters that send back a response.

3.1 Questionnaires

In order to get a broad view of the European TV Broadcasting market and their use of Internet TV, a questionnaire has been sent to approximately 630 TV Broadcasters throughout the whole of Europe. The aim of this questionnaire is to investigate how TV broadcasters currently handle the rapid rise of Internet TV and how they intend to incorporate Internet TV into their business. Furthermore, the questionnaire tries to determine what the future effects, for traditional TV broadcasters will be and what strategies and business models will be used to capitalize on the changes caused by the emergence of this new medium for TV broadcasting.

An article by Dr. Nigel J. Miller (2002) has provided useful insights for constructing the questionnaire.

The questionnaire is divided into seven sections:

1) General: An introduction of the questionnaire that consists of a few general questions about the respondent. The required data includes: name (optional), organization, function, number of years working for the organization and the number of years working in the media business in general.

2) TV Broadcaster: This part of the questionnaire is used to gather information about the characteristics of the particular TV broadcaster. These characteristics could have an important impact on the answers given in the rest of the questionnaire. The required data includes: name of broadcaster, location (country), number of full time employed personnel, type of broadcaster (public/commercial/other) and the area of broadcasting (regional/national/international/other).

3) Current situation: this part focuses on the TV broadcaster and the ways in which it

currently uses the Internet and Internet TV applications. Some general questions inquire the types of programs the organization broadcasts, the major category of programs the organization broadcasts and the ways in which the organization uses the Internet. Furthermore, a question is asked about which of the organizations’ current internet activities generate revenue either direct, indirect or both.

A checklist is used to determine the types of programs the organization broadcasts and through which medium (Cable TV/Radio/Internet). The advantage of a

checklist is that it is easy and fast to complete.

4) Future situation: this part of the questionnaire evaluates the respondent’s expectations regarding Internet TV and its future use. Statements are used to indicate to what extent the respondent agrees with a particular statement. Each

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statement is a short one-liner about the future of Internet TV. The respondents can choose between the following categories: ‘totally disagree’, ’partly disagree’, ‘neutral’, ‘partly agree’ and ‘totally agree’. This list of statements is easy and fast to fill in.

A second question in this section is about the number of channels through which the organization will deliver their content. A checklist can be used to answer this question.

5) Technology: this part evaluates the technological aspects of Internet TV. Statements are used to indicate to what extent the respondent agrees with a particular statement. The respondents can choose between the following categories: ‘totally disagree’, ’partly disagree’, ‘neutral’, ‘partly agree’ and ‘totally agree’.

6) Business Models and Strategy: this part of the questionnaire focuses on the organization and the business models and strategies used to respond to the development of Internet TV. The first question (Q9) in this section is about the Internet TV applications the broadcasters will implement to generate revenue. The respondents were asked to rank their answers by level of importance. This way a better distinction can be made between the given answers.

The next two questions (Q10 and Q11) handle about the use of business models to generate revenue. The first of these questions is about the current use of Internet business models within the organization, whereas the second question focuses on the respondent’s expectations regarding the future use of Internet business models within his organization. In this question, the definition of the term future is five years from now. The respondents were asked to rank their answers by level of importance. This way a better distinction can be made between the given answers. The next question is about the methods of payment the respondent thinks are best suited for their organization. Again, the respondents have to rank their answers. The last question of this section is about the economical aspects of Internet TV. Statements are used to indicate to what extent the respondent agrees with a particular statement. The respondents can choose between the following categories: ‘totally disagree’, ’partly disagree’, ‘neutral’, ‘partly agree’ and ‘totally agree’.

7) Open Questions: The questionnaire ends with an open question: If you have any additional remarks, questions or tips, please place them here. Finally, the respondent can request a summary of the results.

The questionnaires were sent to 630 TV broadcasters throughout the whole of Europe. Almost all questionnaires have been addressed to the Directors/Heads of the particular TV broadcaster. By first contacting the national authorities we were able to obtain the addresses of many TV broadcasters.

The questionnaire also included a cover letter, addressed to the Director/Head of the TV broadcaster. The letter introduced the research, stated that it is conducted by the Rijksuniversiteit Groningen, and mentioned that data are treated confidentially and only for academic purposes. The cover letter is found in Appendix 1 and the questionnaire is found in Appendix 2.

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Before sending the questionnaire, a pilot group of 2 TV broadcasters has been

constructed. The pilot consisted of measuring the time needed to fill it out, the clarity of the questions and assuring the questions provide the intended answers. From the pilot was concluded that the questionnaire takes about 10 minutes to fill out. Only one question had to be adjusted and rephrased in order to improve its clarity.

Within a period of 5 weeks, 59 responses from 17 European countries were received (response rate of 10.7%). In the now following paragraphs (3.2-3.5) a discussion of some useful descriptive statistics is presented.

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3.2 Respondents

The questionnaires were sent to the Directors/Heads of the TV broadcasting

organizations. In reality the respondents are mostly Directors or General Managers or have other key functions such as Head of new media, Head of marketing, Broadcast Engineer or Editor in Chief. Table 4.1 displays the distribution of respondents to the questionnaire by their function at the TV broadcasting organization.

Function: Number:

Director/Head (CEO) 36

Head of Marketing 5

Head of New Media 4

Other 14

Total: 59

Table 3.1: Function of Respondents

Most of the respondents are positioned at key functions in their organization, and therefore provide a solid base of knowledge for this research. The most experienced respondent has 45 years of working experience in the general media business. On average the respondents have 14.9 years of experience. Figure 4.1 displays a graph that shows the experience of the respondents.

Respondents Experience in the General Media Business (years) 19% 12% 19% 17% 12% 21% _0-5 6-10 11-15 16-20 21-25 26-more

Figure 3.1: Respondents experience in the general media business

3.3 TV Broadcaster

3.3.1 Size of organization

This measure represents the size of a TV broadcaster by the number of its full time personnel. The TV broadcasters that responded to the questionnaire differ in size. The largest is an organization with 21000 full time workers, while the smallest only has 1 person working for them on a full time basis. The average number of full time

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that employs 21000 people. Leaving that number out results in an average of 247 full time workers, which is more representative for the population as a whole. Most TV broadcasters have between 0 and 50 employees. Figure 4.2 displays a pie chart of the number of full time personnel employed by the responding TV broadcasters.

Number of Full Time Personnel

58% 8% 12% 8% 14% 0-50 51-100 101-250 251-500 501-more

Figure 3.2: Number of Full Time Personnel 3.3.2. TV broadcaster location (country)

As stated before, the questionnaire was disseminated amongst TV broadcasters in 17 European countries. Table 3.2 shows 3 columns. Column 1 shows each of the 17 countries. The second column shows the number of questionnaires send to TV broadcasters of each of the 17 countries. The last column shows the number of respondents per country.

Country: Nr. of questionnaires:

Nr. of

respondents: Response rate (%)

The Netherlands 131 13 10 Belgium 22 5 22 Germany 201 8 4 Denmark 13 1 8 Sweden 30 3 10 France 48 1 2 Spain 91 5 5 Hungary 10 10 100 Kosovo 22 1 5 Slovakia 104 1 1 Slovenia 18 2 11 Montenegro 14 1 7 Bosnia Herzegovina 40 2 5 United Kingdom 52 2 4 Cyprus 1 1 100 Finland 10 2 20 Switzerland 24 1 4 Total: 630 59 10,7

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Table 3.2 shows that the response rate for some countries is extremely low (0-10%). Some of this can be attributed to the fact that the questionnaire and the cover letter are written in the English language. In most of the responding countries the knowledge of the English language is minimal, which can be a large part of the reason that the response rate from these countries is so low.

That is not the only reason though, because even from The United Kingdom the response rate was below average (4%). Nonetheless, the sample is large enough.

3.3.3 TV broadcaster type

The TV broadcasters in this research can be distinguished by two main types: public broadcasters and commercial broadcasters. Public broadcasting is a system in which TV, radio, and potentially other electronic media outlets receive some or all of their funding from the public. The broadcasters’ funds can come directly from individuals through voluntary donations, license fees, or indirectly as state subsidies that

originated as taxes. Commercial broadcasting is the practice of broadcasting for profit. This is normally achieved by interrupting normal programming to air advertisements, also commonly called ‘commercials’ in this context. Both types of programming are very common and usually exist alongside of each other. A small majority of the TV broadcasters participating in this research are public broadcasters (32 - 54%). The rest of the respondents were commercial broadcasters (27 – 46%).

3.3.4 Area of broadcasting

Another distinguishing characteristic between the participating TV broadcasters is their area of broadcasting. The three main areas a TV broadcaster can focus on are regional, national and international. Table 4.3 shows the area of broadcasting of the respondents to this questionnaire.

Area of broadcasting Nr. Perc. Regional 23 39,0% National 23 39,0% International 7 11,9% Other: 6 10,2% Total: 59 100,0%

Table 3.3 Area of broadcasting.

Table 3.3 shows that the amount of regional and national broadcasters that send back the questionnaire is equal (both 39%). For the research this means that a good

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3.3.5 Type of broadcaster and area of broadcasting combined

To get an even better idea about the types of organizations that have responded to the questionnaire, a comparison is made of the amount of commercial and public

broadcasters and their area’s of broadcasting. By doing so, each broadcaster can be placed in the matrix shown in table 3.4 and its graphical representation in figure 3.3.

Regional National International Other

Public 18 7 3 4 54%

Commercial 6 15 4 2 46%

41% 37% 12% 10% 100%

Table 3.4 Broadcaster type compared to area of broadcasting

Broadcaster type compared to area of broadcasting

18 7 3 4 6 15 4 2 0 5 10 15 20

Regional National International Other (Local)

Area of broadcasting N u m b e r o f b ro a d c a s te rs Public Commercial

Figure 3.3 Broadcaster type compared to area of broadcasting

Figure 3.3 shows that most regional broadcasters in this research are public broadcasters and that most national broadcasters are commercial broadcasters.

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3.4 Current situation

3.4.1 Type of programs

The first questions in the questionnaire refer to the respondent’s organization and the ways in which it currently uses the Internet and Internet TV. The first question handles about the types of programs the organization broadcasts and the medium through which it does this. Two of the distinguishing characteristics that between the TV broadcasters in this research are:

1. The type of programs they broadcast. The different genres used are:

1. News 7. Game shows

2. Soaps and sitcoms 8. Programs for children 3. Reality shows 9. Cartoons

4. Documentaries 10. Sports 5. Educational programs 11. Music 6. Movies 12. Other

2. Type of medium used to broadcast the different program types. Three mediums are distinguished in this research:

• Cable TV

• Radio

• Internet

Table 3.3 gives an overview of the types of programs that are broadcasted via a certain medium.

Types of programs and different broadcasting

channels

48 20 12 41 28 3 2 12 38 11 ₈ 20 0 10 20 30 40 50 60

News Soaps and

sitcoms

Reality shows Documentaries

Cable TV Radio Internet

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Types of programs and different broadcasting channels 31 24 16 24 17 2 4 10 20 3 9 16 0 5 10 15 20 25 30 35 Educational programs

Movies Game shows Programs for children

Cable TV Radio Internet

Figure 3.4b Types of programs and different the different broadcasting channels

Types of programs and different broadcasting channels

13 37 31 1 16 23 3 27 24 0 5 10 15 20 25 30 35 40

Cartoons Sports Music

CableTV Radio Internet

Figure 3.4c Types of programs and different the different broadcasting channels

Interesting observations derived from figures 3.3a-3.3c:

• From the 11 program categories there are 5 that are being used a lot on the internet, namely: news, sports, music, educational programs and children’s programming. As was expected based on the literature study. Chapter 2.5 mentions the content that is suitable to be broadcasted via Internet TV. • TV broadcasters hardly use the internet to broadcast movies.

• A surprising large amount (11) of broadcasters uses the internet to broadcast soaps and sitcoms

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4. FINDINGS

This chapter presents a further, more in-depth analysis of the data that is gathered from the returned questionnaires. The chapter starts with having a closer look at the broadcasters’ attitudes towards future trends in Internet TV. This is done by using descriptive statistics. Bar graphs are used to depict the respondents’ answers. Section 4.2 sums up all the different variables that are used in the data analyses. Paragraph 4.3 mentions the hypotheses that will be used to test the links between the different variables.

Paragraph 4.4 and 4.5 present the results from respectively the correlation and the regression analyses. A discussion of the findings is presented in section 4.6. A conclusion to the chapter can be found in paragraph 4.7

4.1 Attitudes about the future

The questionnaire inquires the respondents’ expectations regarding the future of Internet TV for their organization. This is done by using statements to which the respondents can react in five different ways:

1 Totally disagree 2 Partly disagree 3 Neutral

4 Partly agree 5 totally agree

The following bar graphs (1-15) display the distribution of the respondents’ opinions.

1) In the next five years the computer and the TV set will converge.

2 3 10 24 19 0 5 10 15 20 25 30 1 2 3 4 5

2) Internet TV will become profitable for my organization. 3 4 14 17 17 0 2 4 6 8 10 12 14 16 18 1 2 3 4 5

3) Internet TV will become an attractive substitute for traditional TV.

3 8 9 32 7 0 5 10 15 20 25 30 35 1 2 3 4 5

4) In the future Internet TV will replace traditional TV 8 15 7 15 13 0 2 4 6 8 10 12 14 16 1 2 3 4 5

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5) Internet TV will create a wealth of new niches my firm can use

1 4 12 23 16 0 5 10 15 20 25 1 2 3 4 5

6) Internet TV will change the type of content my organization will offer

4 9 10 23 13 0 5 10 15 20 25 1 2 3 4 5

7) Consumer's need for control over time will boost adoption Internet TV

2 6 8 27 15 0 5 10 15 20 25 30 1 2 3 4 5

8) Internet TV will change the scope of my firm from regional to worldwide

12 13 9 17 3 0 2 4 6 8 10 12 14 16 18 1 2 3 4 5

9) Internet TV will imply a loss for the organization 15 17 13 8 3 0 2 4 6 8 10 12 14 16 18 1 2 3 4 5

10) Internet TV will be a prime source for customer knowledge 4 10 17 23 3 0 5 10 15 20 25 1 2 3 4 5

11) Some content is better suited for distribution over the Internet

1 ₀ 6 20 30 0 5 10 15 20 25 30 35 1 2 3 4 5

12) My organization is an early adopter of Internet TV applications 4 19 13 10 12 0 5 10 15 20 1 2 3 4 5

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13) Consumers are willing to pay for the content my organization offers

13 8 17 11 4 0 2 4 6 8 10 12 14 16 18 1 2 3 4 5

14) Larger revenues will be generated because of larger possible audience

4 12 18 13 6 0 5 10 15 20 1 2 3 4 5

15) My organization will use the synergies between networks to build on

the strengths of different technologies

3 ₂ 15 21 13 0 5 10 15 20 25 1 2 3 4 5

The following paragraphs describe the findings depicted in the bar graphs above (each number refers to the corresponding number shown in the bar graph).

1) The majority of the respondents (43) agree with the statement that during the next five years the computer and the TV set will converge. This is an expected result, because of the continuously evolving technology people expect that the current trend of convergence will continue which will ultimately lead to total convergence of computer and television.

2) The majority of respondents (34) also expect that Internet TV will become profitable for their organization. This is an interesting finding because around 2002 the numerous articles that handle about the profitability of Internet TV in the long run are all pretty skeptical about the future. The general consensus is that unless some fundamental shift occurs and people begin to pay for the content, Internet TV will never be profitable. This finding shows that apparently a shift has occurred.

The broadcasters that expect Internet TV to become profitable are also likely to invest in this technology.

3) A large share of the respondents (66%) thinks that Internet TV will become an attractive substitute for traditional TV. Most broadcasters acknowledge the

possibilities Internet TV has to offer. These organizations are likely to use Internet TV next to their traditional TV activities.

4) About half of the respondents (28) indicate that they think Internet TV will fully replace traditional TV in the distant future. The other half does not. Apparently, the broadcasting market is still undecided on this issue. The near future will show whether or not Internet TV will replace traditional TV.

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5) Internet TV will create a wealth of new niches that can be used by traditional TV organizations to create new sources of revenue. Most respondents (39) agree with this statement. Numerous broadcasters recognize the fact that Internet TV offers them a chance to focus on very small, well defined user groups. These groups are often willing to pay for programs of their interest. This offers a lot of new possibilities for traditional broadcasters.

6) Most respondents agree with the fact that Internet TV will change the type of content their organization will offer. For example, broadcasters can develop content that uses a lot of interactivity features. Broadcasters can also add a lot of additional information and user groups can be better specified so that the broadcaster can use this to develop programs that better suit their customers.

7) A large share of the respondents (72%) agrees with the statement that the

increasing need for control over time will boost the consumer’s adoption of Internet TV. This notion is one of the driving forces behind the willingness of broadcasters to invest in Internet TV applications. Broadcasters realize that the control over time concept offers a lot of possibilities that can be effectively offered by using Internet TV.

8) There are mixed responses when it comes to the fact whether or not Internet TV will change the scope of their organizations from regional to worldwide. These mixed responses can be explained by the fact that it will be much easier for national

broadcasters to expand their focus from just one country to worldwide. Regional broadcasters on the other hand, are probably not that interested in worldwide

exposure. The content they offer is mostly developed for a small number of customers and of no interest to people from other areas.

9) Most respondents (32) disagree with the statement that Internet TV will imply a loss for their organization. Combining this result with the fact that a large part of the respondents think that Internet TV will become profitable for their organization indicates that most respondents think that the rapid emergence of Internet TV will imply benefits for their organization.

10) The majority of respondents agree that Internet TV will be a prime source for customer knowledge. Through the use of data mining, broadcasters are able to collect a lot of very useful user information. This information can be sold to advertisers to generate revenues but it can also be used to distinguish certain user groups and target them with programs created for them.

11) A large majority of the respondents agrees with the statement that some content is better suited to be broadcasted on Internet than other content. This means that most broadcasters really acknowledge the possibilities of Internet TV and that they don’t see it as just another broadcasting medium. The internet has got its own characteristics and functionalities, broadcasters know this and will have to decide what types of content they want to broadcast and what not.

12) About half of the respondents state that their organization is an early adopter of Internet TV. The other half does not. This means that many broadcasters have been hesitant to implement Internet TV into their organization. Organizations are often not

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willing to experiment with new technologies. At the moment many organizations are at a point where they will have to make a decision whether or not to implement Internet TV.

13) The respondents are in disagreement when it comes to the fact whether or not their customers are willing to pay for the content they broadcast. About a third of the respondents think their customers are not willing to pay for the content its

organization offers. These are probably either small or public organizations that lack the resources or the ability to get the customers to pay. Another third is undecided and the last third thinks that its customers are willing to pay for the content it delivers. 14) Most broadcasters are not sure whether or not they will generate larger revenues because of a larger possible audience through the use of Internet TV. Results in the near future will show whether or not this is the case.

15) Most of the responding organizations (44) will use the synergies between

networks to build on the strengths of different technologies. Broadcasters do not limit themselves by only using one technology.

Conclusion:

There can be concluded that most broadcasters are optimistic about the future possibilities of Internet TV. Although the literature discussion suggested otherwise, most broadcasters do expect Internet TV applications to become profitable in the near future. They also expect that this technology will create new opportunities that can be used to their advantage.

It is also clear that, if you did not already implement Internet TV applications into your strategy, now is the time to make a decision otherwise you will likely miss the bandwagon.

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4.2 List of variables

This section presents a description of the different variables that are used to test to what extent the hypotheses that are stated in paragraph 4.2, are true. Three categories of variables can be distinguished, namely: organizational variables, content related variables and variables related to the use of business models. In the section below an overview is given of each category and their variables. A more thorough description of each variable and their corresponding code used in SPSS can be found in Appendix 3. These codes are later used during the correlation and regression analyses.

4.2.1 Organizational variables:

Organizational variables describe the properties of the firm. The organizational variables used in this research are:

• Location: the country from which the particular broadcaster operates. A list of the countries that are part of this research can be found in table 3.2.

• Size of the firm: the size of the firm is determined by the number of full time personnel that is working at a particular broadcaster.

• Type of broadcaster: in this research the type of broadcasting is either public or commercial.

• Area of broadcasting: broadcasters either broadcast their programs regional, national or international.

4.2.2 Content related variables:

Content related variables also describe the properties of the firm. The content related variables used in this research are:

• Major category of programs the organization broadcasts: the main category the particular broadcaster focuses on. A list of categories can be found in

paragraph 3.4.1.

• Programs produced in-house: a percentage of the total content a particular broadcaster airs.

• Programs purchased from broadcasters that are from the same country: a percentage of the total content a particular broadcaster airs.

• Programs purchased from foreign broadcasters: a percentage of the total content a particular broadcaster airs.

4.2.3 Business model variables:

The first group of variables describes business models and how they are currently used by the broadcasters. This group describes what business models are currently used within the different firms (see Appendix 3; variables NOWAD-NOWHYB). The next set of variables describes the expected adoption of business models in the near future. This group refers to the application of these business models five years from now (see Appendix 3; variables NEXTAD-NEXTHYB).

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The third group of variables describes the set of available Internet TV applications that can be used by broadcasters to generate revenues (see Appendix 3; variables TRADSTREAM-DATAMINE).

The next group of variables describes to what extent the Internet TV applications that are being used actually generate revenues, either direct or indirect (see Appendix 3; variables DIRTRADSTREAM-INDDATAMINE).

The last group of variables measures the current and future amount of business models used. These variables are created to gain a better understanding of the number of business models that is used by a particular broadcaster, now and in the future (see Appendix 3; variables BREADTHNOW-BREADTHCHANGE).

TV broadcasters and the emergence of Internet TV