Internet Business Models for Broadcasters: How Television Stations Perceive and Integrate the Internet

Article excerpt

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The exponential growth of the Internet has changed the rules of competition in many industry 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 the competing media incumbents in their attempt to counter or leverage the rising popularity of this new market entrant.

The strategic importance of the Internet is especially evident for the television industry as television and the Internet develop a symbiotic relationship with significant financial implications. Television provides the most desirable marketing communication channels for Internet marketers. With millions of Web sites available, the Internet is the most cluttered medium in the world. To succeed in marketing an online brand, a marketer most likely will need to distribute messages via a mass medium such as broadcast television to create broad awareness of the product or service, or use a niche medium such as cable television to connect with target markets.

On the other hand, the increasingly critical role of the Internet in American media consumers' daily lives has led to a re-orientation of business strategy and operations by the leading "mass" medium, television broadcasting. For example, both television stations and networks now frequently cross-promote their online and offline content, especially for news and sports-related television programming (Greene, 2000). NBC recently launched a multi-platform advertising plan to focus on cross-platform advertising sales using its cable and broadcast networks, television stations, and Internet properties in an attempt to move away from an ad-reliance business model and reshape its business into a more interactive lifestyles management, information, and entertainment company (Mermigas, 2001). Disney and Fox formed a joint venture, movies.com, to distribute movies digitally through broadband Internet connections or cable video-on-demand services (Healey & Verrier, 2001). With the arrival of digital television, many television broadcasters are contemplating the feasibility of Web-enhanced applications such as on-screen links to advertisers' Web addresses, localized news services, late-breaking news, sports statistics, interactive polling, background to documentary material, online chat, and links to movie trailers and ticketing services (Nelson, 2001 ; Pavlik, 2001). There has also been a shift in the thinking of leading Internet television companies towards using the Web to enhance the viewing experience, rather than using the television as merely an alternative Web access device (Thompson, 2000).

As revolutionary as the Internet is for the television industry, few studies have examined the changes in business models, operations, and perceptions in response to the Internet among the broadcast media incumbents. Media scholars have mostly investigated the impact of the Internet on society (Havick, 2000); the general interrelationship between the Internet and television; and the Internet in the context of digital television, multimedia, and broadband communication (Chan-Olmsted & Kang, 2003; Picard, 2000), online content of mass media organizations (Coyle, 2000; Lin & Jeffres, 2001), regulatory and economic implications of Internet broadcasting (Fan, 2000; Waterman, 2000), and the characteristics of the Internet audience (Webster & Lin, 2002).

Television stations have adopted a variety of internet strategies, from outsourcing Internet operations, utilizing the Web to create interactive advertising experience, employing the Internet as a marketing tool for on-air content or station brands, and positioning Web sites as local portals, to producing content for enhanced television (Kerschbaumer, 2000). A 1999 NAB survey of television stations revealed that the majority of stations (70%) maintained their own Internet operations, while the rest either outsourced their operations to a third party, used a combination of outsourcing and internal management, or had their parent network maintain the Internet function (Nitschke, 1999). …