Realization of Internet Services in a Media Company the Case of. using Bertelsmann Professional Information. A b s t r a c t. A u t h o r INTRODUCTION

Transcription

1 RESEARCH Downloaded By: [German National Licence 2007] At: 14:39 11 March 2010 Realization of Internet Services in a Media Company the Case of Bertelsmann Professional Information THOMAS HESS INTRODUCTION Products of the media industry can be digitized completely, ie digitally processed and distributed. Therefore, enterprises in the media industry depend on innovations in information technology more than most other branches. The CD was the first digital medium for information and entertainment purposes. The CD facilitated multimedia presentation of content. But potential uses of CDs are restricted. Certainly, the Internet offers more options. In addition to processing content digitally, the Internet provides digital distribution. Technical restrictions remain today only in the distribution of video sequences. Broad research has been undertaken to investigate the Internet activities of media companies (Hars 1999; Hess 1999). In-depth analysis is still missing. This paper aims at filling this gap, using Bertelsmann Professional Information (BPI) as an example. BPI developed new Internet services from 1996 to First the background is described. BPI s project and its results are discussed. Conclusions are presented at the end. The Internet offers an opportunity to provide up-to-date content, individualized and in an interactive way. Therefore, professional information seems to be well suited for Internetbased distribution. As well, online access is still more common at work than at home. Because the PC is an established and well-known front end in the office environment, there is no need for a change in media consumption habits among target customers. Therefore, a publisher of professional information has been selected as an example for this case study. BPI is one of the leading publishers in this area in Germany and the whole Bertelsmann group shows a strong engagement in applying multimedia technology as well. The case study is based on a partly structured interview in July Among the participants were Dr Ulrich Vest (at this time chief controlling officer of BPI) as well as Jochen Ade and Sabine Hoch from the Electronic Publishing Team of BPI. The interview was structured in four parts: course of the project, scope of the Internet services being offered (content services, communication services and transactional services), provision of the services (development of formats and bringing in specific content), and technical infrastructure. The participants knew the structure of the interview before the interview itself took place. They have approved the resulting case study. BACKGROUND BPI is a publisher of professional information and a provider of infor- A b s t r a c t The Internet offers a new channel for distribution of content and provision of new services to media companies. Media companies are adopting this. Indepth analysis of products, processes and Information Technology infrastructure in the companies is still missing. The aim of this paper is to discuss this question based on the case of Bertelsmann Professional Information. Bertelsmann Professional Information developed new Internet services from 1996 to As one of the results of this study, several new topics for research have been identified: opportunities and restrictions of automation of selection and packaging of content, organization of data flow while using different target media and outsourcing of information technology functions in a media company. A u t h o r Dr Thomas Hess (thess@unigoettingen.de) is head of the media research group at Goettingen Business School, Germany. He holds a Master s Degree in Information Systems from the Technical University of Darmstadt, Germany, and a PhD in Business Administration from the University of St Gallen, Switzerland. Dr Hess s research interests include new media, planning and control of inter-firm networks and business process management. Keywords: media company, Internet, Bertelsmann Copyright & 1999 Electronic Markets Volume 9 (4):

2 Electronic Markets Vol. 9 No mation services, serving specific market areas. The activities concentrate on building/environment, entertainment, health, transport and business/ science. Until the end of 1997, direct marketing was also part of the BPI. Currently, there are about 50 profit centres with approximately 2,000 employees. Well-known labels are Gabler, Vieweg, and Heinrich as well as Ärzte Zeitung and Musik Woche. BPI s regional focus is Germany, but there are activities in nine other countries as well. In the fiscal year 1997/ 98, BPI generated revenues of about DEM 600 million, mainly from advertisements. A major target of BPI is a significant growth of revenue and profit. The professional information market in Germany, like in other countries, is strongly fragmented (Deutsche Fachpresse 1998). The whole industry generates revenues of about DEM 4,000 million, shared by approximately 500 publishers. Small players with an average of seven titles dominate the market, most of which have a monopoly within a small niche and therefore operate successfully. BPI is one of the few major players in Germany with a revenue of DEM 500 million in this area. THE PROJECT In 1995, BPI conducted a study about the importance and meaning of Internet services. The study recommended participation in Internet business. The project of implementing an online service started in January A major target of the project was to generate new areas of activity, and in some cases to react to the competitive environment. In the first half of 1996 two major decisions were met: First, to prefer the Internet to proprietary online providers, and second, to provide a joined solution of five parts of BPI, which was backed up by a central unit, in order to avoid isolated solutions of single publishers. A joint solution was expected to reduce operational costs (about 25% less) and to relieve single units from technical details. Up to then, there had been no common project of that size within BPI group. The common platform was available in July 1996, resulting from prior detailed analysis of requirements, identification of common components as well as design and implementation. Based on this platform, Internet services were developed and introduced: Building/environment in November 1996, transport in February 1997, direct marketing (which was still a part of BPI at that time) in August 1997 and entertainment in October During that whole time, the Internet services of the business/ science area were extended continuously. Deliberately, the Internet services did not employ a unified user interface. The project team consisted of the central Electronic Publishing unit of BPI, the area units and debis, an external system service provider, which was responsible for all technical issues. For management purposes a steering committee was implemented and chaired by the CEO of BPI. The budget of the project was about DEM 10 million. The capital investment appraisal according to Bertelsmann group standards estimated a return on equity (ROE) of more than 15%. Today the Internet services are managed as independent profit centres. Their target is to reach breakeven within the next two to three years. THE INTERNET SERVICES Internet services can be described using three different perspectives: the products, the production and the Information Technology (IT) infrastructure. We now discuss these three perspectives. Perspective 1: Products The Internet services of BPI can be divided into three categories (see Gerpott and Heil l997): content services, communication services and transactional services. Content services provide information and entertainment in the classical way without communication. Communication services support synchronous and asynchronous communications among groups and individuals like news groups and chat rooms. Transactional services offer tools for transactions like selling a book. For the purpose of this study it is necessary to distinguish between different kinds of content services. Referring to possible added value of the Internet services, content services can be described using the following criteria: target group, scope of offered content, topicality, used media types (text, picture, video etc.) and degree of personalization (for example delivery of information according to preselected areas of interest via or so-called push services). Target group of Baunetz ( the Internet service of the building/environment area, are architects and other occupations within the building industry. Baunetz provides related business news, competitive and product information as well as standards and regulations. Furthermore, it allows architects to supply information about themselves. The site is updated daily; dominant media types are text and pictures. As far as personalization is concerned, the service offers a configurable, based service, for example customers can order up-to-date information about business news or invitations to bid. Also, there are and chat rooms as communication services for Baunetzs s customers. However, there are no transactional services. In June 1998 Baunetz had about 17,300 registered users and about 300,000 page views a day. The offerings of Transport Web ( are targeted at transport companies, forwarding agents and commercial vehicle traders. The service offers up-to-date news and background reports, individually useable route planning, an overview of roadwork and roadblocks, vehicle tests and reports, market overviews and interactive freight and vehicle

3 exchanges. Dealers can link to their own web presentation. The content, which consists of text and pictures, is updated frequently. There are no personalization features or transactional services, but there is a non-moderated discussion forum. As a customer service, Transport Web provides the administration of advertisements and subscriptions. In June 1998, there were about 1,800 registered users and approximately 110,000 page views a day. The entertainment area s Internet service looks quite different. Ebiz ( offers news from the entertainment industry, national and international charts, dates of new releases as well as a comprehensive film-, video-, multimedia-, and address-database. The service is constantly brought up-to-date, text and pictures serve as the main media types. The service does not offer communication and transactional services, personalization is not supported either. The Internet services of the direct marketing group ( are very specific. It concentrates on access to the address database, which contains more than 3.5 million addresses. Further content as well as communication and transactional services have not been implemented. The Internet services of business/ science group ( comprise three areas: professional magazines, information services as well as product catalogues and an order service for books. Six professional magazines can be accessed via the Internet. Their scope varies from a simple table Table 1. Summary of BPI s Internet services of contents (eg in Management International Review) or abstracts of current articles (eg in Zeitschrift Arbeit) to full text contribution with archival and pre-print functionality (eg in Wirtschaftsinformatik ). Apart from a few exceptions (eg Wirtschaftsinformatik) the topicality of the contributions depends on the frequency of publication of the corresponding print product. This suggests a perception of the Internet as an addition to print, not as an independent channel. The dominating media type is text, supplemented with a few pictures, personalization is not implemented. The information services of the business/ science area provide a similar picture. As an addition, , and transactional services are offered (eg in Platow ). Altogether, there were 160,000 page views in December The price models of the five services of BPI are different. Access to Baunetz is free, however, there is payper-document pricing in some areas. As well, users have to register (without fees). Likewise, most areas of Transport Web are free. Selected services have to be paid for (mostly payper-document). In order to raise funds for Ebiz, subscription rates of the print product have been raised slightly. The enlarged subscription provides access to Ebiz. Prices for addresses from Bedirect are calculated from the known pricing tables used in print. Today, professional magazines can be accessed via the Internet without cost. There are plans to link Internet Service Content Communication and transactional Pricing access to subscription of the print product. In contrast, the information services are not for free, a user has to be a subscriber of the print product in order to access the corresponding Internet service. Equally, access to selected content has to be paid for (eg in Sales Profi ). Table 1 summarizes the Internet services offered by BPI. In the fiscal year 1997/8, revenues generated by the Internet business (without transactional services) were about 0.5% of total revenues. No print product has been replaced by Internet services. Perspective 2: Production The production-cycle of Internet services can be divided into three steps: development of a framework (ie a rough structure of content), filling of this framework with information and provision of services, that the customer accesses via the Internet. The following considerations concentrate on the third step, which is concerned with the provision of content. This step can be described by three characteristics: scope of editorial work, kind and scope of incoming contents (sources) and frequency of provision. Baunetz maintains its own editorial board, which produces exclusive content and prepares the layout. Furthermore, contributions of the three editorial offices of the corresponding print products are scanned and eventually revised and transferred into the Internet services. The Internet service is updated on a daily basis and is not Baunetz Industry news, competitive and product information and chat as communication services Pay-per-document (for premium services), otherwise free Transport Web News and information, route planning, exchange Discussion forum Pay-per-document (for premium services), otherwise free Ebiz News, charts and databases Subscription of print product Bedirect Address database Same as conventional service Gabler Online Professional magazines (partly full text), information services and product catalogues Discussion forums (sometimes), transactional services for books Magazines currently for free, information services linked to subscription Thomas Hess Realization of Internet Services in a Media Company 280

4 Electronic Markets Vol. 9 No linked to the publishing frequency of the print products. Likewise, Transport Web maintains its own editorial board. However, the editors do not create new content, but choose and revise interesting parts from the contributions published in print. Ebiz does without generating exclusive information for the Internet. In this case, the editors are responsible for converting the print contents and transferring them to the online services. Therefore, updates are linked to the publishing dates of the corresponding print products. This concept is adopted by the business/science area to an even greater extent. Likewise, only very little dedicated content is created for the Internet services in this area. Bedirect accesses its central database, from which the print products are generated as well. No special treatment is necessary in this case. Apart from a specific production, a dedicated sales department has been set up for Baunetz, Transport Web and Ebiz. There are 33 employees in the Internet specific areas for production and sales. Perspective 3: IT Infrastructure The Internet services are mostly based on Javascript and Netscape Enterprise Server 3.0, including Livewire. A database-oriented approach has been chosen, ie that some of the HTML pages are generated dynamically at run time. Therefore, information can be published without knowledge of Java or HTML. Using this system, each area can create its content according to its specific requirements. The system also includes functions for mail services, discussion groups and Internet shopping. The software was developed by debis, part of the DaimlerChrysler group. Smaller maintenance tasks are provided by BPI, on the other hand, debis is responsible for comprehensive and extensive adjustments. The five services outlined above are hosted on two Sun Ultra servers by mediaways, a joint venture of Bertelsmann AG and DaimlerChrysler AG. MediaWays also provides a technical hotline, while the webmastering is done by debis together with the webmasters of the individual Online services. IT support of the production process is characterized by separated data for print and Internet, and by restricted functionality of the used software. Usually, print-oriented content is created with a standard DTP tool (QuarkXPress). To reuse the content within the Online Services, it has to be converted to HTML by third party extensions (eg HexWeb) or by external service providers. The resulting HTML code is then revised in a HTML editor and transmitted to the server via ftp, where finally the necessary linking is done. CONCLUSIONS A suitable classification of business models can help to organize the discussion about the business opportunities of the Internet for media companies. There are a few suggestions in the literature (see for example Carveth et al. 1998; Haegel and Armstrong 1997; Shapiro and Varian 1999; Zerdick et al. 1999), but as yet Table 2. Idealistic Internet services categorized by the degree of digitization a consensus has not been reached. Based on the case study outlined above, these suggestions can be further enhanced. In particular, production-oriented problems have not been addressed. From the service provider s point of view, it seems convenient to orientate towards the degree of digitization. In Ebiz s case, the print product still constitutes the core product. The Internet service only supplements the print product, from which the content is mainly reused. The updating frequency depends on the publishing dates of the print product. In conclusion, access to the Internet services is provided for subscribers of the print product only. To fund the Internet activities of Ebiz, subscription rates have been raised insignificantly. Gabler and Bedirect have been positioned similar to this. To evaluate the investment in such an Internet service the benefits to the core products should be considered. Key figures could be new subscribers or improvements in the circulation. In contrast, Baunetz has been designed as an individual, independent service. The content for Baunetz is created exclusively, respectively selected from three print publications, with daily updates. Access to Baunetz is partly free and partly based on payper-view, but it is not linked to subscriptions of the corresponding print products. Independent services like Baunetz should be profitable on their own. Transport Web is in an in-between position. Content is not exclusive, but taken from print publications and appropriately modified. Likewise, parts of the service have to be paid for. Table 2 summarizes the charac- Characteristic Internet as a supplement to print Internet as an independent service Source of content Taken from print with appropriate modifications Exclusively created, supplemented by converting content from various print sources Updating frequency Linked to print publications Event-driven or based on an individual updating frequency Pricing Free for subscribers of the print-product Customers have to pay for certain parts of the service, no connection to print subscription Way of evaluating Benefits to the print product Profitable investment on its own

5 teristics of the two contrasting strategies. For each of the two approaches certain forms of production are especially well suited. In case of a supplement to print, a major goal is to link the production of the Internet services close to the print publication, eg by doing without dedicated Internet editors and using media independent content storage. In contrast, a dedicated editorial board should be maintained when the Internet service is perceived as being independent of the print product. Usage of media independent storage of contents depends on the scope of reused information. As an alternative, Internet services can be categorized from the customers point of view. From this perspective, which information/ entertainment needs are addressed is crucial. Bedirect and Gabler concentrate on single, narrowly defined purposes. In contrast, Baunetz provides information not about special needs but rather presents broad content for a dedicated group of target customers. Transport Web and Ebiz (with qualifications) can be classified similarly. In addition, the case study provides hints to questions that have to be discussed when considering Internet services of media companies. The observation that revenues of publishers generated by Internet services are marginal (see Zerdick et al. 1999) is confirmed. In the case of BPI, these are well below 1% of total revenues. Maybe the Critical Point of Success (see Kollmann 1998) is not reached yet. Price models are still changing (see Bakos and Brynjolfsson 1998; Shapiro and Varian 1999). BPI uses classical models (like subscription for the print product) and new models (like payper-document). Only a little part of the content is for free. Advanced pricing strategies, based on knowledge of individual customers, are not used. As well, the case study confirms the theory that the consumption of Internet services does not reduce consumption of corresponding print products (see Bruck and Selhofer 1997; Eimeren et al. 1998; Fink 1996). No BPI print product has been replaced by Internet services so far. Technically, there are a number of opportunities for content personalization (see Resnick and Varian 1997). On the other side BPI has not adopted these mechanisms. The high degree of individualization in the print market for professional information could be the reason. Therefore the discussion about the opportunities for personalization should be more differentiated. It seems there is a limit up to where a user can define his information needs. Further, there are hints that point towards five topics that, as yet, have not been addressed: The core competencies of a publisher in a narrow sense are selection and packaging of content. The question is if information systems can replace manual work in these fields. Lycos, PointCast, and others show a way to automate both. BPI chooses a different way. In-depth research is still missing. Outsourcing of Information Technology functions has been discussed in general, but not in respect to the Internet technology and its importance for the products of media companies. The case study suggests that outsourcing of hosting and software development is an option to be considered. It is still not clear whether there should be a specialized division for Internet services in a media company or not. Maybe a specialized division is for Internet services independent from the old products. At this point research is still missing. BPI and the whole Bertelsmann group are still working on this issue. Each access to an Internet server is recorded in log files. These log files, transformed in a data warehouse, could be used for marketing and for controlling purposes. Prototypes are still missing. Only very little research has been conducted on the data flow in content production. Content Management Systems (based on XML or not) offer the opportunity to reuse content in different media at the same time or at different times. Also it is possible to reuse and recombine parts of content. BPI is working on this subject. These topics seem to be attractive areas of interest for future research. References Bakos, J.Y. and Brynjolfsson, E. (1999) Aggregation and Disaggregation of Information Goods: Implications for Bundling, Site Licensing, and Mircopayment Systems, in: Hurley, D., Kahin, B. and Varian, H. (eds), Internet Publishing and Beyond: The Economics of Digital Information and Intellectual Economy, Cambridge: MIT Press. Bruck, P.A. and Selhofer, H. (1997) The Ignored User, Communications & Strategies, 2, Carveth, R., Owers, J. and Alexander, A. (1998) The Economics of Online Media, in: Alexander, A., Owers, J. and Carveth, R. Media Economics, 2nd edn, Mahwah: Lawrence Erlbaum Associates. Deutsche Fachpresse e.v. (1998) Pressestatistik, 28 December. Eimeren van, B., Gerhard, H., Oehmichen, E. and Schröter, C. (1998) ARD/ZDF-Online-Studie 1998: Online-Medien gewinnen an Bedeutung, Media Perspektiven, 8, Fink, C. (1996) Strategic Newspaper Management, Boston: Southern Illinois University Press. Gerpott, T. and Heil, B. (1997) Wettbewerbsstrategien von Online- Diensteanbietern, Die Unternehmung 51(3), Haegel, J. and Armstrong, A.G. (1997) Net Gain, Boston: Harvard Business School Press. Hars, A. (1999) Academic Journals on the Internet, in: Scheer, A.W. and Nüttgens, M. (eds), Electronic Business Engineering, Heidelberg: Thomas Hess Realization of Internet Services in a Media Company 282

6 Springer, Hess, T. (1999) Das Internet als Distributionskanal für die Medienindustrie Entwicklungstendenzen im deutschen Markt, Wirtschaftsinformatik 41(1), Kollmann, T. (1998) Marketing for Electronic Market Places the Relevance of Two Critical Points of Success, Electronic Markets 8(3), Negroponte, N. (1995) Being digital, New York: Vintage Books. Resnick, P. and Varian, H.R. (1997) Recommender Systems, Communications of the ACM 40(3), Shapiro, C. and Varian, H.R. (1999) Information Rules, Boston: Harvard Business School Press. Zerdick, A., Picot, A., Schrape, K., Artope, A., Goldhammer, K., Lange, U.T., Vierkant, E., Lopez-Escobar, E. and Silverstone, R. (1999) E-conomics: The Economy of E- Commerce and the Internet, Heidelberg: Springer. Electronic Markets Vol. 9 No 4 Downloaded By: [German National Licence 2007] At: 14:39 11 March