Blog

Facebook opens doors to profitability with internal payments system

Valerie | 04 Jun 2009, 14:39

Photograph: Craig Ruttle/AP

Facebook is introducing an internal payments system, a move that might help the site achieve profitability and position it as significant e-commerce player, the Financial Times has reported.

The social networking site – which already has 300 million registered users and continues to grow rapidly – is in the early stages of developing an internal payments system that will allow users to buy “credits”, which they can exchange for virtual goods, purchased from third-party applications that run on the site, or from Facebook itself.

The move to introduce a new revenue stream marks a change in Facebook’s business model, which up until now has been almost entirely reliant on advertising. Facebook hopes that by offering a site-wide currency it will encourage more commerce on the site and that, by serving as the payment provider, it will capture a percentage of every transaction.

Gartner Research analyst Ray Valdes believes that it’s a positive move that could achieve revenues representing one-third of Facebook’s income:

“Over time, this will be very significant. Social networking sites have suffered with monetising [their services], but this leverages [the fact that] users are there on Facebook.”

The outlook for the company certainly seems optimistic. Last week, the Russian internet company Digital Sky Technologies which owns Russia’s largest web site, Mail.ru, announced it had acquired a small stake in Facebook for $200m (£125.5m) in a deal that values it at $10bn.

However, with Facebook founder Mark Zuckerberg predicting a 70% growth in revenue for 2009 over 2008, this article points out that pinning its future success on acting as a go-between for users and merchants is a potentially risky manoevre, with security issues just one challenge that it will need to address if it is to succeed in the Web payments business.

Publishers look to music industry for lessons on digital content

Valerie | 03 Jun 2009, 14:04

As growing demand for online content driven by advances in technology continues and consumer appetite for e-books steadily grows, it appears that the publishing industry is now looking to the music industry for lessons on how to profit from online content and combat piracy, Reuters reports.

At a panel discussion on the challenges presented by declining publishing revenue and the rise of electronic books like Amazon.com Inc.’s Kindle 2, held at the recent Book Expo America, Chris Anderson of Wired magazine, told the panel that the Internet broke the traditional physical distribution model for music and is now doing the same for the publishing industry. But rather than being a threat to the sector, he believes that e-books will, over time, instead “enhance and contribute to the success of the book rather than replace it”.

Jared Friedman, the co-founder of document sharing site Scribd was also optimistic about the sector’s transition to digital, arguing that publishers needed to encourage a more competitive marketplace:

“It’s clear now that there’s going to be enough demand for books distributed as digital content, that there is going to have to be a digital distribution mechanism for books. If we handle the transition correctly the electronic model may actually monetise better than the print model.“

However, many publishers are still wary of the piracy of digital books. Oren Teicher of the American Booksellers Association said:

“There are very clear lessons and we are very conscious of trying to prevent repetition of what happened in the music industry. The challenge for us is to incorporate all the new ways that people access information and to continue to be relevant in that dialogue.“

This is a major theme for the c&binet forum in October, which will bring together leading figures from across the global creative industries to share best practice and address ways to protect, produce and commercialise creative content.

Pinewood plans £200m development to rival Hollywood

Valerie | 02 Jun 2009, 07:10

Pinewood Studios, home to the James Bond and Harry Potter films, is planning a 40-hectare, £200m expansion that would allow it to compete with Hollywood and, increasingly, Eastern Europe in hosting the next generation of blockbuster movies.

According to the FT, the film and television company is seeking planning permission for Project Pinewood, a 100 acre development in Buckinghamshire that will see the development of a series of permanent film lots, including a row of New York brownstone apartments, a Parisian square and a Venice canal, so film-makers no longer have to fly abroad in search of locations.

The proposal would also include the incorporation of up to 1,400 flats accommodating cast and crew into the scheme, which is expected to create 1,600 jobs.

Pinewood Studios told the FT that that the project is unique in Europe as it aims to recreate the atmosphere of the Hollywood studios, while providing significant cost reductions for British film industry, which no longer will have to move productions abroad to find suitable locations.  The project has been described as “a long term scheme of national significance to create a living and working community for the creative industries” and contrasts with the situation in Hollywood, which has increasingly seen an exodus of film making to locations in other US cities, a result of attractive tax incentives.

Speaking to the Times, Ivan Dunleavy, chief executive of Pinewood Shepperton said:

“Film-makers have the pick of going anywhere in the world. It is a very desirable industry from a profile point of view and from an economic point of view. We need to keep Britain ahead in terms of its creative skills and creative infrastructure.”

Will we see a Spotify for films?

Valerie | 01 Jun 2009, 08:52

Whilst the internet has revolutionised music consumption, with consumers now able to discover new artists using streaming services such as Last.FM and Spotify, an article in the Times questions whether similar services will be available for films in the not too distant future.

Currently, users can add an application to their internet browser that will enable them to locate and stream films straight onto their PC but the article points out the key challenge with this – it’s legality – and argues that access to movies must be made easier if the film industry is to learn from the music industry and address piracy issues.

Despite the popularity of services such as FindAnyFilm.com, a website funded by the UK Film Council which directs users to a number of legal viewing options for a catalogue of 30,000 films, demand for online film content continues to grow and outpace the development of new business models.

Andy Frost, director of media at technology consultancy Detica thinks that that the web offers very tangible benefits to the film industry:

“The film industry has an advantage over music. Film has a well-understood rental market, which will translate easily to the internet. As long as a decent catalogue is available online for a fair price, it will work, because consumers get what rental is – in terms of films, they don’t really understand the notion of ‘free’.”

A Spotify for films is one possible solution to feed this growing appetite for streamed content but the Times argues that the “complicated financing structure means that licensing old films for inclusion on a service resembling Spotify or Last.FM is nigh-on impossible “.  So, what is the future for accessing online film content?

Frost believes that whilst the film industry is closely following developments in the music industry, many commentators don’t think the music industry’s innovations are viable in the long run.

Frost’s colleague, Dan Klein agrees: 

“There’s no single model… It all depends on where you are and how much you’re prepared to pay to consume it.”