Media establishments are profit centers which earn revenue by selling their commodities to the public. This excludes organizations engaged in Public Service Broadcasting (PSB) which are funded with public money and broadcast in the interest of the public. Every other form of media establishment is in the business of creating informative, entertaining and educative contents for audience members’ consumption. The media and entertainment industry in Nigeria generates billions of dollars annually through products ranging from books, magazines and newspapers to audio recordings, films, television shows and online content.
There are two major categories of revenue earning methods for media industries in Nigeria, just like in most other parts of the world. They are direct or indirect payment methods or a combination of the two. A direct payment occurs when the consumers (audience members) of media products pay to the media house for the products. This occurs when they buy newspapers, magazines, movies, pay for satellite and cable tv subscription, or for print media subscription. Indirect payment is where other companies pay to reach the consumer by advertising in a media establishment. In this case, the advertiser – not the consumer – is the media organization’s client.
In summary, the revenue strategies come in form of payment from consumers (direct) and payment for consumers (indirect). Media houses strive to earn money from the consumer and for the consumer (where advertisers pay to reach the consumer). In the first case the company sells products to the consumer while in the second case the company sells the company sells the consumer (audiences) to the advertiser.
Let’s look at various revenue sources in both the direct and indirect payment systems.
Direct Payment Revenue Types
This is a revenue generation method where the media organization gets a one-time payment for its product. It is the oldest direct payment method for media products. This kind of transaction occurs whenever a consumer buys newspaper, magazine, book or video game, pays to download a music file, purchases movie DVD, buys a movie ticket, or pays for cable tv subscription. Media and entertainment businesses such as book publishers, recording companies and movie studios generate the majority of their income through outright sales.
This is another common direct payment method where subscribers pay for copies of a newspaper or magazine, for instance, to be delivered to them regularly. The payment is made up-front, so that the publication is sent once it is out. Subscriptions involve periodic payments in exchange for current media. Magazines, journals, newspapers and many Internet media companies generate part of their income through subscription. Other forms of subscription are Monthly fees for cable or satellite television services are another type of subscription. Companies that charge a monthly fee for rentals of video games or DVDs also use a subscription model of direct payment.
This is another direct payment revenue method. It works for media types that come in an individual package, offer no ongoing value, and are sustained through sales alone. Sales here occur where a consumer patronizes a pay per view movie on cable, purchase of a movie ticket at the theater, or sale of a CD or DVD. It is a one-off transaction that ends with exchange of the item purchased.
This is a direct payment method used by media organizations as a secondary, or ancillary, income source. This is popular with recognizable media franchises whose fan base would want to purchase related items. It could be bags, clothes or costumes of movie characters owned by the company. An example might be the merchandising efforts of a company like Disney, which produces and sells merchandise for all of its big-budget movies and TV shows. Many times, merchandising efforts earn more income than the media product it references. For example, the original Star Wars movies earned more income through merchandising than through ticket sales.
Some media organizations engage in generating revenue by running other services often related to their business. It could be media consultancy services, organizing awards and pageantries, public relations services, among others. This is also a direct payment revenue strategy since the consumers pay for the products or services offered by the media houses.
Indirect Payment Revenue Type
Advertising is the major source of revenue for most media establishments. It is the most common of all revenue models in the media industry, both for traditional and online media. TV shows, newspapers, and websites offer their content (programming, news stories, etc.) at no charge (or at a low price) in order to attract a large audience. Advertisers then look for media establishment with large audience base or those that have the audiences of their products and buy space or time for advert place in the media organizations. They pay the media outlets to promote the products they are selling by placing advertisements in between their content for the audience to get exposed to. Media organizations strive to offer quality products to the audiences to receive patronage that will increase their audience base and attract huge budget advertising to the company.
Government subsidies could be described as indirect payment revenue source since the media house does not get the money from the consumers. This is a strategy which applies to government owned media organizations in Nigeria. Most of these organizations can hardly survive on their own due to lack of direct and indirect payments from both the consumers and advertisers. They enjoy monthly subventions and subsidies from government that owns them as a way of survival. The products offered by most government establishments in Nigeria mostly do not appeal to many audience members who see these establishments as lacking objectivity due to government interference in editorial content. This includes the fact that the media industry is very competitive with privately owned media establishments offering quality contents to the public.