INNOVATIVE BUSINESS MODELS IN THE MEDIA INDUSTRY

               Vladimir I. Soloviev, Institute for Humanities and Information Technology
                    Pavel A. Kurochkin, State University of Management Moscow
                Anton V. Rendiuk, Institute for Humanities and Information Technology
                 Anton V. Zazuk, Institute for Humanities and Information Technology


ABSTRACT: In the modern media industry, in addition to the traditional business model of proprietary
products selling, there are a number of new business models that involve free distribution of whole
products, or some parts of the products. The advantage of the open business model is in the value
creation by a large community of developers, whereas the proprietary business model means a simpler
form of value capture. However, open and closed business models can not exist in pure form: the
proprietary model does not give enough space for innovation, while the open model gives insufficient
opportunities for generating profit. An investigation of the problem of optimal business model choice at
the monopolistic market indicates that the fully closed business model is less efficient than the model
with the closed core and open extensions; it is profitable for any firm to open all of those ideas and
technologies that can not be used without the base module; the completely open business model is
optimal if and only if a substantial part of the consumer value is determined by additional services or
innovative activity of the users.

Key words: business models, innovation, vertical differentiation, horizontal integration, proprietary products,
open products, media industry, monopoly

JEL codes: O31, L17