• Hybrid Business Model Innovation: The Cross-Boundary Mechanism for Over-the-Top Organizations

Abstract

The over-the-top (OTT) service model is out-competing traditional television business models and ushering in a new paradigm for the digital media industry. This study investigated two outstanding business models in the OTT industry, namely those of Netflix and iQIYI. The results revealed that both of these services have innovated their business models by systematically fulfilling user demands. Netflix and iQIYI do not rely only on membership fees to cover production costs and information technology (IT) investment; instead, by satisfying users’ content, interaction, and cross-boundary service demands, these services have appropriately used content and media innovation to develop specific business models. Netflix applies a horizontal integration approach and establishes “effectual” hybrid models. It produces high-quality content and cooperates with local suppliers to embed its service into various video devices. By contrast, iQIYI applies a vertical integration approach and establishes “multiplication” hybrid models. Through artisan selection, incubation, and brokering, iQIYI has established vertical business models and earned profit from agencies, fan clubs, and e-commerce sources. This paper provides theoretical contributions based on hybrid and open business models and highlights the relevance of synergy creation for systematic vertical and horizontal integration. OTT services can establish idiosyncratic hybrid business models only by using a systematic approach. This paper also contributes to the Internet+ concept in terms of three perspectives. For cable TV, OTT content (and thus Internet+) provides new cooperation opportunities. For telecommunications companies, OTT content (and thus Internet+) can generate mutual interdependency. For key stakeholders in the OTT industrial supply chain, Internet+ can offer an opportunity for systematic integration.

Keywords: Hybrid Business Model, User-Centric Innovation, Cross-Boundary Innovation, Ott Service, Interaction Design