For each of our markets we have considered the business imperatives, business trends and the impact that emerging technologies and solutions may have in addressing these.
Imperatives
Developing New Revenue Streams
The days when the back catalogue was an expensive burden are over. It is instead a gold mine, full of hidden riches and precious artefacts. But as the market becomes more competitive the exploitation of this is more difficult, the window of opportunity is closing, and content owners need to digitize, index, and make their content catalogue compelling in order to win market share.
Investment and adoption of effective Digital Asset Management is key to generating value. The music industry initially spent too much time fighting illegal Internet downloads and criminalizing their audience, rather than investing in innovative digital revenue streams. New initiatives with combined revenue models of advertizing and user subscriptions or fees should be evaluated by all content owners.
Exploiting New Brands and Opportunities
The diversity of content is always increasing. Whether it is lectures, newspapers, magazines, live events, games, or TV programs, they are all being distributed on nearly every conceivable subject and can be consumed on demand and online. At the same time, new user-generated content brands are emerging, some with massive followings. Aggregationbased companies must seek to collaborate with or acquire these new brands and design business models to monetize content provision. The race to everywhere-and-anytime entertainment and ubiquitous information has just started. Creating innovative and interactive content for fashionable and highly functional devices must be a key concern for Media executives.
New Approaches to Marketing and Content Delivery Channels
Whilst the cost of high-quality drama and feature films rise, the abundance of media means that the value of content has fallen. This ocean of content requires careful exploitation. The long tail may turn out to be a source of valuable revenue from niche audiences. And the content owners that fail to recognize this are in danger of missing a major opportunity.
Search engines which can exploit this vast array of content have become mediums in their own right—the best example being Google, which is now one of the largest advertizing mediums. In the press, the development of free newspapers through the Internet has transformed business models. Companies will continue to find new growth through product innovation and diversification. In France, the sports newspaper L’Equipe has developed books, a Website, and a TV and radio channel, in its search for new revenue. In the Netherlands, the financial FD Media Group has integrated its print, radio and online editorial and commercial staff to become a single multi-channel business.
The search for new revenue is taking place against a backdrop of declining print sales. As sustainability issues become more pressing, and portable devices become friendlier, it is safe to say that the printed versions of daily newspapers and magazines will slowly become less and less important. The convergence between media and technology continues. IP networks have become the new broadcast networks leading to consideration of ‘ITcasting’ as a new strand to traditional business.
Business trends
Consolidation
In 1993 there were 50 large US Media companies. Acquisitions and mergers have consolidated this number down to just six huge Media conglomerates (Time Warner, News Corporation, Disney, Comcast Corporation, Bertelsmann Media Worldwide, and NBC Universal). All of these organizations are cross-Media companies investing heavily in Web technology, Virtual Worlds, and mobile content distribution. In Europe, the regulation around cross-Media ownership is slowly being relaxed and as a result, a similar round of European Media consolidation may be on the horizon.
Consolidation could bring a further concentration of advertizing revenues; the landscape is changing rapidly. There is increasing polarization between the global agencies and Media owners (such as Lagardère Active or NRJ Global in France) on one hand and new niche providers on the other. As these small, nimble players start to grow they are being acquired by the major corporations, including the Publicis Group acquisition of Phonevalley, Microsoft with ScreenTonic, and Yahoo! and AOL acquiring RightMedia and ThirdScreenMedia respectively.
New channel players are entering the market in some cases with massive budgets. In France, Orange has developed several partnerships including movies and programming with Studio 37, an exclusive partnership with Warner / HBO, sport with the French Football League (€200M for one year), music, Video on Demand (VoD), and more. As it becomes harder to grow, will online advertizing revenue players such as Google look to acquire and maybe even make its own content?
New Content Services and Channels
Have we reached the paperless world? Not yet, but in France the two main mobile operators expect to launch their own 3G platforms to sell electronic newspapers and books. The financial newspaper Les Echos is experimenting with an e-Paper edition. In Japan, 3% of the books sold are already digital, and a conservative forecast is that this will grow to around 10% by 2011.
Nintendo reinvented the demographics of computer gamers with the launch of the interactive DS and Wii. This has caused the creation of a new audience and many new devices, add-ons, and revenue opportunities. It is likely this will develop into richer content and more online and interactive offerings.
Increasingly, younger generations are moving to Massively Multiplayer Online Role Playing Games (MMORPGs), which are generating more and more revenues. Virtual items can be bought with real money; real companies can advertize and sell not only virtual but physical goods in their virtual shops. We can expect virtual marketing to grow and Virtual Worlds to open new opportunities for developing new services.
Interactive TV is also being redefined. The cathode ray tube is disappearing and content is consumed through the BBC iPlayer through a PC and VoD, by mobiles and more. As these new devices experiment with interactivity, understanding and owning iTV patent technology will become increasingly important and the development of home devices will demand increasing sophistication.
The Changing Behavior of Consumers
The explosion in the quantity of user-generated content has only just begun. Currently 35% of Internet content comes from users. In the near future we can expect to see every piece of human art, commentary, and information in video, audio, and written form. The number of undiscovered but talented directors, artists, and actors is vast. These people will find that YouTube-type sites are the simplest route to their audience. Advertizing will be on, in, around, and through portals and the aggregation brands that can work effectively on the Web. Considering that at times YouTube traffic reaches between 15 and 20% of the total Internet traffic, it is not difficult to see the power of these sites.
The 2008 US presidential election has shown the role of the Internet and social networking as powerful marketing tools. Barack Obama won the media battle by using social networks, helped by Chris Hughes, a 24-yearold co-founder of Facebook. My.BarackObama.com invited supporters to create a profile, blog their campaign experiences, plan and attend events, find other supporters, and help raise funds for the campaign. Obama also had an official presence on Facebook (more than 1 million ‘friends’) and YouTube. Finally, he built a strong SMS, email, and TV campaign with a US$5 million (€3.7 million) and 30-minute prime-time clip aired on CBS, NBC, and Fox a few days before his election.
The exploitation of the social network for marketing purposes is embryonic. Behavioral, interest, and profile data located therein is providing high-quality information. The trouble is existing enterprises are only just learning how to mine and use this information. We will see new lines of business appear that harvest, understand, and derive revenue from such data.
Consumers are now accustomed to having access to free content online (press, music, movies, pictures, digital radio, and TV). Therefore, the challenge for Media and Entertainment companies is to create value-added products and services for their customers. By offering more reactivity, interactivity, and personalization, they will be able to offer a convergent and continuous experience with the brand.
Monetization Dilemma
Advertizing is the engine of the Media industry. Today’s consumers are bombarded with a huge array of communication channels and have access to technology that allows them to skip through TV ads. So how can the attention of the audience and their money be grabbed?
A short-term solution is advertizing that pretends to be content, either in the form of product placement or in the form of well-made watchable adverts. Rich media formats have allowed Internet advertizements to become more entertaining and open new frontiers in the art of catching a user’s interest. Old measures from the physical world of impressions and costs per thousand are being replaced by new performance-based models such as cost-per-call (CPL) or cost-per-action (CPA). Behavior targeting is the new way to increase the effectiveness of digital advertizing. Promotional strategies will increasingly be multi-channel in nature and span a myriad of devices.
Cost Reduction
The falling price of professional and amateur hardware, such as cameras and editing facilities, are fueling the growth in content. Amateur videos shot on cell phones can often be seen on the news broadcasts of major channels. Companies need to embrace new lower cost, lighter-touch technologies which may necessitate the re-engineering of their business models.
The Power of the Network
Think bandwidth, bandwidth, bandwidth! Content creation and consumption is driving demand on bandwidth up and up, such that video will make IP traffic grow by 400% in the next four years. High broadband network (FTTH) will enable higher capacity and improved connection quality. When considering the huge network investment being made by the telecom operators (more than €1000 per socket,) we will see acceleration in their content activities.
Impact technologies
Mobile Advertizing
Recent UK surveys have shown that 32% of 11-20 year olds embrace mobile advertizing. This doubles when their interest areas are targeted. The evolution of Web advertizing profiling, targeting, and customization is reflected in the needs of the mobile advertizing world.
Some of the technologies driving this are new, free tracking and audience measurement tools such as Google analytics. The insertion of mobile-specific adverts into content and the advent of streaming to mobile, allow digital advertizements to be inserted within video and audio streams with relative ease.
The tools driving this are simplistic Web applications built using LAMP, jQuery and Tomcat, on very low cost, commercially-hosted Web servers.
Mobile Applications
The Apple AppStore has been a great success with 100 million downloaded applications and revenue of €22 million in the first month of operation. The majority of these mobile applications have the same key success factors-interoperability, interactivity, personalization, and ease of use. Many of the applications revolve around music, dating, geolocalization, social networking, mobile business (m-business), coaching applications, and news.
Alternative Content
It is primarily open source work using LAMP with agile methodology that is driving alternative content projects. The desire to be informed in a different manner and collaborative media is an opportunity for citizens to regain control of the information they consume and publish. The number of ‘citizen journalists’ is on the rise, providing many points of view to inform debate.
Video on Demand (VoD), Catch -up TV, and Podcasting
In 2008, many telecoms operators and broadcasters derived revenue from on-demand content. The next technology iteration could move content 100% online. Therefore, organizations will be transitioning to content delivery from their Web streaming platforms. Infrastructure delivery organizations will be stocking up on Flash streaming servers whilst the
developers will focus on jQuery. Much of the success has been built with open source products.
Offline Media Consumption
The network is nearly, but not quite, ubiquitous. Physical media is in decline, but until the network companies connect our trains and planes there remains a market for offline media consumption. So what’s going to fill the gap alongside traditional physical media? Downloading is one solution and podcasting is its most popular form. Technologies such as Google Gears provide an example of the how to access online content whilst offline. Monetizing this is an area for innovation but organizations need to move quickly.
Micropayments
Technologies to allow small transactions of a few cents are being developed and deployed—these are again free, open source products. As the use, of these new payment methods enter into mainstream commercial use we will see a change in audience behavior.
Content Search
The amount of video and sound content in the digital world has exploded. The mainstream usage of a search engine is still associated with finding tagged content via text request. The next generation search engine will be able to find image, audio and video content based on a request that contains an extract of the video or semantic description of the video content. You will be able to find pictures on the Web that are related to other pictures. The Flickr API is already enabling this and there a number of research search engines that demonstrate this behavior. This is a technology to watch as its application could be significant.
Traditional data has grown exponentially and new value-added services are appearing, including transparent content analysis and customized categorization. New tools are becoming standard, including devices such as the Google search appliance.
e-paper
e-Paper devices are on the edge of the technology curve and today they command a high price. The underlying technology and materials used in e-Paper production are actually low-cost, meaning that a price drop is on the horizon. We will soon see a host of new digital displays on items such as clothes, watches, low-cost phones, toys, and a whole host more.
Enhancing Content through a Virtual World and 3D
Virtual Worlds and 3D technologies will move into new applications . Clearly, movies and advertizing are in the vanguard but we can expect to see major activity by the major technology companies in this area. Telecom operators such as Orange are diversifying into 3D media. It is likely that new businesses, products, and services will emerge around this technology.
Monetizing Piracy
The fight against content piracy may turn itself into a revenue opportunity— at least for ISPs and Web publishers. Online monitoring of streamed content and content sources, together with validation of copyright information, will help to fight infringement. Charging for this service and developing smarter technology may prove to be a growing source of revenue.
Computer Power
Grid Computing, high-specification hardware and better networking mean more number-crunching power. For Media, this means bigger, better, faster game engines. This is especially important for Artificial Intelligence behind the bots in MMORPGs.
Cybernetics
The boundaries between man and machine are being eroded. Brain pacemakers to control mood and artificial nervous systems and being implanted into people today. Artificial eyes that are video cameras have been in use for years. The entertainment uses of such technology are yet to be explored.
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