fragmented media

How technology, innovators and serial disruptors are shaping the future of the media industry

I recently chaired a panel discussion with Jon Block (ITV), Ed Couchman (Facebook), Mark Rowland (Indiemedia) and Julia Lamaison (GfK Media) at GfK’s ‘People, Devices and Content’ event. Here is my write up of the event with my interpretation interwoven throughout.

The long tail

We’ve never had so much access to visual content – both professionally produced (such as TV shows, films and radio programmes) and amateur content (uploaded to services such as YouTube and Soundcloud). Living in today’s media-rich world provides the consumer with unimaginable choice catering for a diverse set of tastes and interests. ‘The Long Tail’ Chris Anderson talked about back in 2006 has now arrived. Whilst this is creating new opportunities for content producers, consumers face the challenge of sifting through masses of content to arrive at something that interests them.

Mark Rowland, CEO of media-producing startup, Indiemedia, is constantly exploring the opportunities the current landscape creates for small businesses. His company produces the TV show ‘Sing Date’ which is part of an increasingly long tail of content that satisfies niche audiences. The idea for the show originated in the US where he observed the growing phenomena of online karaoke. Currently aired in the UK, Mark is looking to take it back to the US where the idea originated. He explains, ”if the broadcasters [in the US] had paid attention to the long tail, they wouldn’t have needed me to go round this circle to take it back to them”. He believes that if he secures a deal, Sing Date can move “from the long tail up to the top of that tail”.

But the long tail is not just about niche-interest content; it’s also about monetising a vast back catalogue of visual content which, until recently, was primarily achieved through DVD sales. Declining sales of physical formats has seen traditional broadcasters seeking to diversify their revenue-generating strategies. ITV, for example, is looking to its multiple channels (ITV2, ITV3, etc.) and digital platform (ITV Player). As Jon Block, ITV’s Controller of Digital of Commercial Digital Products, explains “if you think about the long tail of Britain’s Got Talent (BGT), [it] is actually in the way that Syco manage to monetise the Susan Boyles of this world, that’s quite a good way of monetising the long tail.” The point is that production company Syco not only spins off ‘Britain’s Got More Talent’, the best and worst auditions, and past series, but the ‘talent’ it uncovers (more often than not) moves from a mainstream TV show into the long tail for music or dance.

Whilst very few will complain about having more choice there is a direct correlation between the amount of content available and the effort it requires to sift through it all. For a long time the broadcaster has curated a channel of content for its audience which is simple to understand and easy to plan an evening’s viewing via the electronic programme guide (EPG). Broadcasters have been building relationships with their audiences for decades in the aim to develop a brand which the consumer associates with certain types of content. Ed Couchman, UK Sales Manager at Facebook argues that consumers no longer associate content with broadcasters and believes “that programme brands are much more powerful than channel brands.” He highlights that with an average Facebook network of 267 friends it is inevitable that “the social EPG is the next exciting step for content discovery because it’s curated by your friends, not by commissioners or schedulers who are impersonal to us.”

The role of social networks in content discovery is undoubtedly an interesting one. The emerging debate is centred on the extent to which social networks (not just friends on Facebook but interesting people on Twitter and Pinterest, etc.) define a person’s viewing schedule in contrast to curation by broadcast schedulers. It’s highly probable that both will play an important role in the future, and the most effective discovery services will be driven by integrating them (e.g. the way TV app Zeebox integrates both what your friends are watching, and what the ‘stars’ are tweeting)

From social to second screening: the role of devices

The digitisation of content and proliferation of new media content services and platforms puts the consumer in control of how, when and where they watch their favourite TV show or film. Smartphones and tablets enable consumption beyond the home and enhanced viewing experiences inside the home. As a result, many digital services are showing impressive growth figures; BBC iPlayer requests grew 20% year-on-year in 2012 and Apple recently announced that 1.38 billion videos have been downloaded (TV and films) on iTunes since their introduction in 2008. ITV’s Jon Block thinks this is great news for traditional broadcasters like ITV as he believes digital services are supplementing TV consumption because “all these extra devices are just providing new television screens”. Indeed, there is no better example than the London Olympics last year to support this argument. It proved the continued importance of TV with the closing ceremony attracting the largest TV audience in over 30 years but also emphasised the importance of digital. The BBC empowered people to stream the live events directly to their preferred device or catch-up whenever time allowed.

The fragmentation of media consumption on different devices is not just an ‘either or’ option. Ed Couchman argues that multiple device usage is having the greatest impact as a second screen. This can be chatting to friends about what they’re watching, engaging with a TV show via competitions or voting or playing games developed as an extension to the video content. He believes social networks, per se, have an important role in facilitating this content-audience interaction. Ed stated that: “Social media can help build anticipation of a TV series prior to its broadcast. Importantly, I think it’s all about making a deeper more meaningful relationship with fans”.

There are some great examples of this already happening as Jon Block proved with the stats on the latest series of Britain’s Got Talent: “[BGT] was our most successful play-along game or show-related app ever, with just over one million, downloads. It had about ten million user sessions as well, with people coming back on average ten times. Over half a million people blinged their buzzer.”

Clearly, mobile devices and TV are complementary screens, particularly for live events like sports and talent shows. But can it be as effective with TV dramas and films?. Indiemedia’s Mark Rowland believes it can and his latest project aims to extend TV drama ‘Midsomer Murders’ beyond TV and into an iPad game. He was quick to add that this will not work for all TV shows and success will only be found where there are synergies between the audience and the formats. Mark noticed that hidden object games were a popular genre on Facebook driven by the same demographic enjoying TV dramas on ITV. Midsomer Murders is kind of a hidden object drama which then presents an opportunity for extending the TV Drama into new formats. Mark explains: “We’re just taking a successful genre in games and the detective show, but only creating the game because those two things intercept, not because some TV person went, ‘Hey, let’s have a game out of ‘Midsomer Murders.’”

Experimentation and disruption: new business models

With the kind of entrepreneurialism from companies like Indiemedia, it is unsurprising that there is much talk about new business models in the media industry. Furthermore, companies like Apple, Amazon and Google are all interested in driving growth through video-based media content. These serial disruptors are likely to approach things differently to support their existing business strategies; for Apple, driving hardware sales and, for Google, digital advertising revenues.

In the UK, however, there is a cultural legacy of free broadcast media funded by advertising and a licence fee. In contrast to the US, the UK market is less used to paying for their entertainment so future business models will need to recognise this. Media Insight and Research Director at GfK, Julia Lamaison, contends that an ad-funded model is still a strong possibility even in the digital domain: “Whilst 21% of Americans are subscribers to Netflix, it’s by no means sure that that’s going to be the model that sustains in the future. I think the free-to-air model is an interesting one that perhaps, in the on-demand space, is going to be more powerful”

Thus, to fully consider future business models it is important to see where the value is in the journey from the spark of an idea right through to the target audience. The simplest way to think about this is in terms of the content creators, the content distributors and the devices used to access content. It seems that the part of the chain that is most open to disruption is the content distributors such as TV channels and digital services. These have built strong brand relationships with their audiences as the ‘go to’ destination for certain types of content. However, as Facebook’s Ed Couchman argues, consumers are more engaged with the content brands than the channel brands and if this is true then power and influence will shift.

Jon Block recognises the opportunities and threats facing ITV’s business model but remains positive about its future. ITV’s key strength is that it is both a content creator and a content distributor and thus will remain a powerful player in any future business model. Stating that ITV’s five-year vision is to produce amazing world-class content, Jon Block explains, “we are a producer broadcaster and we aim to distribute our content by broadcasting, but also by distributing to the biggest platforms so Virgin, Sky, iTunes or Samsung smart TVs, are all opportunities for us as well”.

ITV recognises that people are consuming content in new ways which doesn’t necessarily fit with the current linear broadcast model. The broadcaster is experimenting with new ways of monetising content and has recently launched an ITV app which is ad-free and costs £3.99 per month. For Jon, it’s all about “experimenting and looking at new ways to develop new revenue streams”. This can only benefit ITV in the long run.

But it’s not just ITV that recognises that owning content is key to defending and growing revenue streams. Broadcasting company Sky has built a highly successful business this way with exclusive rights to sports, multinational telecommunications services company BT has also invested in Premier League football and Netflix has commissioned original programming with the US drama series ‘House of Cards’.

However, original content can require huge upfront investment and it is not guaranteed that there will always be a return on that investment. Setanta and ESPN have tried and failed to monetise football. GfK’s Julia Lamaison argues that “the kind of budgets that [Netflix] got to put into quality of programming isn’t going to be sustainable and I’ll bet that in a few years’ time we’ll see ‘House of Cards’ turn up on some linear channel somewhere in order to get some of that investment back”.

The fundamental flaw with putting original programming behind pay walls is that if someone wants to watch Premier League football, ‘House of Cards’ or a specific film, then that person is going to rack up a huge bill. The more the industry moves in this direction, the more consumers will discover ways around the inconvenience and cost. Mark Rowland warns of the perils of walled gardens and the ingenuity of consumers to find a way round them. He uses football to highlight his point: “every single Premiership game is also available free, dead easy, and frankly, if you’re lucky, you can pick up a pretty good stream and I think that everybody knows that”.

The future

The general consensus about the future business model in the media industry is that there needs to be a convenient way for consumers to access content, without paying multiple subscriptions. The disagreement lies in how this manifests itself in reality. On the one hand, the TV schedule is the perfect medium to distribute content, and if digital platforms can be built into the TV schedule to allow some kind of flexibility then monetisation will evolve around this business model. On the other hand, the channel and the schedule will become redundant and that a future business model needs to evolve around the consumers’ needs to watch what they want, when they want and via whichever device they want. This future model requires strong content discovery engines (possibly facilitated by social networks) and seamless interoperability between platforms and devices.

As demonstrated, visions for the future of this connected landscape differ, the opportunity for experimentation, innovation and creativity has never been so great. With so many companies, from incumbents to serial disruptors, seeking to carve out a stake for themselves, the competition is evidently intense. So who will be the winners? Those who harness the power of technology and put wider consumer needs ahead of narrower commercial considerations will, undoubtedly, prevail.

This article was first published by GfK and can be read here

Image: Frank Okay

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