The first day of the emerging media technologies conference was largely around the way that new acquisition and delivery techniques are changing the way we present and consume content. Which is all well and good, but are there new business models emerging to fund it? That was the theme of the first session on the second day. Taking the chair was Tom Morrod, senior broadcast analyst at IHS Screen Digest.
Morrod’s first point was that total consumer leisure spending is still focussed on traditional content types. New media and online spending is still down in the noise in comparison: 1 or 2% only. More than half goes to pay TV, 10% on gaming, and substantial revenues still go to cinema and DVD.
Advertising revenue, though, has shifted towards internet and online. Television is still the largest single market, but internet is now running it close. But that revenue is largely associated with online video, so in a way it is returning to the same content owners and providers.
Consumer spending is surging ahead, but only on pay television. Advertising is flat – a growth of only around 20% from 1999 to 2011 – but online advertising is rising fast. Morrod also showed a chart of the decline of the music industry, showing that unless it is properly managed a rise in online services will not necessarily be good for business.
The final point he made was that consumers are spending on devices: the typical household will now include tablets and smartphones as well as computers, televisions and DVD players. The results are two-fold: first that the share of viewing hours taken by the television screen will fall rapidly, and second that it is placing huge – maybe unreasonable – demands on IP traffic.
Morrod then introduced John Yip from RTHK. In these times of technology change, he suggested that we are in a David and Goliath situation, Davids being the new, agile companies and Goliaths are the big monolithic broadcasters who may be slow to change.
To provide some quantitative method of determining whether a new service is viable, he introduced his RPMO analytical model, a simple way of analysing business trends. This is a conceptual equation which balances Regulatory, Pricing, Marketing and Other factors across macroeconomic forces to derive a numeric value for driving force. He even provided a link to an Excel calculator on the RTHK website. Yip’s claim is that it is a pretty accurate way of predicting the growth in market penetration of a new service.
Through examples he showed that the model derives values for R, P, M and O, and by taking the geometric mean you get a number between 0 and 5 for the proposal. 5 is a certain success, 0 is hopeless. Because it depends on a geometric mean, if one factor is not there it will bring the final total to zero.
Martin Guillaume from IBM quoted from a study of 1700 CEOs. Of these, they took the answers of the top performing 20% businesses and contrasted them with the remaining 80%. On the question of innovating the industry model, the average response was 18%, the top performing group as 35%, but media CEOs were at 45%, showing a clear appetite for new business models. Similar results were determined for new sources of revenue. While this innovation and new revenue is being forced on the media industry, it is clear that a significant number of businesses are taking positive steps.
Turning to where the money will come from, Guillaume noted that traditional broadcasters had to adapt to multiple delivery platforms, not least the fact that audiences can ignore advertising by focusing on the second screen. You have to deliver new experiences to develop new business models, not least to make the multi-screen experience more immersive.
For content owners, the rules which have governed the value of content has to be rethought. It should be possible to derive and justify the value of each piece of content, and them optimising the way that revenues are earned around it.
As an example, he showed a mock-up of a tablet app for football, which derived data in real time from the game – player stamina, for instance – and model it onto the screen. That opens up new revenue opportunities from gaming and advertising insertion to direct links to gambling and subscription data.
The key point to bear in mind is that, as modes of consumption change, so the value of rights have shifted, and you need to find new ways of measuring and analysing it. So metadata is the cornerstone of new business models.
The final speaker was Charles Sevior from Australian company Charan Group Consulting. He concurred with the prevailing wisdom that, as viewers are uniformly keen to adopt new devices for content consumption, broadcasters need to find the best ways of harnessing them to improve the return on investment for their advertisers.
He then turned to the demands on broadcast infrastructure. The growth of channels and consumption platforms has a multiplying effect on scale and capacity, and the challenge is to decide when to invest: early to allow agility, just in time to get the benefit of the latest technology.
One of the ways in which that is being handled is the move to generic IT. Standard software environments are increasingly well-behaved, he suggested, allowing them to deliver broadcast standards of reliability and stability. It allows the agility by replacing traditional broadcast interconnectivity with a three layer model of network I/O, processing and storage.
He showed an interesting slide which reminded the audience that the whole of the broadcast industry, according to the IABM research, is worth around $25 billion, which is about the same size as EMC alone, and dwarfed by Windows and Apple. His conclusion was that the broadcast industry should increase alliances with major IT vendors and qualified media IT system integrators. That would allow us to focus our ingenuity and investment on differentiating software and specialised hardware.
In the panel discussion, Sevior described the current series of The Voice on Channel Nine in Australia, where alongside conventional premium-rate telephone voting the audience can download songs from iTunes, which counts as two votes for the performer. They see this as a source of new revenue, as well as a practical link to social networking.
Guillaume talked about realtime analytics of social media as a way of determining what audiences think about a show as it was being broadcast. Comments on Facebook, Twitter and blogs can be parsed as they are posted to evaluating the programme and its talent.
Yip said that one of the benefits of media consumption on mobile devices is that you can then use location-based services. Advertising can be tailored not just for the individual but where that individual is at the time, maybe suggesting nearby shops or restaurants.
Morrod then moved the conversation away from the new revenue opportunities towards the costs: what investment will be required in infrastructure and content creation, and will it be justified. Sevior felt that there was no new money around and he was unconvinced that bold new ideas would be commercially sound.
Guillaume suggested that broadcasters and content creators need to challenge technology suppliers to come up with new solutions, maybe based on cloud, which can be delivered quickly and easily to allow these new models to be tested in the real world. If an idea fails then it can be quickly killed without significant cost; if it succeeds then it can be scaled up rapidly.
Finally, the debate moved onto so-called t-commerce, the idea that a mix of television advertising and interactive services could become a huge new stream of revenue, potentially coming close to replacing bricks and mortar stores entirely. Sevior felt that was technically a huge challenge, and the rewards were not clear: it required a significant change in consumer behaviour, too.