Lights, Camera, Digitize!
Over the past few years, the production-to-consumption supply chain in the media & entertainment industry — broadcast or cable networks, movie studios, music labels, radio stations etc. — has changed drastically. Content is still king, but the Internet is rapidly becoming the channel of choice for millions to access high quality content via a proliferation of high-tech personal devices. This in turn has transformed consumption patterns and behaviors as a new generation seeks more control over when, where and how they access content of their choice, as well as over how much they have to pay for it.
In order to succeed in this vastly different landscape, M&E companies will have to renew traditional business models and propositions to fit changing consumer expectations. Concurrently, they will also have to build new services and capabilities that resonate with a radically different customer’s expectations of a distinctive experience.
The major focus areas for renewal are customer experience management, subscription offers, service costs, supply chain and advertising methodologies.
We understand, Mr. Customer
Not only have mobile connected devices made TV viewing a multi-screen multitasking activity but they have also extended entertainment beyond the boundaries of home and conventional primetime slots. These behavioral changes are accompanied by altered expectations that companies are responding to with a TV Everywhere model, which empowers new consumption patterns. For instance, Comcast’s TV Go smartphone app registered 11 million downloads in less than a year and the service is now being used by 30% of regular subscribers. As companies address the consumption shift from ‘linear’ to ‘streaming’ and from ‘own’ to ‘subscribe’, they will also have to address diverse pricing preferences, from a la carte to all-you-can-eat.
We want it, when we want it — Changing subscription demands
Analysis of subscriptions reveals a paradigm shift in customer demands. There is a revolution in the way consumers choose and pay for TV services, from a la carte to pick-and-mix, that will not only change distribution models but even subscription offers. Relaxation viewing is increasingly being driven by Video-On-Demand (VOD); scheduled TV is shifting to appointment viewing; while linear TV is best suited for the ‘here and now’ appeal of live sports and entertainment. Given this situation, content mobility, availability and affordability will be critical success factors to ensure customer engagement and brand relevance. Traditional models will therefore have to be renewed to support unified, cross-platform solutions, which support diverse monetization models and deliver new content experiences directly to the customer. With these changes in subscription offers, service costs are also moving towards a need-based model.
Optimizing service costs
Netflix is a great example of the transformation in the service costs model in this industry. Though the on-demand streaming video model that Netflix offers is still quite limited in terms of depth of selection, a combination of quality content, extended device/platform compatibility and competitive pricing has made it a premier destination for customers looking for entertainment value. Amazon Prime has further upped the ante with its cost efficient services and very soon the key consideration for consumers will be the ease with which they can switch providers. Soon there might not be a high-end pay-TV service market any more as service bundles fragment into focused clusters at a wider range of price points. Dish Network’s Sling TV, for example, offers a limited range of channels at a very competitive price and is targeted at the cash constrained millennials and cord-nevers rather than the general cable audience. As service providers continue to launch more efficiently targeted-by-cost-and-content packages, pay-TV operators will have to compete for audiences at every level. The industry will also have to compete hard for advertising revenue.
Ads for you, and you only
As providers fight for every dollar of advertising revenue, the evolution of the dynamics of distribution, pricing and consumption will intensify their focus on addressable and accountable advertising. Service providers will have to find innovative ways to match specific audience preferences to individual advertisers based on up-to-the-minute data. This has to be supported by the appropriate allocation of ad inventory to serve the right ads to the right consumers on the best-suited screen and at the most appropriate moment. A focus on programmatic ad buying and delivery will help them to revive revenues from traditional streams, while the creation of an enterprise-wide ‘data lake’ would enable them to leverage analytics to make the process of managing, marketing and measuring advertising more efficient.
Reviewing the media supply chain
All the initiatives discussed above need the support of a strong supply chain. As linear consumption from household television sets yields to on-demand relaxation viewing over mobile devices, the traditional media supply chain will also have to be renewed in order to address the changing preferences and behaviors engendered by this shift. The sector will have to redefine conventional metrics of engagement, and this will result in the packaging of content in efficient bundles. As linear TV evolves into a series of more flexible consumption possibilities, the conventionally linear media supply chain will also have to morph into something more flexible, adaptable and appropriate to the new M&E model. Communications today, enables us to live the digital lifestyle and it’s no longer just an end service. The new communications service providers (CSPs) and multichannel video programming distributors (MVPDs) have to be proactive and adapt to new digital services.
Besides the renewal opportunities described above, a number of opportunities to adopt new technologies, systems and practices await the industry.
M&E providers can look for new opportunities in changing customer needs, viewing habits and technologies, exemplified by the some of the following trends
The rise of cord cutters & cord nevers
As they have done elsewhere, the youth have changed the rules of consumption in the media and entertainment space as well. Most millennials, the cord nevers, prefer SVOD (subscription video on demand) and OTT (over the top) content and a la carte pricing to long-term committed subscriptions. Recently launched offering from HBO GO allows users to view their favorite shows without the cable TV or satellite subscription. Then there are the cord cutters, a segment that has increased by 44% over the past 4 years in the U.S. Both these segments will be critical to the success of the pay-TV industry and will have to be targeted with completely different strategies of content, packaging and pricing. The industry’s ‘TV Everywhere’ thrust is a testimony to the importance of these two segments with most major players launching services designed to bring them back into the audience. Apart from the earlier mentioned Sling TV, NBC O&O also has smartphone apps for live TV Everywhere that includes local programming, primetime and late night network shows and network news.
Binge watching, the new addiction
The rising popularity of streaming entertainment services like Netflix has triggered a trend called binge watching, a cultural phenomenon that over half of all American adults now seem to have embraced. In fact, the political drama ‘House of Cards’, one of the most binge-watched shows in the U.S, has helped establish Netflix as a transformative power in the media and entertainment industry. If releasing an entire season of a show helps whet the ever-growing appetite for more entertainment, it also builds engagement with consumers, acquires new fans and delivers bigger audiences for subsequent seasons. More importantly, it results in new marketing and distribution strategies, like holiday marathons.
Changing primary screens
The change in consumption patterns as described above is accompanied by a change in consumption interface. The primacy of the television screen in the media and entertainment universe has now been usurped by the smartphone. Primacy itself may no longer be a definitive concept as consumers define screen dominance based on their immediate entertainment needs. The emphasis will therefore have to be on tailoring a content experience that seamlessly adapts to consumer needs irrespective of viewing interface. It is true though that alternative screens have taken the lead as sources of mainstream engagement in an era where companies like Netflix and Amazon have delivered some truly disruptive possibilities. The focus therefore will have to be on developing capabilities, partnerships and models that enable businesses to deliver a new portfolio of services directly to customers.
Beyond TV, creating new experiences
As service providers increase direct interaction with customers, they have another opportunity to intensify engagement by creating a more interactive and immersive approach to storytelling across different channels and screens. The first 4D theater in the U.S., combining a 3D experience with haptic and tactile stimuli, was launched last year. A team of scientists from New Zealand and South Korea are already at work on a project to bring a similar 4D experience to home entertainment. In an increasingly interactive world, the entertainment experience should also be more interactive, maybe even going to the lengths of extending the locus of narrative control itself to the viewers. As virtual reality technologies become more practical and cost competitive, it should soon be possible for consumers to ‘attend’ a live concert on the other side of the world or even immerse themselves in their favorite movies or sitcoms.
IoT at your service, literally!
Similarly, the IoT will also reduce the distance between the consumer and content. This means that once the world transforms into a vast network of connected consumers, devices and sensors, the industry will have to constantly explore opportunities to develop new services that enhance the consumer experience as well as expand the possibilities for brands. The focus should be on leveraging IoT to identify new contexts to create new content consumption and marketing experiences. Most importantly, companies will be able to generate insights into consumer behavior that are derived from more than just an individual’s content consumption patterns to tailor personalized, contextualized content .
Cloud hopping with Media Function Virtualization (MFV)
Besides 4D and IoT, the technology innovation that will exert great influence over the M&E space is Media Function Virtualization. Just as Network Function Virtualization eliminated the need for traditional hardware by virtualizing functions onto the cloud, Media Function Virtualization will help transform the overall content lifecycle in the media & entertainment business. The storage function on mobile devices is already virtualized to a large extent in that created content is uploaded to a cloud. Soon the entire lifecycle — editing, production, distribution, programming, consumption and feedback — will be run on the cloud to create a virtual TV experience. This would enable the delivery of in-sync content and services to any user context and device while also allowing for the rapid and continuous development of applications and services.
Success in the media & entertainment business will be determined by the ability to map the DNA of new consumers, connect with them directly and deliver an experience that is personalized to their individual context, expectations and preferences. In order to achieve this, companies need to energize their traditional strengths by renewing their capabilities and offerings while simultaneously venturing into new opportunities and creating new propositions. But even in a dual ‘renew and new’ strategy some things remain constant: an acute focus on changing expectations and behaviors of customers and an emphasis on delivering what is best for them, when, where, and the way they want it, at a price point that represents mutual value.
VirooPax Mirji : Originally published this in 2015 at : https://www.infosys.com/industries/media-entertainment/white-papers/Documents/lights-camera-digitize.pdf
