Cord cutting, on-demand streaming, eSports live broadcasting, the comeback of podcasts….. Digital transformation has disrupted the entertainment industry, and consumers are driving the change. And while more than ever before, people are willing to pay for digital content, their expectations are high. Just having good content is no longer enough: It has to be personalized, accessible anywhere and anytime – while being fully integrated into other digital experiences.
Digital is oftentimes perceived as a transformational wave consisting of both opportunities and threats and forming the ecosystem in which we conduct our daily activities, work and play. In the digital world, technology is changing at high speed while consumers are the ones making and breaking the rules of the game. In this context, every business becomes digital and thus requires a digital focus in all business processes and functions.
As traditional business models are gradually substituted by both emerging startups as well as digitally transformed existing players, media companies need to develop new digital-based business strategies to be able to compete and retain their audiences. Those lagging behind now may never have a chance to catch up.
Footstep of digitization in the media and entertainment industry
Every industry has been impacted in a positive manner by the use of digitization and the entertainment and media industry has been no exception to this. In the previous year, the M&E industry was taken by storm by the digital revolution and from the results we saw, 2018 is not going to be different. As predicted by experts, it is this digitization that will help in breaking new barriers and creating bigger grounds to play.
This impact has been further fuelled by the rise of the mobile technology along with the coming-of-age of internet too. This is akin to a revolution that this industry has never seen before has given this generation a great spectacle to witness. In earlier times, it was newspaper that bought in news the next day morning from around the world. Today, the job of reporting and analyzing is being done by social media platforms like Twitter and Facebook.
Since the advent of mobile technology, television, radio and newspaper have taken a backseat just like the internet has transformed the M&E industry. The “second screen” phenomenon has made sweeping changes to the way users watch television. The second screen is the laptop, mobile or tablet that is used in between programs or commercials by television viewers. The presence on this second screen is extremely critical and every industry is vying for space here.
Content that is available at the click of a button, yet is available from anywhere and can be shared is the need of the hour. Digitization will make sweeping changes in the way content, be it newspaper or television, is looked at and consumed. Large Media houses dealing with news on print have started looking at various avenues of reaching the audience and digitization is help them to do so.
High demand of new digital channels
Despite traditional broadcast models which still represent the largest share of the industry; digital channels are clearly on the rise. With video becoming a digital-first product, we’re about to witness a decline in old business and delivery models. Players from outside the traditional broadcast industry are using video to drive other revenue streams. Meanwhile, online video content is slowly changing consumers’ expectations regarding price and value, since they can oftentimes access it for free, without the need for a paid subscription.
In this context, digital transformation becomes necessary for traditional media companies who find it ever more difficult to achieve a return on video services and content. One example of digital transformation done the right way is BT Sports, a sports broadcasting venture launched by British Telecommunications. BT’s new offering is a multi-platform, premium content, and broadband-based TV channel available on a wide range of devices— from set top boxes to smartphones— free for BT broadband subscribers.
Factors influencing the media landscape
From buying a newspaper to opening a news app on your tablet, from renting a DVD to streaming your favorite television series on a smart TV, from buying a cookbook to getting customized recipe suggestions on your smartphone, it’s undeniable that the digital transformation of the media industry has already begun. Now we are going to analyze the most important consumer, ecosystem and technological trends that are driving digital innovation in the media industry.
As the global middle class grows (from 1.8 billion people in 2009 to an estimated 4.9 billion in 2030), demand for new media services focusing on convenience, education, premium content and video-on-demand will grow, particularly in emerging economies. Meanwhile, the emergence of millennial (the generation born between 1981 and 1997) is creating demand for technology services that offer convenience, memorable experiences and instant access to content. At the same time, the world’s population is ageing, leading to increased demand for health and wellness, entertainment and education services designed for older people. Finally, urbanization will contribute to increased demand for media offerings designed with people’s commutes and busy work lives in mind.
2. New consumer behaviors and expectations
These demographic shifts are having a dramatic impact on what consumers expect from media, how they consume it, and on their familiarity and savviness in navigating the digital world.
- Changing consumer expectations and behaviors. Younger generations are keen to consume content from around the globe. Their expectations are built around instant gratification, especially the ability to access content immediately. Moreover, as the boundaries between industries blur, customers judge their experience of a service not just against competitors in its own sector, but against the best services from other industries.
- Editorial content, advertising and propaganda. Consumers are increasingly savvy at spotting marketing or PR spin disguised as editorial content. As growing numbers of Internet users turn to ad-blocking software, marketers are changing tactics and looking to engage consumers through storytelling or providing useful information (brand utility).
- Content duration and delightful experiences. Consumers appreciate having someone to curate content for them, similar to what an editor would do with a (paper) magazine. Clean mobile reading experiences and native advertising platforms are reaching new and savvy audiences, enhancing the user experience and allowing publishers to charge a premium to advertisers.
- Security, privacy and trust: Consumers are becoming increasingly aware that their daily lives are being turned into data that can be analyzed and monetized by third parties. Opaque and complicated privacy policies and customization algorithms may prompt consumers to switch to services that offer them more transparency and better data privacy.
3. Ecosystem challenges
As the media industry adapts to the changing habits of its customer base, we have seen a number of significant changes to the landscape of the media sector.
- Startup disruptions. Talent, access to technology and a ‘change the world’ attitude are allowing startups to bloom across the world, creating new businesses and lean models. Once this breed of company reaches scale, it invests both in raising the quality of its content and in offering new services, putting competitive pressure on traditional media companies.
- Everybody is a content creator. A diverse set of brands and organizations now assume the role of broadcasters competing for consumer attention (for instance, Unilever and Intel through their partnership with Vice Media).
- Access to financial resources. Creative people are finding noble ways to fund new products and services. Content creators are bypassing traditional media companies and turning instead to innovative sources of financing such as crowd funding platforms.
- The transformation of work. Digital transformation is likely to have a significant impact on employment, creating demand for some highly skilled digital roles, while making some job categories redundant. As the workforce adapts to the digital economy, there is likely to be a need for lifelong learning to keep pace with the evolution of technology.
- Regulatory uncertainty. Legal frameworks surrounding intellectual property are not ready for a new generation of media consumers who expect instant access to content from anywhere on the globe. As a consequence, many consumers are choosing to bypass conventional means to access content (for example, using Virtual Private Network (VPN) services to access US Netflix in the United Kingdom).
4. Technology trends
The increase in mobile and Internet penetration has made being connected a way of life for younger generations of consumers. This presents media businesses with opportunities to fuel the continuous conversations that this connectivity allows. Alongside this increase in connectivity, technology now allows access to content anywhere, anytime. Meanwhile, the growing availability of open-source and free software enables startups to build new businesses and innovative products in record time. And finally, through the widespread availability of cheap sensors, connected devices and cloud computing, we are witnessing the birth of the Internet of Things, a network of connected machines delivering smart services, which will offer the media industry a whole range of opportunities to create seamless, personalized services.
Against the background of these broader technological advances, there are a number of technological trends that we believe will be central to the digital transformation of the media industry.
- Data analytics and real-time content management. Data collection and analytics enable companies to get consumer insights across many channels and devices, allowing them to deliver relevant and meaningful experiences. This real-time use of data analytics is particularly important as media organizations no longer just provide content but experiential services built around that content.
- Mobile and social. The power of mobile and social is transforming how media is consumed and perceived.³ Continuous and instant access, particularly through sharing on social media, empowers users to promote or destroy brands and institutions. Overnight stardom or instant reputational crises are new phenomena that need to be managed from business and technology perspectives.
- The industrialization of the media industry. New digital processes are changing how media is created, distributed and monetized. Traditionally, the media industry focused on creating content and optimizing distribution, but today many companies are automating this, digitizing catalogs and inventories, launching new rights management systems and writing algorithms to create content.
Digitization will redefine the media and entertainment industry in 2018
It’s a revolution unlike any. This generation has been fortunate to witness a sweeping change in the way media and entertainment is consumed. “Digitization has already made a huge impact on the M&E Sector. The emergence of mobile, and convergence of Internet have redefined the sector,” says Sayed Peerzade, group CIO, Reliance Entertainment Group.
A few years ago, newspapers were the sole informers of the happenings around the world. But that job has now been borrowed by Twitter, Facebook and other social media sites. So much so that sometimes it’s the discussion on these sites around a news piece that people read before actually getting to know the news. “I think the speed to publication is clearly important. Daily newspapers can’t keep up with breaking news in digital media. The balance between immediacy and content is something that publishers need to find. Posts on Facebook tend to be the headlines, people don’t wait for newspapers anymore to get their daily dose of news,” says Colin Bodell, EVP and CIO, Time Inc.
That’s something that was unimaginable at a time when radio, TV and newspapers ruled the roost. The Internet age has transformed the media and entertainment sector drastically. It has given rise to what is coming to be known as the second screen phenomenon. Simply put, if you use a laptop, smartphone or tablet while watching TV or during commercial breaks, then you are a second screen user. “You’ve got to have a presence on the second screen. You can’t let go of that audience. You have to understand that mobile has redefined reach. We used to say it’s hard to reach rural folk but even my cook and maid are using words like ‘online’. The new generation is getting exposed to a lot of these things. You have to be where they are,” says Ritu Madbhavi, SVP-IT, FCB Ulka.
About 65 percent of people are surfing the Web while watching TV, according to the Realtime Report, a website that tracks social, mobile and Web trends. According to Deloitte, more than 90 percent of millennials (those aged 14 to 30) are typically engaged in four different activities when in front of the television. This is a challenge and an opportunity for advertisers. The challenge is that they have to attract the attention of a distracted viewer. According to Realtime Report, TV ad awareness decreases 58 percent with second screen use. And that’s the opportunity. Advertisers have a chance to convert second screen users to potential customers. The Realtime Report suggests that people who see advertising in synchronization have a 60 percent higher click through rate on digital ads.
And the audience is getting younger. They want content that’s on-demand, shareable and accessible from anywhere. That’s why; despite touching 2.5 million copies per day, Malayala Manorama knows that it can’t stick to print forever. “The younger generation will move to digital. Not many people will read newspapers. Today, most people depend on WhatsApp and Facebook for news. So we have to look for new business models around them. People want instant news, wherever they are. As business houses, we have to gear up for these changes in 2016,” says V.V. Jacob, DGM-systems, Malayala Manorama. That means companies like Malayala Manorama now need to cater to an audience that feeds off social media and mobile. In order to do that they need to employ the services of analytics and cloud computing.
Media, entertainment industry to hit $40 billion by 2020: PwC
India currently rules the roost as the largest cinema market in the world, and is expected to remain so till 2020, says PwC report. The Indian media and entertainment sector grew 12% to reach $25.13 billion (Rs.1.68 trillion) in 2015, according to PricewaterhouseCoopers (PwC)’s Global Entertainment and Media Outlook 2016-20. The industry is expected to exceed $40 billion by 2020, growing at an average annual rate of 10.3% between 2016 and 2020, said the report.
“Given India’s overall growth in GDP (gross domestic product) and PCI (per capita income), it is not surprising that India is amongst the top 10 markets for growth in the sector. Although, in India, traditional media like newspaper publishing and cinema has always shown strong growth, we expect that even in terms of absolute total spend, it should get into the top 10 in the early part of the next decade,” said Frank D’Souza, partner and leader, entertainment and media, PwC India. “What would be more interesting, however, is how rapidly India would catch up with global trends, where traditional media is finding it hard to remain relevant, and the digital sector is leading the growth trajectory and consequently bringing in continuous disruptions. That will all depend on how quickly the Indian digital/broadband ecosystem matures, and how the Indian players adapt and drive business models in what would be a rapidly changing environment for consumption of data/content fashioned largely by India’s under-35 population,” he added.
As far as the Indian print industry is concerned, it managed to buck the global trend. Globally, magazine, book and newspaper publishing combined registered a near flat or negative growth. However, Indian publishing remained one of the fastest growing publishing sectors in the world, on the back of factors such as demographics, increasing literacy rates, educational needs and a strong desire to consume news and content in local languages, combined with nascent digital/broadband penetration. These factors were expected to fuel growth and keep it relevant over the 2016-20 period. In 2015, the overall publishing revenues were at $6.13 billion, an increase of $302 million over 2014.
Content will continue to be king and drive growth in this sector. While it is easy to assume that content is becoming more globally homogeneous, with the launch and adoption of services such as Netflix, experts maintain that the reality is that content is being redefined by consumers who also want local content. Moreover, globally, the ability of consumers to design and curate their own media diet has been one of the most powerful trends to emerge in the industry. But the bundle is far from dead, with video and cable incumbents—initially slow off the mark—now fighting back by offering their content on an integrated omni-channel basis, on TV, laptops, tablets, and smartphones, said D’Souza.