In the CPS team we are exploring new ways of delivering our ideas, as part of a strategy to open up our research processes. So if you'd like to hear me talk about how media companies should be building new revenue streams, please click on the video link below. And watch this space for updates on how to subscribe to future podcasts via iTunes. And as ever, I welcome any thoughts and feedback on both what we are saying and how we are saying it.
If you’ve been following the coverage from the CPS team over the past 12 months you’ll be familiar with the concept of the Media Meltdown - where traditional business models based on scarcity and control of content are fundamentally undermined by the digitization of content. The challenge facing media companies is a grave one: how can they respond to this threat and compete in this challenging new environment?
With this post we are launching a major new project, the conclusion of which will be a new report identifying new paradigms for the content industries, based on adopting best practices from other industries and from historical precedents. But this time, given our focus at Forrester on the importance of social media and the Groundswell, we invite you to contribute to the research process. In this and a series of future postings, including a series of video podcasts, I want to share our thinking on these issues at it emerges from the process of iteration and evaluation – the kind of process which normally happens within the Forrester team. We have a big idea, but in order to develop it into a fully-realised and actionable piece of research, we would like your input.
We start with an observation that has stuck with me ever since I studied film history at university, a reality reinforced when I later worked in the movie industry. Films don’t make profit for cinema owners. Not directly, anyway. As content owners consider ways to force ungrateful consumers to pay for the content they consume, it’s worth revisiting a truism about the cinema, one of the 20th century’s most enduring media businesses. Movies get people into the cinemas, and generate ticket sales. But if you want to make a profit, sell them popcorn.
(please note you can listen to an audio blog post on this theme by clicking the link below)
So here we go. A paywall it is. After much speculation, we learn that News Corporation’s two flagship titles in the UK, The Times and The Sunday Times, are to start charging users to access online content from June. No freebies, no tiered access models, just a paywall. And the price, at £1 per day, is the same as the cover price of the print edition.
The Times.co.uk (note, not Times Online, its current moniker) is primarily intended, it seems, to add value to the core product, the print newspaper. Of course the risk Murdoch’s team is taking is in sacrificing scale for an untested revenue model. What kind of conversion rate would make this viable? There are few precedents, though in the gaming world, a paid conversion rate of 2% would be considered successful. And even the Financial Times, the self-styled pin-up boys of the paywall, have found that only around 121k of the 1.9m who have registered for the site, are paying subscribers. That’s just 6.4% of registered FT.com users paying for content which helps them do their job, and which they often expense anyway. What chance for a generalist title competing with free rivals?
Even assuming a 5% conversion rate, that would mean 60k from a daily online readership of around 1.2m (according to the ABCe figures). Factor in that around two-thirds of the readership are outside the UK, and advertisers locally will be left with a readership of around 20k. Advertisers may say they value engagement over scale, but will they actually come on board? Even if current revenues are disappointing, they are going to be hit hard by such a diminution of scale. And the costs of delivering a high quality website will still need to be met.
The media meltdown has been a major theme for the Consumer Product Strategy team at Forrester. We have of course covered its impact on traditional media companies (see my last blog post about the BBC’s latest strategy review, which elicited a response from a senior BBC exec). But just as importantly, the media meltdown — where digitization leads to the collapse of traditional business models based on controlling the distribution of inherently scarce content — is creating challenges and opportunities for non-media companies, too.
As I wrote in a report last year, We Are All Media Companies Now. Every company, every brand, every organization now creates and controls content on its own Web site, for example , to address its own audience directly. But not all get it right. Engaging an audience with content requires skill sets which many non-media companies do not yet possess. The reality is that we are all content strategists now, too.
For non-media companies using content directly to engage consumers, the barriers to entry have never been lower, but with so many Web sites competing for eyeballs, the competition has never been fiercer. While "paid" media remains vital to marketers and strategists, "owned" media — content created to engage directly with their consumers — is an increasingly important tool and part of a wider content strategy.
This morning, the BBC’s Director General Mark Thompson launched a new strategy document outlining the future direction of the BBC. Beneath the headlines about the cuts to its digital radio and online activities, what does the BBC’s positioning tell us about not just the corporation’s own priorities, but about the digital content landscape for broadcasters? And why is this important for the wider media industry?
When the BBC sneezes, much of the rest of the world’s media catches a cold.
This is not just a UK story. In every country I have visited as an analyst, clients want to talk to me about what the BBC is doing. In the UK, the BBC is the market leader in TV and radio, while online, it is the only UK-sourced web site in the top 10 destination for UK internet users. Internationally the BBC retains an impressive international footprint.
Under pressure, it has cut back on new platforms to prop up established services.
Facing ever-increasing demands for its services, the BBC has been under financial pressure, ratcheted up by commercial rivals and politicians from both main parties. But given a) the BBC’s legacy of creating new platforms for digital content, b) the long-term shift towards multi-platform and on-demand digital content, and c) the growth in time spent online, its decision to re-focus £600m on high end TV content seems a retrograde step.
Successful digital services still cost a fraction of core TV channels
Today’s news that the latest hurdle has been cleared in the development of Project Canvas – approval (albeit provisional) from the BBC Trust – is good news for most interested parties, if not rivals such as BSkyB and Virgin Media who have been vigorously opposing it.
The minutiae of the behind-the-scenes politicking are not of interest beyond a small group of analysts and policy geeks, but the future of Project Canvas itself is a huge story for the media sector in the UK and beyond.
Information on teens' behavior, as we saw from the coverage of Morgan Stanley’s efforts to map the zeitgeist earlier this year via the musings of a 15-year-old intern, is in great demand.It’s not only useful to baffled parents, it’s also crucial for content providers, advertisers and marketers seeking to engage with teen audiences.
Based on a European wide survey of nearly 1,400 internet users aged 12-17 across seven major territories (UK, France, Germany, Italy, Spain, The Netherlands and Sweden), we captured a number of key consumer trends that help us identify the challenges and opportunities ahead, including the following:
TV is still the main media channel for teens. Reports of TV’s death have been greatly exaggerated. European teens still spend more time watching TV (10.3 hours per week on average) than they do using the internet for personal purposes (9.1 hours). But gaming – 11.7 hours per week if you combine time spent playing games on a PC and on a console – now consumes even more time than TV for European teens.
Social interaction online is an integral part of media consumption. European teens have embraced social media heartily – not only Facebook, which 44% visit at least weekly, but blogs, which 30% read at least weekly. And teens are twice as likely to comment on someone else’s blog as users aged 18+. For teens, the separation between ‘content’ and ‘social media’ is an increasingly irrelevant one – the latter is integrated into the former as part of a wider content experience online.
If you’re familiar with our research this year you’ll know about the Media Meltdown. It’s when traditional media business models build around controlling the distribution of inherently scarce content are undermined by the digitization of content. Exacerbated by the recession, it’s wreaking havoc across the media space (in case you hadn’t noticed). Media companies have been very vocal in sharing their pain, while consumers have been feasting on a growing supply of free content online.
But while consumers’ reluctance to pay for online content is widely recognized, it is neither universal nor inevitable. Amid the rubble of the media meltdown, it is possible to detect a glimmer of hope for those trying to make money from the boom in online media consumption. In a recent Forrester survey, while the number of European internet users who have paid for some kind of online content is 27%, a figure that grows significantly when we include those who say they might pay in the future. When we asked people what they might pay for, the greatest prospects would appear to be music, movies and e-books, although none of these markets is anywhere near maturity.
The link up between Xbox LIVE and BSkyB, announced earlier this year, goes live next week in the UK, and the jointly-funded ad campaigns are under way. From the live demo I’ve just seen, I’d say this raises the bar for internet-delivered video.
Users with an Xbox LIVE Gold account and a Sky subscription will soon be able to watch Sky’s live channels (such as Premier League football on Sky Sports 1 and 2, or Sky Movies) on their TV via their Xbox. This allows them to watch at the same time as similarly connected friends, with who they can communicate via on-screen avatars (in a virtual front room) or via their headsets.
It’s a fun, social way to consume content, and in an age of increasingly fragmented audiences reinvents the notion of TV consumption as an event. Even better, it supports and reinforces Sky’s fundamental principle that its high-end content is worth paying for, however you receive it.
One small gripe – there’s no obvious way yet of connecting via live text feed on-screen – inputting text onto a TV screen is still a hurdle for interactive products - although Xbox does separately support Facebook and Twitter. Some kind of future link-up allowing users to send messages direct to their virtual on-screen friends from their laptop would be fantastic.
It’s sometimes difficult to recall, with recent press coverage focusing on boardroom strife and funding shortages, how pioneering the UK’s Channel 4 has been since launching in 1982. So today’s news that it is the first broadcaster globally to offer full-length TV programmes via YouTube is welcome confirmation that innovation remains part of its corporate DNA.
Under the terms of the three-year deal Channel 4 will make recent shows - and 3,000 hours of archive content – available free of chargeto UK consumers, and will share the ad revenues with YouTube. Though the details of the revenue split have yet to be revealed, it might be assumed that YouTube are more pragmatic now than they were even a year ago, when their hard-nosed dealmaking was rebuffed by other broadcasters.
By offering its content on YouTube as well as on its own website, Channel 4 has extended the notion of blended distribution. Indeed, the nature of the non-exclusive deal, combined with the fact that Channel 4 does no own the rights to its hit shows, means that in future UK internet users will be able to access the same legal long-form TV shows via a number of sites, including MSN, Blinkbox, and Arqiva’s SeeSaw, not to mention the two shadows looming over this space - Hulu (whose link-up with ITV has been widely rumoured) and Project Canvas, backed by BBC, ITV, BT and Lovefilm.