Newscorp + Microsoft Scratch Each Other's Backs, And Consumers Won't Care

 

[Posted by Sarah Rotman Epps and Shar VanBoskirk]

Microsoft and Newscorp are rumored to be in talks about an exclusive relationship, where Microsoft would pay Newscorp to remove its content from Google and allow it to be indexed only through Microsoft's Bing.

We don't know any more than you do about the veracity of this rumor.  But we do find its potential interesting.  Here's our take:

Newscorp’s short-term desperation will sabotage its long-term interests.  Everyone is watching newspaper companies lose more ad revenues as subscriptions fall even lower in 2009 than the declining trajectory they have been on since 2000.  Getting consumers to pay for content is a hard sell; media companies may have an easier time generating revenue by licensing their content to other companies, like portals, device makers, and non-media companies like Fidelity who need content for their Web sites. Murdoch wants a deal like this to get MS to pay him for the opportunity to index his companies' content. But the tradeoff for short-term revenue could be long-term irrelevance: If consumers don’t find Newscorp results in Google searches, they’ll just click on another content source. “If a tree falls in the woods…” could be rephrased as “If a site isn’t indexed by Google, does it really exist?” For the majority of consumers who use Google to search the Web, the answer is no.

Microsoft wins publisher goodwill, but probably not much search traffic. Bing has enjoyed growth in its share of searches since its launch in summer 2009, but it still accounts for only about 10% of searches compared to Google's 65%.  So Microsoft needs to do everything it can to try to gain search traffic. We see this as another way to try to drive searchers to use Bing instead of other possible search engines. But stealing one content source from Google won’t be enough to change consumers’ search habits.

Consumers don't care about a deal like this.  Consumers do not expect search engines to be exclusive.  In their minds, search engines are gateways to answers, and if they can’t find something through search, it may as well not exist.  So, while Newscorp and MS might enjoy scratching each others’ backs in a deal like this, consumers won't know and won't care that Bing is the only place they can find Wall Street Journal articles and other Newscorp content.

Most content doesn't have enough value for exclusivity to matter.  A number of reporters have asked us if this is the beginning of something big in terms of media/search engine deal.  Our take is no way. Because frankly content is plentiful and cheap and consumers are very good at finding what they need without having to pay for it or be inconvenienced to get it.  So while Newscorp may have some content that still qualifies as "exclusive," we don't see many other media firms having any leverage to create similar deals with search engines.

It’s Berlin, Circa 1989, and the Media Industries Are East Germany

by James McQuivey, Ph.D.
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Allow me to add my voice to the chorus of those applauding the fall of the Berlin wall twenty years ago this month. It was this event that taught me firsthand why revolution is simultaneously impossible as well as inevitable. In 1986 I sat with other students from around the globe just blocks from the wall and debated whether it would ever come down. The naïve among us insisted freedom was imperative: It was inevitable. The others asked if we had stopped to think about the massive relocation of people, economic resources, and government structures that such a revolution would require: It was impossible.

Until it happened, just three years later.

 

The author, pictured left, photographed in front of the Brandenburg
Gate from what was then the East German side

Such is the content industry’s less political but equally momentous dilemma. Walls are crumbling on every side: First the CD and now the DVD. Traditional structures that held entire industries together like little Warsaw Pacts are under threat. Media companies that deal in any flavor of print, audio, or video are under siege from the economic effects of content digitization, forever altering how content is created, packaged, and distributed.

At Forrester we call this the Media Meltdown and though we’ve been documenting its slow dissolve for some time, it’s high time we declare that 1989 is upon us – it’s time to actively tear the wall down rather than watch value continue to trickle out around the edges. We must rebuild the media industries anew: goodbye analog inefficiency, hello digital economics.We recently published a report called How To Rebuild The Media Industries, in which we issue this call. We’re no Reagan, but we issue the call with the same clarity: Stop building value on your supposed content and distribution monopolies because digital economics have forever reduced barriers to competitive entry. Publishers and producers, someone else can make that content for less money. Networks and distributors, someone else can package and bundle the content more efficiently. And movie theaters, retailers, cable networks – anyone who delivers content – there are new alternatives to you popping up every day. How? Because the analog assets and processes you built your empires on will soon hang around your necks like dead weights wile new digital competitors enter unencumbered. Some will dispense with analog assets in one fell swoop as Conde Nast did with Gourmet, others will whittle assets down to the bone like Disney did to Miramax, while some will cut as much internal fat as possible while keeping up external appearances as Newsweek has done.

And that’s just the internal wrangling over budgets. When you serve external customers, you’ll change what, how, and when you distribute content. Sony Pictures will stream Cloudy With a Chance of Meatballs to owners of Sony Bravia connected TVs before it’s available on DVD. This is just one example of how to seize the economic advantage that comes from serving consumers at a new, digital, level of convenience. You’ll have to embrace the devic consumers embrace – connected TVs, smartphones, and eReaders – offering content as a service that spans multiple platforms, and charging for the convenience of easy access to what you provide.

In the last two months I have been on the road presenting our view to dozens of clients and to others in larger, less private settings. Some chirp that this is all obvious and inevitable, why do we even bother to write about it? Others squawk that we can’t possibly be serious – have we never stopped to consider how impossible such a massive relocation of labor, assets, and economic value is? To the former, I applaud your naiveté and welcome your bold moves in the market. To the latter, I encourage you to learn your history lesson. Those who rebuild now will still be here to discuss the finer points of the digital transition ten years from now. Those who do not, will not.

_____

Note: a version of this post was also published on Paidcontent.org, though without the attractive retro photo

Oprah abandons broadcast TV for a life in cable: Oprah, we need to talk...

by James McQuivey, Ph.D.
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Just this Monday Sarah Palin told Oprah she was "the queen of talk shows." Which might mean there's no better time to abdicate the throne than when you're clearly on top (and when the #2 talk show, Dr. Phil is produced by you). 

But Oprah didn't just announce that when she wraps her 25th season in 2011 she will wrap the show for good. No, she announced that she would also begin the next chapter in her mega-successful life: she's going to move to cable. Her cable network, titled OWN, for Oprah Winfrey Network, was actually announced some time ago, so while that's not news, the fact that Ms. Winfrey is moving away from daytime television's most-watched show to build a fledgling cable network is an eyebrow-raiser. 

Because cable TV is no safe haven away from the woes of broadcasters.

Audiences are fragmenting, cable TV is having a harder and harder time maintaining viewers in the face of the DVR and Hulu one-two punch. In fact, OWN was supposed to be up and running this winter but was postponed because of the challenging advertiser climate. It's a climate that's not going to get dramatically better even if our economy continues to improve. That's because advertisers have many alternatives for their advertising dollars, including the Internet, where more and more spending is shifting every day, reaching nearly $26 billion this year (see our July 2009 Interactive Marketing Forecast report for more detail).

Does that mean we're waving Air Oprah off the cable runway? No, we think cable is a great place for the Oprah empire. Beyond 500-channel programming lineups that are under threat, cable does have some serious advantages going into the next decade including high-speed broadband connections and control of the home network. Then take one look at O magazine and you'll see a smorgasbord topics that can easily feed a cable network and satisfy Oprah's devoted followers using those technologies better than they're used today.

That's why we offer Oprah our free advice, as if we had her here on the couch in our very own studio. Here's what we would say:

• Insist on Internet delivery of your content. Existing cable networks -- including Discovery Communications, your 50-50 partner in OWN -- are stuck in contracts they negotiated under analog assumptions. They involve separate licenses and all kinds of exclusive restrictions for linear feeds, VOD content, and online content -- which is why there's precious little of the latter coming out from cable nets. Tell your new cable MSO partners that you understand their need to make money from subscribers and from advertising -- offer to help by leading them to the future, insisting on a single license to your shows that they can use online, over mobile, and in VOD. But require that they invest in reaching your audience with those platforms with the threat that you will if they don't. Which leads to...
• Charge for access to your experience. If you can help it, don't roll yourself up in tier 1 of the cable lineup -- while it is tempting to make a grab for a large audience, you want people to pay for you like they do for Disney. You're not just charging for content, however, you're charging for access: your customers will pay for convenient access to OWN on multiple platforms so they can get their fix in the living room, kitchen, bedroom, or even when applying the mascara you recommended in the bathroom. On whatever device they happen to be near. Even if you do go tier 1, you can always make multiplatform access a premium experience -- tie it to the magazine subscription if you must, but do it. Help us prove that people will pay for what they value: easy access, on any device, to content they believe in.

You get the picture: cable can be good, as long as it's a different cable than the one we all currently experience. So while these points are a bit technical and Oprah probably has people that take care of these things, that's what we would tell her if we could have a face-to-face. (Yes, we might also blather on about our favorite Oprah moments, including the Flashmob with the Black Eyed Peas and 20,000 fans in downtown Chicago, but if we could stay focused on business, that's what we'd say.)

The mobile revolution is just getting started

[Posted by Thomas Husson]

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I just presented the latest findings of a new research published "Mobile Technographics in Europe" to Forrester clients at our London Consumer Forum.

This report looks at the state of the European mobile market and at how consumers are using mobile services. We have created different profiles looking at how consumers are using their mobile phones in the different countries.

Over the past two years, the introduction of the iPhone has changed the way consumers and brands perceive mobile phones. It acted as a marketing catalyst, raising awareness of smarter devices and conveying the idea that there are as many mobile services as there are consumers. Consumers will continue to shift their attitudes toward mobile phones — perceiving them not only as communication tools but also increasingly as entertaining and productive devices that can help them in their daily lives. More than 40% of European consumers are beginning to demonstrate sophisticated usage of mobile services.

We expect this to grow over time led by the two most sophisticated group of users (SuperConnecteds and Entertainers). They will change the general perception of mobile phones:

I had a number of conversations with financial institutions, retailers, travel companies and global CPG or luxury brands either planning to add a mobile dimension to their strategy or already doing so. Most of them recognized that mobile could be potentially as disruptive as the PC a decade ago. Japan or South Korea are not exceptions. The question is not if but when and how to phase out their mobile investment.

I have also met executives that are still skeptical saying the market is not mature enough and acknowledging they are still struggling with their online strategy. We believe they are wrong because the path of innovation is accelerating like never before and because they are growing even if limited opportunities to tap into today. The key is to identify the relevant audiences.

Companies that hadn't anticipated the disruption of the PC internet such as media companies are now doubling their efforts to catch up in the digital space, not only on the PC but also on mobile.  

Let's face reality, mobile is not going to change drastically their P&L even in 2010. However, it is time to make the most of new consumer behaviors and to anticipate changes.

One first step is to look at the mobile profile of your own customers to at least know the potential you can tap into today...and to plan ahead for tomorrow.

Clients can access the research here. If you want to discuss this more in depth, feel free to contact me at thusson AT forrester DOT com.

New Forrester Report: Consumers Weigh In On Paying For Content

[Posted by Sarah Rotman Epps]

In the past year, we've seen a palpable shift from newspaper and magazine publishers with regard to paid content--they still don't know how to make paid content work, but they know they want to try. A recent report from the American Press Institute underscores this trend: The API reports that 60% of newspaper executives say they're considering paid content options, even though currently 90% don't charge for any content online.

Consumers, though, have different ideas. In a new Forrester report, we find that most consumers (80%) say they wouldn't bother to access newspaper and magazine content online if it were no longer free (no surprise), and the rest are split about how they'd like to pay for content:

It's especially notable that, while publishers talk about micropayments so much you could design a drinking game around the word, only 3% of consumers say they'd prefer this method of payment for newspaper and magazine content.

This data suggests two things:

1. Publishers should continue to offer free, ad-supported products to the 80% of consumers who won't pay for content online; and
2. Publishers should offer consumers a choice of multichannel subscriptions, single-channel subscriptions, and micropayments for premium product access.

But one size won't fit all — consumers want choice. The need for a multichannel product and pricing strategy is further reinforced by the "what if" scenario of print being discontinued. When we asked consumers, "If the publications you read were no longer available in print, how would you prefer to access that content?" we found that no single channel dominated responses. Thirty-seven percent of US consumers say they'd prefer to access content on a Web site, and smaller percentages say they'd prefer access via portable devices like mobile phones (14%), laptops and netbooks (11%), or eReaders like the Amazon Kindle (3%). Notably, 10% say they'd prefer the anachronistic solution of PDF by email.

Again, this points to the need for publishers to provide consumers with choice: There's no one delivery platform, and no one pricing model, that will satisfy all consumers. Consumer willingness to pay is so modest — and, in general, we find it tends to over-report in surveys — that publishers need to be extremely flexible to accommodate the needs of these precious customers.

Check out the new Convenience Quotient web page!

[Posted by Doug Williams]

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I'm pleased to announce the launch of a new web page on Forrester.com that is devoted to a key theme for the Consumer Product Strategy role:  the Convenience Quotient (CQ). Regular readers of this blog and of Forrester's CPS research will be familiar with CQ.  Now there is a single web resource for everything related to CQ: the methodology, why it's important, how it can be useful, what the standard deliverables are for a CQ project, and some of the possible add-ons to a CQ project.  It's also the most convenient (!) place to access all of our CQ reports, which provide a transparent look at the development of CQ scorecards for various services, products, channels and markets.

For the uninitiated, I invite you to click on the link above and explore the CQ consulting offering and our published reports.

Intrigued by what you've read?  Contact your AM or consulting@forrester.com and set up an Inquiry to talk it through.

The Forrester EMEA Marketing Forum is Just Around the Corner

[Posted by Mark Mulligan]

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Forrester’s Marketing Forum EMEA is fast approaching — November 17-18, 2009, in London. I'll be presenting at this event on the topic of 'How Media Will Never be the Same Again'.  The presentation will kick of the Consumer Product Strategy afternoon session focused on series of research we're building that deals with the interplay of media, technology and brands.  We call it the Media Meltdown.  My colleagues Nick Thomas will also be presenting on how the Media Meltdown makes media companies of us all and finally another colleague Ian Fogg will be presenting on how technology companies both shaped and are react to the Media Meltdown.  Before Nick and Ian I'm thrilled to announce that Nokia's Tim Grinsditch will be giving an industry key note to the session which will focus on Nokia's music strategy.  It is a great agenda and I look forward to seeing some of you there

Elsewhere in the event, other leading Forrester analysts will present on leapfrogging competitors out of the recession, enriching online engagement with customers, and which product and service innovations to be ready for. This event provides a platform where marketing and Customer Experience professionals can share innovative best practices, network with peers, benefit from keynotes and track sessions, and pose direct questions to top Forrester analysts during One-On-One Meetings.

 

We have great speakers this year, with keynotes from:

 

Guest Keynote Speakers

·        Bernhard Glock, Former Vice President Global Media Purchases & President World Advertising Federation, P&G

·        Diederick van Thiel, Chief Consumer Marketing Officer, ING Group

·        Conny Kalcher, Vice President Consumer Experiences, LEGO

·        Malcolm Duckett, VP Marketing, Magiq

·        Mike Cripps, Customer Experience Manager, Service Operations, Capital One Financial Services Inc.

·        Kamel Ouadi, Global Digital Media Director, Louis Vuitton

·        Alexandra Wheeler, Director Of Digital Strategy, Starbucks

 

Forrester Keynote Speakers

·        Moira Dorsey, Vice President, Research Director

·        Mary Beth Kemp, Vice President, Principal Analyst

Here are some great ways to maximize your experience:

·        Check this blog for our in-depth updates on keynotes and track sessions.

·        Follow us on Twitter as we plan and launch the Event.

·        Tag your photos and tweets with #FMFE09 to contribute to the conversation.

·        RSVP on our Facebook Event page, and network with attendees.

Take the conversation offline:

On Tuesday November 17, 2009, Forrester hosts a London Tweetup. Tweetups are low-key social events where Twitterers can network and meet the people they tweet with. Anyone can attend; it is an informal atmosphere that allows casual conversations.

 

This tweetup is for anyone who's attending the Forum or lives in the London area. There is no charge for attending the Tweetup, so come meet and mingle with @forrester, @jgownder, @bsimm, @Mark_Mulligan, Alexander Hesse, Peter O'Neill, and others.

Taking Digital Music To The Mainstream: The Music Product Features For The Living Room

[Posted by Mark Mulligan]

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What is interesting in the current scramble for the killer online music business model is that there is an implicit assumption that the only place people would want to go from the CD is online or mobile.  The iPod heralded a new paradigm in music consumption, but it has done little to counter the impact of the CD's terminal decline and may even have helped accelerate it.

 

As things currently stand, the mass market music consumer isn’t being catered to with any form of new product and the fight for these consumers’ living room is being lost.  It wasn't too long ago that the home hi-fi system was the flagship piece of living-room technology but over the past decade, living-room tech spending has shifted firmly to the TV while the aging home hi-fi system is either gathering dust or has been replaced by a docking station. (The latter of which is an awkward attempt to make a personal device a household device, and besides, the majority of households don’t even have one).

 

The time has come for new music products and experiences that cater for the mass market and that - for the non-tech savvy majority - bring the home music experience into the 21^st century.  In our latest report ‘Taking Digital Music To The Mainstream: The Music Product Features For The Living Room’ Forrester puts forward a vision of what we think is needed. 

 

We propose that the new mass market music experience must be explicitly part of a new hardware experience that is contemporary but highly competitively priced.  Our conceptual technology is a hard drive, midi-sized music hi-fi that with a detachable touch screen display / remote control. We argue that the new hardware must:

 

• Deliver a compelling experience even if not connected: it’s just too risky to assume that mainstream consumers will have the inclination or know-how to connect a music product to a home network, even if they have one.
• Include extensive music at point of purchase: this is, we think, the crucial element.  Mainstream consumers don’t have the appetite for another format replacement cycle, so we suggest the device should effectively replace their entire CD collection and add more, all for the cost of the device.  (And yes, we know this is light years away from where current licensing values are). And in case you didn’t notice – we just invented a new music consumption paradigm here, and a new role for retail.
• Provide the tools for baby steps into the digital world: for those consumers that do connect we propose a convenient range of digital discovery and acquisition applications to encourage consumers towards the digital arena.
• Leverage telcos: we want these devices to be affordable, but to really go mass market they probably need subsidizing by a telco e.g. a Sky Songs broadband package would include the device bundled with the router.

 

Of course there are many other ways this challenge can be met, but met it must be. Unless the music industry enters the battle for the living room, it will soon lose it — and with it the mainstream music consumer.

If you are a Forrester client and would like to discuss the report in more detail then please schedule a call with our client inquiry team.

If you are press and would like more information on the report please email Press AT Forrester DOT COM

New US Internet Access Forecast Released

[Posted by Doug Williams]

Greetings and salutations!

(Quick pop trivia quiz: What 1988 movie is that line from, and which current TV actor said it?  Answer below.)

Our new US Internet Access Forecast is complete, and I've just published a short report highlighting some of the key findings.  In particular:

• Nearly 16 million new broadband subscribers will emerge over the next five years, but more than half of those will come in the next two years. Broadband service providers have 2 years before they face a severe drought in terms of revenue growth, and thus need to prepare now for the next stage of growth.
• Fiber to the home (FTTH) subscriptions will rise from 4% today to 10% of US online households. Verizon's bet on future-proofing its network by taking fiber all the way into the consumer's home will continue to pay off, but Verizon will continue to cannibalize its own DSL subscribers along the way.
• Consumers will migrate into faster broadband speed tiers.  Some of this movement will come by choice as consumers engaged in high-bandwidth activities look for a better online experience.  But some providers will force consumers into faster speed tiers simply because they have no interest in offering slower service.
• Dial-up goes gentle into that good night.  Dramatic declines will continue over the next two years, after which the dial-up candle will continue to flicker and fade -- unless the access providers snuff it out themselves.

JupiterView clients will find more specifics in the report with regard to these subjects and some of the underlying data as well.  As always, ForecastView clients have even greater access to the nuts-and-bolts of the forecast model, as well as further details by access platform and household demographics.

(Pop trivia answer:  The movie was "Heathers," a classic yet very black comedy about high school life in suburban Ohio.  The actor? Christian Slater.)

Video Strategy: Evaluating the Online Video Platfoms

[Posted by Bobby Tulsiani]

In our first two reports in the Video Strategy series, we have detailed how online video has moved beyond the exclusive domain of media and entertainment companies. From travel to financial web sites, video is now ubiquitous across the internet. 

Our latest report, The Forrester Wave: US Online Video Platforms, goes beyond market sizing and best practices to call for online video to be managed as a product. Like any web product, be it site-search or recommendations, a company has the choice to build an internal solution or to utilize a third party solution.  In the Forrester Wave, we evaluate six vendors that offer product solutions for online video: Brightcove, Fliqz, Kaltura, Ooyala, Twistage, and VMIX. 

While the number of companies in the space is certainly larger than six, we decided to focus on a set of vendors that serve a variety of clients, regardless of size or industry.  For that reason, some vendors that primarily focus on high end media companies, such as Digitalsmiths, The Platform, or Move Networks were not included.

The space proved to be highly competitive.  Almost each of the six vendors had some strength that others could not fully match - while some led in monetization, others were stronger in distribution or user generated videos. Product managers evaluating the video platforms should carefully think about their goals and utilize our Wave tool to adapt the criteria weightings to select the right vendor for their needs.

The space is rapidly evolving with several of the vendors announcing new funding or partnerships just in the past few months. I expect online video to be even more of a focus for Forrester and myself as we move into 2010.  I look forward to hearing your thoughts, comments, and feedback on the Wave.