The Three C’s of Digital Content

For the last couple of months Forrester’s global media team has, in collaboration with a number of other Forrester analysts, been working on a series of research looking at the impact of the Media Meltdown and the implications for the future of media businesses. A number of key reports have already been published (see Nick Thomas and David Card’s reports) but there is also plenty ‘in the pipes’. One of these works in progress is a report laying out the product innovation that Forrester believes that music companies need to pursue to survive the Media Meltdown. What is becoming apparent is that many of the fundamental challenges and solutions apply far beyond the music business.

In fact it’s beginning to look like there is the makings of a product innovation blue print for all media companies in the digital age. We’re really excited with where some of these ideas are going and I want to share with you a few of these key concepts here. In return I’d really value your comments and feedback to help us continue to hone our thinking.

One of the core challenges facing any business that tries to sell content to consumers (in digital or physical form) is that content scarcity is gone. In the boom years of the distribution era content scarcity encouraged consumers to think distributors and retailers had a monopoly on the supply of content. In the digital age of ubiquitous availability and pervasive free, scarcity of content simply does not exist.  Consequently consumers' willingness to pay for content fades by the minute. 

So perceptions of value must be rebuilt along new lines using a new form of scarcity as the lynchpin. Though free content may be just a click of a mouse away, it is increasingly inconvenient to find it and deliver it to your devices of choice. In short convenience is becoming a scarce commodity in the digital age.  So we’re proposing that convenience becomes one of the key ways to communicate value in the post-content-scarcity world. In fact we’re suggesting that it forms one of the ‘Three C’s of Digital Content’

3 Cs

 

Content, convenience and cost. These are the three principles of digital content which we think should form the basis of differentiating a clear hierarchy of value to consumers. We think that a careful mapping of content availability and degree of user control of content with pricing tiers will be key. Of course this implies a much more strategic level of coordination between rights holders and digital content services than currently exists. 

 

To succeed this strategy requires a fundamental shift of emphasis from business model innovation to product innovation. It’s all well and good building content licenses that dovetail with the business structure of channel partners, but if the user experience is subjugated then it is doomed to failure, however robust the business model.

 

As I mentioned at the top of this post, these ideas are still a work in progress. We’re currently discussing some of these themes directly with some industry executives, but we’re also really keen to enter into dialogue right here.  So let us know what you think by commenting below.  And of course if you’re a Forrester client we’ll be more than happy to set up an inquiry call with you to discuss things one-on-one.

Comments

re: The Three C’s of Digital Content

Interesting ideas. I can't help but agree that any models formulated to feasibly tackle the challenges which the music industry currently faces may be applied to other media businesses with similar success. Indeed, as our behaviour towards scarcity (and its evolving dynamics) continues to transform in line with new technologies over the years, trying to preserve the status quo in methodology vis-à-vis management and distribution is near impossible if not foolish.However, there is one point about which I'd like to ask for clarification: In what way has finding free content become increasingly inconvenient? Is there data that supports this? If so, how great a scope does it represent globally, not just in the UK and US?I am of the opinion that when one enabler or provider of free content ceases to exist or becomes difficult to come by, another one crops up in its place. In order to keep up-to-date with such product substitution, one needs to be well-connected. And there's an impressively extensive underground pipeline through which such knowledge travels easily worldwide.This is nothing new for the world's youth, the most vital demographic in terms of future consumption. Naturally, they are inclined towards a level of technological adeptness that allows them to continuously seek out loopholes when industry professionals try to stand in their way. They also do not often appreciate the views of yesterday's 'old guard' who -- in their eyes -- 'just don't get it'.

re: The Three C’s of Digital Content

The inconvenience of free is inherent in the fact that there are so many diverse places to get content, each with different limits on device compatibility. For example how do you get an illegal free stream of a TV show onto your PSP or iPod. It's possible, but an inconvenient process. And just finding the content is a hassle too. Last time I checked there were over 500 eDK2 and BitTorrent sites, over 30 major P2P applications and a similar number of networks and variants.The reason Spotify has proven so successful is that it delivers free content so conveniently. Almost too conveniently.

re: The Three C’s of Digital Content

I agree with you as regards the dispersed nature of free content. But that's not a sound enough assertion of inconvenience when convenience comes down to perspective, habituation, and location in the world. Convenience is relative as pertaining to the means of an individual -- available finance, technology, knowledge.What I wanted to highlight was the relationship young internet users have with the web, the way they interact with it as a whole, and the way in which they track down free content with ease. Dealing with content dispersal may be less of a hassle than having to listen to an ad every ten minutes on Spotify. And it may be more convenient for some to use the countless filesharing services on offer than it is to find the money to pay for content.Perhaps the first step towards problem-solving is to understand consumer interaction with free content and the significance of any barriers that such dispersal creates. Secondly, one ought to more closely examine the opportunity cost of convenience. What is the underlying price of convenience, and how may different types of consumers be distinguished so as to market according to their willingness to pay instead of scavenge for content? And on that basis one can move on to the third 'C', deciding what cost may be deemed appropriate and to what extent content ought to be subsidized.Spotify is a positive development in that it provides another (legal) alternative for those who are generally not willing to pay for music. However, there are people who still don't posses the technology that allows for mobility with Spotify. And there are also those who will continue to supplement the many gaps in the Spotify catalogue through filesharing.Ultimately, consumers are creative and resourceful. For them, the need to be these two things is neither an inconvenience nor deterrent. They will often put together the many different models/products/methods in such a way that they are able to optimize the content-to-cost ratio. And they will probably continue to do so as long as the money they have is more scarce than the music they want -- and the industry should never overlook the tremendous importance of that.

re: The Three C’s of Digital Content

Perhaps it's not so much about convenience as it is about relevance on a mico level. If the content is ubiquitous at a minimal cost or no cost, the content search per se becomes the cost. By optimizing search process to get refined results with high level of relevance and usefulness, the content is more likely to be delivered more readily and conveniently. Agree?

re: The Three C’s of Digital Content

>optimizing search process to get refined results >with high level of relevance and usefulness, the >content is more likely to be delivered more readily >and conveniently.Only if the content delivered is device independent. Regardless of how relevant or useful the content is, if an individual cannot render the content on their personal device (i.e., user agent), then user experience is compromised at best, not optimized and certainly not ubiquitous.

re: The Three C’s of Digital Content

Firstly, I agree whole heartedly that youth are likely to tolerate the 'inconvenience' of sourcing content illegally, they already do so right? But they are time rich and cash poor. Introducing a hierarchy of convenience and content quality is a means of delivering and communicating value to those consumers who have less time on their hands but more disposable income. The inconvenience of searching for free content will always outweigh the inconvenience of cost for young consumers. That's why it's key that at the lower end of the equation tiers of free services exist to tap this segment.At the higher end though, convenience and value must come from a combination of assets, including:- programming / discovery - and this can indeed be robust search functionality, but also collaborative filtering, community, editorial etc- seamless delivery of content to all appropriate devices - so, again 'yes', device ubiquity is key. But this device convenience will need to taper the further down the product chain you get.In short, the more you pay, the better your content and device experience. But the lower end of the equation cannot be heavily devalued either, else consumers will simply opt for the illegal alternatives.

re: The Three C’s of Digital Content

Absolutely, value ought to indeed be derived from an enhanced user experience and ease of delivery; and a model which provides more options and simultaneously caters to both sides of the cost/convenience consumer spectrum is key.You've hit the nail precisely on the head with respect to tackling the issue at the higher end of the spectrum. The longterm success of a service such as Spotify, for example, depends in part on the further diversification of its product (whether first-hand or via third party developers) as it continues to expand its userbase.Increased integration within the context of social media is as vital as there being mobile applications which provide possibly the best incentive there is to pay the premium needed to make up for the shortfall in ad revenue. An online Spotify magazine with exclusives, a more flexible payment model such as pay-as-you-go, credits earned for creators of playlists when other users download them from 7digital that can then be put towards future downloads... The possibilities are endless, so long as they are innovative and seriously take into account users' suggestions.Labels should also be jumping at the chance to more visibly link their own sites to tracks and playlists on Spotify, as music blogs are already doing. It's not enough that labels are advertising their content in the Spotify client; they should be advertising Spotify on their own sites as well (if not already).One thing that is positive is that labels are now more publicly acknowledging the fact that it is not so much the music sales that count for profit but rather the products for which music helps to create demand: gigs, merchandise, video games, interactive applications with high entertainment value. A quote I came across a few weeks ago in a blog post on Wired about music distribution is one I think particularly rings true in this debate: 'If you can't sell music, sell something else.'Incidentally, I don't subscribe to Last.fm to listen to the radio or stream full tracks; I subscribe simply for the ability to see who has visited my user profile. This feature is of tremendous social networking value, because every so often it allows you to connect with someone with similar music taste, thus enhancing the 'music discovery' potential of the service. Plus the subscription is inexpensive...Which leads me to address the lower end of the spectrum: There really ought to be more direct dialogue with music consumers -- there needs to be a greater opportunity to engage in discussion with labels directly in order to dispel the notion that industry executives are greedy and stand to gain at the expense of the musicians they seemingly exploit and from whom they rob any level of genuine musical integrity in order to mass market a hit single as one would the season's 'must-have' fashion accessory.I am aware that this is a rather idealistic statement to be making off on a tangent, but it is a point that many avid music listeners (a.k.a. consumers that are most likely to be 'brand loyal' in the longrun) hold dear. And in the minds of some, this gives them enough of a license to illegally fileshare, seeing as 'the musicians weren't likely to get any of the money anyway'.

re: The Three C’s of Digital Content

Hi Mark. I'm left wondering where 'community' is on this list? Surely one of the greatest changes in the way that digital content is and will be consumed comes from its growing socialisation, no?

re: The Three C’s of Digital Content

One key point that we're developing in the current report in progress speaks directly to both of the last two comments: we believe that record labels should move away from releases in the traditional sense, where timings are dictated by the legacy of getting physical product to market, and instead move to developing continual releases as the basis of relationships with fans.In the digital age there is no need for the speed bumps in the artist-fan relationship which legacy release schedules place. And once you reinforce the artist-fan relationship, especially in the context of compelling legitimate services, you create more sense of belonging and community with the artists.

re: The Three C’s of Digital Content

It's a good point about the development of continual releases (and I agree) but if this is really "beginning to look like there is the makings of a product innovation blue print for all media companies in the digital age" as you say above, then personally I think you can't not include community - surely it is so central now to media producers of all types in terms of distribution, propagation, consumption and dareisayit to how they will make money in the future, no?

re: The Three C’s of Digital Content

All of the comments about social are absolutely valid. We've written a lot of research about the importance of creating community in digital content and we've developed an explicit theme about how the right type of social interaction can in itself create scarcity and therefore value.But what is clear from this discussion is that we need to be more explicit about social in this discussion, perhaps even pushing it to the fore and adding 'Community' to the '4 Cs of Digital Content'?!It is however, much more problematic to scale it across tiers in the way the other three C's, so maybe it sits as a lens through which the others are filtered?

re: The Three C’s of Digital Content

The ability to organize and co-create content is the new competitve advantage. Have you ever encountered Google? Have you paid for Google? Ever had any trouble accessing it from any device? Have you found any content you want using Google? Philosophically, to have the most successful company created in our current era not fit into your model is a huge gaping hole. Also, as the world develops globally, most "new" consumers are not in the US or Western Europe. Yet, this seems only tailored for exactly where we are on the consumer products continuim. It does not work for South Korea, which is far ahead of us in consumer product integration in daily life. On the other hand, in most of the rest of the world, a laptop is still a very big deal. Only we are where we are, and that is an ever shrinking peice of the pie for an intelligent product strategist. How about cutting across all three domains, those ahead, those with us, and those behind us, with a single product? A breathtaking opportunity.Most importantly, I cannot make sense of your idea that content is not easily accessible and free. Are there still small pockets like certain TV shows? Sure, but ask yourself, what is the trend? Where is this headed? More or less content? More or less cost? More or less accessibility? Seriously, if you presented this in my boardroom I would find your disregard for the current direction things are going shocking, then I would ask you politely to leave, then I would find some way to charge you for the cup of coffee you drank.And the music industry is not a good paradigm. Most entertainment people deeply understand this, most non entertainment people don"t. Here is the problem anyone well versed in entertaining other knows:music in some form has always been a part of our lives. We really can't even explain it. It persists. It is special. A song is totally different than a movie. Songs are songs. On the other hand, and this is key, the ways we have told stories have changed. Dramatically. Seen anyone linking up for some hand shadows behind a fire on a cave wall recently? When was the last time your average american attended the opera or theater, once the worlds most popular way of telling a story? Books are not nearly as old as music. Story telling is drastically different every cuple of hundred years. But play a drum for a caveman...he dances...play a drum for a kid...he dances. If you think we need to be developing devices for the future o our kids can watch "Two and a Half Men", more conveinently, you are kidding yourself and your customers. The TV show as we know it is dying. Again, look at the trend. The form itself is only about 60-70 years old and in the perspective of history it may only be seen as a fad. To say we should manage that the way we manage music is as nearsighted as it gets. Please, go deeper. Content can be, and will be, created by everyone. The ability to help the consumer in its creation and organize it is the new value add.

re: The Three C’s of Digital Content

The ability to search is a fundamental part of the Convenience aspect of this hierarchy. But this is a conceptual construct within which tiers of specific services can be built. So it's not meant to be scoping out the exact technology each and every service should use. Therefore it does not preclude (nor for that matter advocate) incorporating Google functionality into the DNA of the services. Highly powerful and relevant search will be a backbone of successfully Convenient services. Google may, or may not, enable that.With regards to regions I see nothing in the post which precludes it from any region. In fact the very lack of specifics that led to the comment about Google, is the reason why there isn't either technological or regional specifics in here. So the 'Three C's' principles can apply globally, localized in regionally relevant and appropriate ways. In fact, because of this, I think it is important not to advocate a single global music product, because any new music product that will be relevant to the digital age will need to leverage functionality that will be technology specific and therefore, less able to localize.Picking South Korea is very interesting, as this market has done more than most in the world to innovate with digital services, due to having witnessed the decimation of its recorded music revenues, brought about by a combination of weak government support and the very consumer product innovation you mention.To the point about scarcity. I think you might have misunderstood my argument. I actually state"One of the core challenges facing any business that tries to sell content to consumers (in digital or physical form) is that content scarcity is gone."So hopefully that would actually be in line with your boardroom's perspectives and I wouldn't have to pay for my cup of coffee! (Though I'd prefer a cup of tea if one's going).So I enthusiastically agree about your views on the death of content scarcity. Which is the foundation for the 'Three C's' argument: new perceptions of value need to be built.And I wouldn't give up on music yet, nor write it off as an anomaly. I've been involved with the music industry directly and indirectly for about 12 years now, first as a recording artist, then helping run small labels, and now as a music business analyst. I've seen it go through tough times, but now I can see it turning the corner. There's a long way to go, but the big labels are learning their lessons. More so, they are learning how to respond to the Media Meltdown in ways that do apply too other media industries. Just in the same way that they have learned from some of the mistakes that the news industry made.In fact Forrester is building a series of research that is explicitly designed to help identify the cross industry lessons that can be learned. That shows the applicable best practices that aren't immediately obvious. The points about the intrinsic value of content that transcends media products is absolutely key: this is why I am optimistic that there is a future for media business. A whole new set of businesses and products need to be cast, but the content itself remains valuable to the consumer.

re: The Three C’s of Digital Content

But where does collaboration fit in to your model?The ability of people to co-create their experience is a driving force and the direction things are going. More money is spent on video games than on movies. That is not a projection, or only true for a certain demographic, it is a cold hard fact. Games passed movies last year. Do you see where this is headed?Again, it seems you totally diregard collaboration and other trends with regards to entertainment. Music has permanence and will live on. I think you misunderstood what I said earlier. Songs and music live on as they always have. Under the light of history, movies and TV shows, and even to some extent books, are very recent phenomena. Might history only see them as a fad? You could say the same about games, but ask yourself, what is the trend? Graph out spending/viewing trends with regards to TV and movies vs games in the US and you see it clearly....two ships passing in the night. Did more people use twitter and facebook last night or watch NBC? Social media is entertainment.So why are you talking about TV shows? Because large corporate media companies like to hire consultants? If you thought what happened to the car companies (last generations dinosaur) was ugly, just wait 3 years and watch the continued erosion of ad dollars and their effect on media companies (this generations dinosaur). Meida companies are dinosaurs and the comet has entered the atmosphere.Seriously, what do you think ad revenue will look like in 5 years for major tv networks? Terrible. The real question is why...... because no one is watching now, and it is already free. It is a dying 70 year fad. It just feels like 100 years ago you would still be working on a new style of buggy for the day when everyone had a horse, unaware that as you toiled in your shop Model T's were whirring past.In short, folks will no longer pay for YOUR content. They will pay to help create THEIRS. That is your problem. Passive uptake is dead for the consumer. Collaboration is the future. Think about it. Why is content ubiquitous? Because everyone is creating it. That is the driving motivation, the magnetic pull of our society today.Last time I'll say this..... what is the trend? Camcorders sell very well, games outsell movies. Youtube, Twitter, facebook, any newtwork in the world would love their veiwership. It is not so much that people can't find their favorite show, its that they don't want to. Their favorite show does not exist. For music it does and always will, and guess what, Apple figured that out. Now you buy an iPod, go to iTunes, and you are good. People will always need music. This is where your model is lost in the woods. Music and shows are too different. People are not going to pay 1.99 to download shows. They are not going to download them for free. They do not care. They want to create their own experience. They want Twitter, facebook, and Youtube at once while they program their iPod shuffle and wait to play Rock Band. Two and a Half Men, or a movie, does not fit into that equation. Music does because music adds to your current experience! That is again why your music industry paradigm does not work. Music is different than a show. You have a great night, you are on your way home, your favorite song comes on....what do you do, blast it, feel even better and enhance your experience. It helps you design your experience in a way that Ugly Betty does not. You can quickly choose a song based on how you feel and how you want to feel in the moment you are in. That is why music will live and the 30 minute show will die. It cannot help you design your experience.To design anything product wise with TV/movies in mind is at its best irresponsible with regards to the future, and the trends we see today. And that is why I would charge you for your tea on your way out. You have little respect for the life of collaboration or the death of passive uptake distributed by dinosaurs.There is one C that the future (and your customers of tomorrow will reward) and that is Collaboration.

re: The Three C’s of Digital Content

This is a great discussion, and I think that our opinions are actually much closer than your realize. If you'd like to finish off this conversation 'offline' please let me know. It would be good to get some perspective on where you are coming from and your business concerns etc.In the meantime, just a couple of clarifications:I didn't actually talk about monetizing TV shows anywhere in my post. If the TV show business models are of interest to you I recommend you read some of the research and blog posts by my colleague James McQuivey http://www.forrester.com/rb/analyst/james_mcquiveyI think you'll like a lot of his thinking.Also, with regards to the potentially dire outlook of the ad market and its ability to support TV programming you should read some of the posts and research of my colleague David Cardhttp://www.forrester.com/rb/analyst/david_cardFinally, with regards to UCG. I agree that it has a big role to play, especially in music, as Mash Ups show. But I equally believe that professional content will remain the core content most people seek out. So engaging the audience to create with the content of the artist (e.g. remixes, mashups, videos) is absolutely something of great potential, and is something we'll be covering in the upcoming report.