Engaging and monetising the new consumer: A balanced revenue strategy

Findings from the European Media Leaders Summit 2006

The ambitions and aspirations of one shadowy figure lay at the heart of the debate throughout the European Media Leaders Summit 2006. The individual in question was not one of the event's roll-call of panellists shaping the digital future. Instead, the person everyone was talking about was the evolving media consumer -- a complex and elusive character who demands seamless, affordable access to content anytime, anywhere, and via any choice of platform.

During the two days of the summit, much of the discussion focused firstly on how to engage and capture this new connected consumer, and secondly on how to monetise the resulting relationship. However, some delegates asked whether the real mass-market opportunity lay elsewhere: among the more traditional 'lean-back' consumers who do not especially want the latest technology, and who simply need access to compulsive content in as easy and accessible a way as possible.

Speaking at the end of day two, Phil Stokes, U.K. Entertainment and Media Leader, PricewaterhouseCoopers, summed up the prevailing view during the event. "We've seen violent agreement breaking out over what the Entertainment & Media winners of tomorrow need to do," he commented. "By common consent, they need capture and engage the increasingly elusive consumer through a relevant and high-quality personal experience. But while there is agreement on that objective, there is far less certainty on how to monetise that engagement and interaction with the consumer."

Escaping from captivity

And what does this consumer look like? The previous morning, Mr Stokes had opened the conference with a thumbnail sketch of the emerging consumer that resonated throughout. "The challenge [today] is that pinning down the consumer is more critical than ever before ? and it's becoming harder by the day," he told the audience. "Today's media consumer is no longer a captive member of a mass-media audience; instead, each consumer is unique, demanding, and engaged: a unique individual, who demands media that reflects that individuality."

Others echoed this view of sweeping change in consumption patterns and behaviour. "The people watching things like YouTube are the consumers of the future," commented Hans-Holger Albrecht, President and CEO of Modern Times Group, speaking in the session on strategies for growing value. "These are a new type of consumer, and we have to adapt to that. The danger is that we still go to the big industry fairs rather than working out how to engage them."

Speaking in the same session, ITV's Director of Television, Simon Shaps, expanded on the point. "It's incontestable that the 21st century TV network has to reach a more elusive audience," he said. "People who have no particular stake as viewers in what we do. We need to convince people that there is a virtuous circle there: the more content we produce for people like you, the more you will secure our commercial future. So we need to find more programs to appeal to ABC1s and the 16-34s."

Revenue models

But having engaged these consumers, what models should E&M companies use to make money from them? Anthony Fry, U.K. MD of Lehman Brothers, speaking in the session on growth strategies, commented: "The question is not just how to access the audience in a fragmented world, but how to monetise that access. What is the consumer willing to pay for -- and how can you deliver content in a way that people will pay a premium price for?"

The consensus was that a balanced approach is best -- aiming for a blend of revenues from end-user subscriptions and advertising. "It's going to be a mixed economy of free ad-funded and pay," commented Andy Taylor, managing director of Channel 4 New Media in the session on content. Rob Bell, vice president for digital platforms at Universal Pictures International, expanded on the point. "People are not worried about paying if they feel they're getting some value for that," he commented. "There is some content that is very appropriate for free to use ad-funded distribution, and some that isn't. I can't see the time when we would make a Hollywood blockbuster free and ad-supported, because there's real value in that content."

Throughout the summit, several speakers stressed that -- whatever the revenue model -- the key to engaging the consumer was "relevance". As they pointed out, consumers prefer free content, but they are prepared to pay for it -- so long as it is relevant enough to make it worthwhile doing so. Consumers are also willing to accept and respond to advertising, so long as it is both relevant and timely, and to share personal data by registering for access to relevant content.

Traditional values


Given this change on the consumer side, a clear question was whether 'traditional' established commercial broadcasters could survive in the new consumer environment. A number of speakers delivered robust arguments why these players would not only survive, but thrive.

Having run though a list of recent corporate deals and new cross-sector product and service launches in his opening keynote presentation on day one, RTL Chief Executive Officer Gerhard Zeiler asked: "With all these developments, is there a future for traditional media in general -- and TV broadcasting in particular? You can imagine, that, as CEO of a 75-year old broadcasting group, responsible for more than 8,000 employees across Europe, I have thought about this question a lot. Can traditional broadcasters continue their success in the digital world? The answer, in my opinion, is: 'yes ? we can'."

Mr Zeiler went on to stress the need for a balanced range of revenue streams -- advertising, subscription, transactional revenues, content sales -- and added that the shifts in audiences were not as sweeping as some suggested. "The average number of minutes spent watching TV is still growing," he commented. "The only demographic who are really watching less TV is the 14-19 year olds."

Others echoed this view. "It's easy to get carried away with the hype today -- the mythical teenager surfing on PSP, using Google and MySpace and so on," commented Shane O'Neill, Chief Strategy Officer of Liberty Global Europe and President of Chellomedia, in the session on bundling. " But the lean-back passive consumer is the target for us. That's the mass-market. That consumer is focused on simplicity and quality of service and value for money."

Global growth

The audience at the summit was also reminded that traditional revenue models were still achieving headlong growth in some markets -- a point stressed by Prof-Media CEO Rafael Akopov in his presentation on the Russian media market.

"The key word in Russia is growth," commented Mr Akopov. "The advertising market is the fastest-growing in Europe, and other media consumption indicators are storming up as well: cinema box office up 25% to 30% a year, plus 80% to 100% new Pay TV customers a year, and printed media sales and subscriptions up 20% over the past two years. The key drivers are citizens' income growth, and the fact that long-deferred demand for goods and services -- including entertainment -- is now being satisfied."

As these comments suggest, engaging consumers anywhere in the world comes back to relevance -- a point underlined by Matthias Immel, Media Consultant and former Project Director FIFA World Cup with T-Mobile International. "The largest cumulative TV audience [for the FIFA World Cup 2006] was in China, followed by Brazil, Germany, and then Vietnam and Indonesia," he said. "From the European point of view, those last two countries are probably a surprise ? plus the fact that three of the top five countries were in Asia and did not even have a team in the tournament...The World Cup is truly the party for the global village."

The new consumer is with us. But the right content delivered in the right way remains the key to engaging the new-style consumer, just as it was with the traditional one.


Find out more about the European Media Leaders Summit 2006 at www.euromedialeaders.com. Or contact: Alex Maclean, Marketing Manager, Global Entertainment & Media practice, PricewaterhouseCoopers. Phone (44-20) 7804-3421; email: alexandra.r.maclean@uk.pwc.com.
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