OUTLOOK 2010: Convergence

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Winning strategies in the new digital frontier -- and how to grab larger victories in the future -- took center stage during a PricewaterhouseCoopers panel session on June 21 in New York. The discussion, focusing on convergence, featured a panel of top-level executives who shared their learnings and expectations -- particularly in the area of how business models need to evolve.

Deborah Bothun, U.S. Advisory Leader within PricewaterhouseCoopers' Entertainment & Media Practice, opined that the "real winners" in the media business are the entities that figure out "how to work with measurement, advertisers, agencies, content and distribution, and figure out the model -- raising the water for everyone in the content and distribution ecosystem."

Yet clearly, for content providers there's not just one winning solution. Bruce Campbell, executive vice president of business development at NBC Universal, noted, "There will be some brands that work well in this new digital environment -- the niche brands, the MTVs, the ESPNs or Sci Fi [Channel] in our case." However, general entertainment channels "may have to evolve a bit. I think there will always be room for branded content on digital platforms, but we may have to think about those brands a little differently."

One of the clear stumbling blocks for many companies contemplating how they must change to meet new opportunities and challenges, is figuring out how to monetize and promote content. The panelists noted conflicts that show how fractious that process can be.

Chris Sacca, head of special initiatives at Google and the session's moderator, Dennis Kneale, managing editor of Forbes magazine, brought up the discussion that some distribution providers like Verizon and AT&T are lobbying the U.S. Congress with new legislative provisions that would give them the right to choose what content is available on their high-speed Internet platforms -- allowing them to essentially erect a toll booth for select portals and Web sites.

Verizon doesn't agree with these assertions and supports Internet neutrality principles. The company says 'cable TV choice' legislation pending in Congress contains enforceable neutrality provisions.

Campbell discussed an incident in which NBC Universal asked the social networking site YouTube to take down a Saturday Night Live skit parodying the film The Chronicles of Narnia, on the grounds of copyright infringement -- even though the clip was generating millions of views and was great grassroots marketing for the show. "I don't think we should be defensive about protecting our intellectual property," said Campbell, adding that NBC and other companies should have the right to determine when they want their content to be used as promotional tools. He noted that the incredible response validated his maxim that great content will be viewed immediately, across all platforms.


Bothun noted that PricewaterhouseCoopers' consumer surveys have shown that there is a huge increase in social-network-site usage. "The other thing they're telling us is that they're doing two and three and four things at the same time. So they are watching professionally created content on television while they're interacting with user-created content on their MySpace page, for example," she said.

"User-generated content is awesome, but it has to be complemented with professionally generated content," added Sacca. "The challenge is, on the one hand, companies like NBC have to make their content easy to discover and share, and on the other, sites like Yahoo and Google and Microsoft have to be really good pointers to content."

Big and unusually creative advertising ideas are clearly the order of the day at Ogilvy North America. Co-CEO, Carla Hendra, referred to a two-minute American Express commercial featuring the movie director Wes Anderson (The Life Aquatic with Steve Zissou) talking about how to make a movie, which ran during the 2006 Oscars telecast. She expects her agency to use more film directors, writers and musicians in its commercial messaging, "because having a captive group of creative people inside the agency isn't enough anymore."

Hendra noted that what's particularly exciting in the advertising realm today is "behavioral targeting," where companies can track what consumers do on the Internet and offer them targeted content and advertising. "We have to make the leap," she said. "It's all there; it's available and usable."

Hendra also noted that "most of our clients have more data than they'll ever be able to use. They may use 5% to be more relevant, more engaging to their more important customers." Advertisers still make a great deal of money from the general market, "so it's very hard to make the shift" to a more targeted marketing approach, she added.

Bothun agreed that advertisers have yet to maximize the insights that research provides. Consumers who take part in PricewaterhouseCoopers surveys are saying, "'Advertise to me what I care about, and then I'll engage,'" she added. "In order to monetize changing consumer behavior, content companies and advertisers will have to develop more robust ROI models, leveraging consumer demographics and activities."

"We need partners like Ogilvy to educate our partners -- the big spenders -- on how they can [advertise and market] across platforms. Ogilvy understands the data better than the partners do," Sacca remarked.

In speaking of the multi-platform opportunity, Sacca added that the fiber-to-the-home distribution platform provided by telephone companies "is interesting, but it's just one network ... I think the companies that will do well are the ones that can be the glue across all different user experiences."

Verizon is moving aggressively to deploy its new fiber-optic network. In addition to full Internet access at speeds of up to 50 Mbps, the company is offering video subscribers an expanded basic package of 200 channels, with access to 2,300 video-on-demand titles, noted Marilyn O'Connell, senior vice president of video solutions at Verizon, adding that the company's VOD offerings are the second largest in the multichannel business. The company is also offering the "largest array" of high definition channels, "22 to 24," all as part of the expanded-basic tier, she said.

In four months of marketing Verizon's video service in some Texas communities, the company achieved a 10% penetration rate, and in one market they achieved 20% penetration in three months, O'Connell said. And competing against Cablevision Systems in the greater New York area, they achieved more than six% within a couple of months. She said Verizon supports 'video choice' legislation in Congress to streamline the video franchise process and speed up competition in the cable TV market.

While it's clear some strategies are working very well, it's also evident that the ever-elastic media and entertainment space is fraught with many questions about how to harness new digital opportunities for maximum growth potential. "We look at the new digital landscape as a great opportunity for us. We just have to figure out the right models," said NBC Universal's Campbell. "We're not threatened. We realize this is a time of change."

For more information on the Outlook, including how to place an order, please visit www.pwc.com/thr.


The PricewaterhouseCoopers Global Entertainment and Media Outlook: 2006-2010 is the leading global entertainment and media industry forecast, including in-depth global analyses and five-year growth projections for 14 industry segments covering every major global region. The complete 632-page book, which includes a "Global Overview" can be purchased for US$995. The 50-page "Global Overview" can be purchased separately for US$95; individual chapters can also be purchased separately in electronic format for US$95.

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