Confab zeroes in on digital effects

Report, NBC Uni exec agree: Adjust biz or be caught downstream

The continuing digital revamping of the media and entertainment business was in the spotlight Tuedsay at a PricewaterhouseCoopers event here.

In a closely watched keynote session, NBC Universal chief digital officer George Kliavkoff highlighted his interest in more partnerships, especially with technology companies, as well as adding gaming and e-commerce offerings. He also cited international growth opportunities and emphasized that the online video joint venture between his firm and News Corp., whose transitional management team he oversees, is not trying to compete with Google Inc.'s YouTube.

Tuesday's event also formally launched PwC's "Global Entertainment and Media Outlook: 2007-2011," which projects that revenue streams that aren't subject to digital competition — including media firms' digital businesses, boxoffice, TV subscriptions and video games, among others — will grow well ahead of revenue streams challenged by digital competition, including home video, physical recorded music and book sales as well as newspaper and magazine sales.

From 2007-11, compound annual gains in revenue with digital competition will come in at 2.7% worldwide and 1.6% in the more mature U.S. market, according to the global consultancy.

Over the same five-year period, revenue not subject to digital competition will increase 8.3% globally and 7.3% in the U.S., the report estimates. This means that those revenue streams will account for 61% of worldwide media and entertainment growth over the time frame, PwC predicts.

During the past five years, revenue vulnerable to digital competition averaged growth of only 2.4% globally, it says. In 2006, for the first time ever, digital/mobile spending streams contributed more to global industry spending gains than competing businesses — $16.4 billion vs. $11.4 billion — according to the report.

In a keynote interview led by PwC partner Michael Kelley, Kliavkoff said Tuesday that YouTube has "cornered the market on amateur user-generated content," while the NBC Uni-News Corp. joint venture is "about professionally produced premium content."

Although NBC has seen more than 300 million video streams of its TV content on its site, including 120 million full-episode streams, "we just need more scale," he said in explaining the rationale behind the venture, adding that it also is an admission that often these days "the brand is not the network, the brand is the show."

The executive also said that marketers increasingly want "three-screen solutions," meaning that a vast majority of advertising deals these days include TV, online and cell phone elements.

Partnerships will be key to succeed in the digital world, the NBC Uni executive said, with tech firms particularly important. "They need content and relationships with marketers, we need the technology," he said.

With e-commerce the third-most-popular form of online usage behind e-mail and content, "we should figure out ways to play in e-commerce," Kliavkoff said, adding that a broader gaming play also would be important given that gaming soon could make up 10%-20% of online usage.

Kliavkoff also was asked whether General Electric looks interested in selling NBC Uni. "I think they like this business," he said. "It's a great growth business and opportunity." Some analysts have suggested that a sale could allow GE to focus on its more industrial businesses.

Meanwhile, a panel of industry analysts and bankers Tuesday discussed the digital strides media giants have made so far.

Lawrence Haverty, portfolio manager at Gamco Investors, said that News Corp., thanks to the acquisition of MySpace, has "found a way to win," while Time Warner Inc. has done well by growing AOL's value from what he said was about $20 billion last year to his current estimate of more than $30 billion.

The Walt Disney Co. has made good content deals but hasn't made a big play a la MySpace, while Viacom Inc. has a lot of potential but hasn't fulfilled it yet, he said.
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