"Wagging the long tail": The impact of user-generated content and social networks


With Google's US$1.6 billion acquisition of YouTube, user-generated content and social networking websites leapt from teenagers' PC screens to the financial pages of the global press. The deal underlined the fact that, as well as greater entertainment choice, broadband services have created a generation of millions of aspirant content producers through blogging, social networking and user-generated content (UGC) sites.

Hardly surprisingly, a key theme of debate at the summit was the potential face-off between this mass of 'micro' UGC and the 'macro' professionally-produced content traditionally carried by broadcasters. There was also speculation over the resulting knock-on effects on business models and revenue streams across the industry. But whatever happens in these areas, it is clear that the race is now on to find ways to monetise the 'long tail' of consumer-produced content and networked relationships.

The opportunity for visibility

During the panel session on content-on-demand, Joanna Shields, managing director for strategic partnerships & syndication with Google EMEA, stressed the size and scale of the shift under way. "A year ago YouTube had not launched," she pointed out. "There are a billion people on-line now: probably the biggest market opportunity anybody has ever had to address. Whether you are content owners or broadcasters, it's really an unprecedented opportunity to participate in a rising tide that is lifting all the businesses that we work with."

Angel Gambino, VP for commercial strategy and digital media with MTV Networks UK, gave an illustration from her own experience. "In the last few weeks we are finding that people don't come to MTV Flux in the same way as to YouTube," she said. "There are a lot of wannabe animators and video producers, and we are finding people making connections based on respect for one another's output. We found an animator living in Brighton who made a connection with an unsigned band in London who connected with a music producer in Brazil. Now they're all collaboration on music videos."

In the same session, Chris Dobson, VP International Advertising Sales with Microsoft, said the key now was for the industry to industrialise. "We need to be able to connect consumers to advertisers at scale," he said. "The way we will do this is all about relevance. The more relevant we can get to consumers, the more consumers will see that it is additive to their experience...What an advertiser needs is a platform play that cuts across all the different places where they can advertise. They don't want some siloed mess. The challenge for us is to create the right interplay. The technology is just a facilitator to gain the asset -- and the asset is the audience."

Monetising the tail

So, how do broadcasters view this trend? RTL Chief Executive Officer Gerhard Zeiler saw it as a massive opportunity for new business models. "In the digital world, the technical limits on distribution no longer exist: there is unlimited space on Amazon and i-Tunes and almost unlimited space for digital TV distribution, be it via digital cable and satellite or via IPTV," he commented. "With distribution turning into a commodity, niche offers -- which only appeal to a relative few -- can be a viable business. We have to find ways to wag this long tail ? meaning to find ways to make money out of the niches."

Deborah Bothun, partner and Global Convergence Leader with PricewaterhouseCoopers, confirmed that research showed the hunt for revenues from the long tail was well under way. "The topic of social networks and revenue models evolved in 2006 from a theoretical discussion to an ongoing dialogue around new business models -- and over the last few months into real money," she said. "PricewaterhouseCoopers recently conducted a survey of 8,000 of our employees to further this investigation. For all ages and all countries, 55% of our employees had used social networks at least occasionally. In fact, over 7% of all respondents said that they would be willing to pay to use Social Networks. So there is another potential business model."

Google is at the forefront of the search for new models. "We enable companies to link contextual advertising with search queries," said Google's Joanna Shields. "But then we started to see the enormous potential for UGC, and new ways to monetise content whether it's UGC or generated by the best in the business. Imagine the creative ways that companies will come up with during the next 12 months to address this enormous market that is emerging, and that has something to say and want something that's relevant to it." Jamie Kantrowitz, SVP for marketing & content for MySpace in U.K. & Europe added: "We are seeing a lot of innovation on lifestyle advertising: how do you take 120 million user profiles, some of whom are musicians, filmmakers and comedians, and create an environment where brands can be inserted in a way that doesn't turn them off?"

No dumbing down

While UGC is clearly of variable quality, the consensus at the summit was that it would not drive down the standards of professional broadcast content. "Is TV going to enter a vicious circle of sliding ad revenues and declining quality of content?" asked Phil Stokes, U.K. Entertainment and Media Leader with PricewaterhouseCoopers. "I don't think so -- because I believe people will still pay for quality of personal experience. In the age of mass availability of content, quality, brands and talent will continue to win out, and the service delivery and quality of experience -- including ease of access -- will mark the winners from the losers."

Speaking in the panel session on growth strategies, Simon Shaps, ITV's Director of Television, expanded on the point. "It's easy to say that because UGC is a phenomenon, then the content we produce will be cannibalised to the point of extinction," he said. "But it's simply not true. Look at kids -- they consume a lot of content but at the same time they love the collective experience of event TV...There's no doubt that event shows provide talking points and shared experience -- you might say not unlike the debate about social networks. The irony is that it's the broadcasters who are providing the material for social networks through big TV events."

Other speakers pointed out that the real challenge for broadcasters lay in wider shifts in consumption habits. "UG clips are getting a lot of viewers, but you have to put them next to TV programs that get two or three million viewers on Channel 4," said Andy Taylor, managing director of Channel 4 New Media. "The real challenge for broadcasters is that people still watch about 26 hours' television [a week], but [in the UK] we have moved from five channels to 400. Firstly, if it stays at 26 hours, there will be a switch from linear to on-demand viewing. Secondly, people's view of the internet has changed from a utility to entertainment and social networking. In that case, the question is what happens to that 26 hours? It's not so much watching UGC versus watching Endemol. It's how people spend their time."

What is clear is that the success of YouTube and other UGC sites have redrawn the battle-lines for content -- and even the major studios are watching closely.. "User-generated versus commercial content -- that's the great battle in front of us," said Harry Sloan, Chairman and CEO of Metro-Goldwyn-Mayer, in his keynote address on day two. "Can commercial content stand up against incredibly popular UGC? That's an incredibly interesting battleground to watch. I think we have the creativity to stand up against some amazing things that are being done ... Whatever happened in the past 35 years, more change will happen in the next five. I will make sure MGM doesn't miss those opportunities again."

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.