MediaPost's On Media
By Diane Mermigas
Nov. 15, 2010
At a time when digital interactivity should be inspiring widespread innovation and out-of-box thinking, too many media companies continue to respond with blanket denial and complacency that will shatter their bottom line.
Tacit dismissals about pay TV cord cutting by consumers favoring cheaper, mobile on-demand streaming video have a familiar ring -- like broadcasters' early denials about the threat of cable, or content producers and distributors blowing off the economic impact of time-shifting devices, such as DVRs. Playing catch-up rather than moving proactively leaves millions on the table.
The more than half a million subscribers recently reported to have abandon pay TV subscriptions -- in response to lingering economic pressures or enticement to use less expensive over the top streaming services -- is just the beginning of a trend sure to gain momentum even in an improving economy. Consumers' newly minted frugality and mobile behaviors are not going away. Their expectations and the perceived value proposition of goods and services are being radically reshaped. Embrace those new economics -- or forfeit the opportunity to participate in new revenue creation.
Why, then, do major media executives continue to defend their status quo? The risk is in how long it takes before accelerating disconnections and other digital impact play havoc with retrans and content fees.
"There has been much ado about very little in terms of all the talk about cost-cutting," said Viacom chairman Philippe Dauman during the company's recent third-quarter earnings call. Like so many of his peers, Dauman refers to anything other than television as "incremental," as if digital interactivity isn't forcing a convergence play across all screens and platforms. He refers to tight consumer spending merely as a product of the recession.
Time Warner CEO Jeffrey Bewkes also referred to his company's domain in terms of "television" rather than as universal "video." TV Everywhere, its big digital play, denotes transporting the television viewing experience to mobile interactive devices on which video is viewed and managed differently. The popularity of the content is its ultimate protection.
"It's probably going to not lead to any cord-cutting -- not in the long run ... if you have to reach [viewers] through some other distribution than the one that we currently have, then that's how the content industry will evolve," Bewkes said.
Even Comcast, the dominant cable provider, is pursuing digital from their dug-in vantage point. Poised to become one of the largest global content producer/distributor by buying a majority managing owner of NBC Universal by early next year, Comcast should be more engaged in creating new content formats and features that begin with iPads and other mobile devices rather than simple transferring static TV and film from their set top box. Cable MSOs lack the operating connection to mobile devices enjoyed by their Telco competitors.
"There will be set top boxes for a long time, but the world is beginning to see technologies that can in some cases do away with the set top boxes," Comcast CEO Brian Roberts said during a recent earnings call. "The most exciting products we are working on allow you to have tremendous functionality right on the TV ... some customers will not want all that and will want a different model, so we are working on all."
That schism between the lowly home television and trending mobile connected devices will begin translating into balance sheet gaps sooner than media moguls think. Just imagine the response if these same media moguls demonstrated their seriousness about digital by addressing it from outside the box -- be it television or set-top box. Here is three ways to make it happen:
*Create social, commerce and content features from the mobile connected vantage point and never look back. Netflix CEO Reed Hastings took his company from the mailbox to every device streaming video in less than two years, skipping right over television to add 6 million new subscribers to its 17 million base, more than 66% of whom stream content.
*Align with major social, cloud and mobile players moving from the fringe to the center. This could include leading companies such as Facebook, Netflix and Google to small-to-medium players such as GroupOn and Zynga whose niches can be used to springboard into mobile. The holiday fight between Google and Apple into the TV space is all about using interactive out-of-home functionality to intensify the convergence cycle. Facebook's foray into casual gaming and mobile access and check-ins facilitated by apps has driven partnership with blue-chip advertisers. More than 500 million Facebook users were once devoted TV fans.
*Innovation must begin outside the norm. The only way to generate new perspective and mind-set it to tear down the silo walls, bring together professionals from every discipline of your business; empower your best thinkers to collaborate without restraints. The ultimate goal is to layer interactivity into every level of your media business to heighten engagement and revenues.
One of my favorite visual guides to turning disruptive trends into revenue generators is the roll-up-your-sleeves workbook, "Business Model Generation" by Alexander Osterwalder and Yves Pigneur. It provides visual tools and techniques that give flight to the classic "Blue Ocean Strategy" by Chan Kim and Renee Mauborgne to enable a new competitive mind-set. It's a little like digital revolution unbound.
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