Next is what

Updated: Dec 30 2008, 09:07am hrs
New developments in content delivery are having a profound effect on peoples lifestyles. Content was originally made for a single platform, like the television serials. But today, content is increasingly independent of the platformthis phenomenon is called de-coupling of content from the platform. This also implies that revenue streams are independent, larger, and differently determinable. De-coupling, along with technological advancements has thrown up vast opportunities, yet there are certain challenges to be overcome.

Digital technologies

The proliferation of new digital options would mean that the amount of time consumers spend with traditional distribution channels will gradually reduce. This is most evident in broadcast television, radio and newspapers. Digital technology has had a seismic impact on the over $1 trillion global media and entertainment (M&E) industry, and now impacts all its segments. Todays youth and children are showing different media consumption patters they have grown up with personal computers (PCs), have at least one mobile device, have the uncanny ability to multitask for example, watching TV while surfing the internetand easily adopt to new technologies like blogs, podcasts and online gaming. And todays youth are going to be tomorrows content buyers.

Also, digital video recorders (DVRs), which allow viewers to skip commercials, will challenge the traditional television revenue model, as advertisers worry that their message will not penetrate audiences.

As audiences shift to new media, advertisers will definitely follow. Advertisers, in fact prefer lower cost of communication, the immediate impact and the increased measurability of new media. The metrics available on internet users, for example, far exceeds that for many forms of traditional media, and, properly analysed, can be used by advertisers to better target their customers, improving return on investment (ROI).

Paradigm shift in models

For advertisers, a single channel will no longer be able to reach a mass audience. The explosion of digital advertising inventory will offer multiple ways to reach young audiences. Next generation ad models will enable advertisers to target audiences and start interacting with them, instead of cluttering them with a host of irrelevant ads.

As the impact of the digital revolution unfolds, M&E companies will initially be slow to react. Though there is a desire to profit from digital distribution, yet companies are worried about cannibalising traditional revenue streams and are unwilling to relinquish control of their content. In the past year or so, however, the Indian M&E industry is witnessing a shift towards digitisation, in some way or the other.

For instance, digital cinema has changed the face of Indian film industry. Due to cost-effective technologies using satellite, a movie can now be released simultaneously across larger geographies and a first-day first-show has become a reality in the interiors of the country. This has not only reduced print costs to nil, but also reduced the scope for piracy, thereby increasing revenues for producers.

Even the television distribution industry is adopting digital technologies to get rid of the inefficiencies in the business. direct-to-home (DTH) and mandatory conditional access systems (CAS) in certain areas have led to addressability and reduced scope for under-reporting. With newer technologies such as headend-in-the-sky (HITS) and internet protocol television (IPTV), the television distribution scenario in India is set to transform considerably in the future. HITS will reduce costs of MSOs significantly and bring in further addressability, while IPTV will provide an impetus to value added services.

Companies in the print industry too are exploring ways to diversify their risks and go online. Globally, major newspaper companies have significant portions of their content available online. All this has led to business models being transformed, though initially these have been in a state of flux ranging from advertising (the bulk) to a combination of paid downloads, subscriptions, or rental models for premium content such as movies and hit TV shows.

Challenges to overcome

But digital distribution can have a powerful segregation effect. Look no further than music. Given a choice, consumers have shown a propensity to unbundle their music purchases, buying individual tracks rather than whole albums. This presents a problem for an industry that was traditionally built around the album. The result is that even though digital music sales are rising, the value of recorded music sales continues to fall. As third parties begin to exert considerable influence in a particular sector, pricing can become an issue.

As digital distribution increases, the industry is also wrestling with the proper role of digital rights management (DRM). Once, M&E companies thought that effective DRM was the key to preventing widespread abuse of copyright restrictions, but some in the industry now think that DRM has become a barrier to the growth of digital media. Several music companies are now releasing music on the internet with no copying restrictions, allowing music to be freely copied and played on virtually any device.

Over the next few years, M&E companies will endeavour to figure out how these changes impact the way in which advertisers can reach increasingly elusive consumers. M&E companies will have to create operational systems, financial controls, and accurate information on a multi-platform basisa very significant change from the past. Companies used to know how to count ticket sales and circulation etc. However, as revenue streams multiply, the infrastructure, reporting, and mechanisms underneath become more complicated. The precise nature of internet measurement tools will have traditional mediaand their measuring entitiesworking to improve the relevance of media measurement tools. New media distribution will require investment in operations, infrastructure, and customer service and these investments may take some time to show returns.

The author is partner and director, advisory services, technology, communications and entertainment, Ernst & Young. Views expressed are personal