10 – 12 October 2011, Vienna, Reed Messe WienMedia PortSession: Tablet Publishing TrendsTitle: The Effect of Tablets on US...
FTI ConsultingCommunications, Media & Entertainment PracticeSeptember, 2011© Copyright 2011, all rights reserved, FTI Cons...
Table of ContentsI.     Introduction to FTI ConsultingII.  The Effect of Tablets on Content Consumption       ■       Over...
Introduction to FTI ConsultingCommunications, Media & Entertainment
FTI: A Leading Global Services Firm  A $2 billion NYSE traded consulting firm (FCN)  One of the fastest growing companie...
Select MediaEngagements     A&E Television                   Edwards Theatres                 Musicland                ...
The Effect of Tablets on US Content ConsumptionProprietary FTI Research Study
Study Overview © 2011 all rights reserved by FTI Consulting, Inc.
Objectives of Study FTI’s recently completed Mobile Device & Digital Media Survey sought to determine how content is consu...
Methodology     The data was collected through an online survey conducted between May 24, 2011 and June 2, 2011. A total ...
Summary of Key Findings     While still comprised significantly of early-adopters, tablet owners today consume more conten...
Digital Engagement and Substitution © 2011 all rights reserved by FTI Consulting, Inc.
Digital Engagement with Media News and social networks are cited as the most common forms of content accessed online.     ...
Engagement by Age Group “Common wisdom” assumes that digital content is for the younger consumer, but the responses show t...
Digital Substitution All media have suffered digital substitution, led by newspapers. Tablet users substitute more.Our stu...
Digital Substitution continued Substitution is not equal across age groups or content types  More respondents said they h...
TV, Movies and DVD− 16 − © 2011 all rights reserved by FTI Consulting, Inc.
Preferred Viewing Device & Willingness to Pay Most digitally savvy consumers, regardless of age,                          ...
What They Are Willing to Pay For? Approximately 40% of those who have not paid to watch TV shows online said they would pa...
Increase in TV Subscriptions 24% of tablet owners and 15% of non-tablet owners claim to have increased their TV subscripti...
Income & Gender Effect on Willingness to Pay Gender has little influence whereas income can have a dramatic effect 65% of ...
Digital UsageSummary of Findings: Movies Tablet owners are twice as willing to pay to watch movies online as they are to w...
Online Effect on DVD Sales and Rental More than 1/3 of respondents say they have stopped or reduced buying or renting TV s...
Newspapers and Magazines © 2011 all rights reserved by FTI Consulting, Inc.   − 23 −
Newspapers - Willingness to Pay Willingness to Subscribe to print declines with age                         53% might or w...
Digital News: Willingness to Pay (continued)        Only 7% thought they would pay for digital news                       ...
Willingness to Pay & Content Preferences 38% of non-payers said they might pay for digital content for the right features...
The Effect of Income & Gender on Willingness to Pay While gender has a nominal effect on decisions, income impacts the dec...
Converting Consumers to Digital Pay Models More than 50% of online respondents are paying or might pay for digital news – ...
Digital UsageMagazines Unlike newspapers, where buying habits were sensitive to differences in age, magazine buying does n...
Music © 2011 all rights reserved by FTI Consulting, Inc.   − 30 −
Digital UsageSummary of Findings: Music Tablet users and Non Tablet users alike indicated an overwhelming preference for t...
Contact Us © 2011 all rights reserved by FTI Consulting, Inc.   − 32 −
Bruce Benson, Digital & Media Practice Leader                                  Mr. Benson is a senior managing director in...
© 2011 all rights reserved by FTI Consulting, Inc.   − 34 −
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The Effect of Tablets on US Content Consumption

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The Effect of Tablets on US Content Consumption

  1. 1. 10 – 12 October 2011, Vienna, Reed Messe WienMedia PortSession: Tablet Publishing TrendsTitle: The Effect of Tablets on US Content ConsumptionSpeaker: Bruce Benson, Senior Managing Director,FTI Economic Consulting, USA
  2. 2. FTI ConsultingCommunications, Media & Entertainment PracticeSeptember, 2011© Copyright 2011, all rights reserved, FTI Consulting, Inc.
  3. 3. Table of ContentsI.  Introduction to FTI ConsultingII.  The Effect of Tablets on Content Consumption ■  Overview ■  Digital Engagement & Substitution ■  Television, Movies and DVD ■  Newspapers and Magazines ■  MusicIII. Contact UsCONFIDENTIAL & PROPRIETARY© 2011 all rights reserved by FTI Consulting, Inc. −2−
  4. 4. Introduction to FTI ConsultingCommunications, Media & Entertainment
  5. 5. FTI: A Leading Global Services Firm  A $2 billion NYSE traded consulting firm (FCN)  One of the fastest growing companies in the US (Fortune)  Over 2,000 Consultants in 30 countries  Specialization in corporate finance, economics, marketing, forensic accounting, and corporate communications© 2011 all rights reserved by FTI Consulting, Inc. −4−
  6. 6. Select MediaEngagements   A&E Television   Edwards Theatres   Musicland   Sony Pictures / Sony Music (/   The Washington Post   Advanstar Communications   EMI – Capital Records   Muzak BMG)   Tower Records   AMC Theatres   Equifax   NBC Universal   Sothebys   Tribune   Blockbuster Entertainment   Gannett   NBC Vivendi   Star Telegram   United Artist Theatres   Broadstripe   GateHouse Media   Paramount   Star Tribune   USA Network   Charter   General Cinemas   Petro   The Advocate   Vertis Communications   Chicago Sun-Times   Grande Communications   Philadelphia Daily News   The Coca-Cola Company   Viacom   Chicago Tribune   HiT entertainment   Rambus   The Denver Post   Viacom   Citadel Broadcasting Corp.   HiT Entertainment   RCN   The Mercury News   Vitamin Water   Clear Channel   Journal Register Company   Readers Digest   The News Hour   Walt Disney Company   Coldwell Banker   Lionsgate   Regal Cinemas   The Orange County Register   WestStar Cinemas (Mann)   Comcast   Local Matters   RHDonnelley   The Philadelphia Inquirer   Westwood One Radio   Cox Media Group   Los Angeles Times   RHI Entertainment   The Sacramento Bee Networks   Diageo   Marvel Entertainment Group   Rodale   The San Diego Union Tribune   Wyndham Hotels & Resorts   Discovery Zone   Media News   Sandy Alexander   The Star   Yari Film Group   Disney   Midway   Scripps   The Star Ledger   Young Broadcasting Inc.   Dow   Midway Games   Sesame Street   The Tampa Tribune   Duane Reade   Morris   Sesame Street   The Terminator (IV)© 2011 all rights reserved by FTI Consulting, Inc. −5−
  7. 7. The Effect of Tablets on US Content ConsumptionProprietary FTI Research Study
  8. 8. Study Overview © 2011 all rights reserved by FTI Consulting, Inc.
  9. 9. Objectives of Study FTI’s recently completed Mobile Device & Digital Media Survey sought to determine how content is consumed online among US and UK respondents, as well as how tablet ownership affects digital media engagement and respondents’ willingness to pay for content.  The emergence of tablets has been an important catalyst for change in media consumption during 2011.  The FTI study highlights critical indicative trends impacting media companies across the TV, motion picture, magazine, newspaper and music industries in both countries. While there are many studies on consumer’s digital engagement, the study focused on consumption patterns among tablet and non-tablet users.  Specifically, we sought to determine the following: ■  When, where and how often individuals use mobile devices ■  What types of media individuals are accessing on their mobile devices ■  Their willingness to pay for that content ■  What will motivate consumers to pay for content when they are not today ■  How does tablet ownership effect their engagement in offline media, their use of digital alternatives and their willingness to pay relative to non-tablet owners ■  What are the differences in usage among age and income group, country, and types of devices on which content publishers and producers from around the globe can adapt their digital media strategies© 2011 all rights reserved by FTI Consulting, Inc. −8−
  10. 10. Methodology  The data was collected through an online survey conducted between May 24, 2011 and June 2, 2011. A total of 1,541 individuals responded to the survey (~1,000 in the US and 500 in the UK).  Because the study was intended to focus on digitally savvy respondents, respondents had to be a current user of at least one of the following devices:   Laptop or desktop computer   Smartphone (e.g. Blackberry, iPhone, Android, etc.)   Tablet (iPad, Android, etc.)   e-Reader (kindle, Sony, Nook, etc.) As a result, this study will differ, sometimes significantly, from studies of digital consumption across the more general population of all consumers.  The study did not address questions of pricing because such issues require more reach and are more nuanced than this study was designed to provide for.  In addition, while this report touches briefly on social media, web behavior and digital games, we drill down more deeply in newspapers, magazines, TV, motion pictures and music because our interest is to explore the effect of digital devices, especially tablets, on the demand for printed and traditional entertainment content.© 2011 all rights reserved by FTI Consulting, Inc. −9−
  11. 11. Summary of Key Findings While still comprised significantly of early-adopters, tablet owners today consume more content and have greater willingness to pay for it.Principal findings include:■  Tablet users consume more online and off-line content than non-tablet users.■  Digital alternatives are cannibalizing all conventional media, but tablet owners show a stronger inclination to shift online.■  Resistance to paying for digital content is high, but differs across media types. Most consumers expect to pay less for digital content.■  Proportionately, tablet users are willing to pay more than non-tablet users for digital content■  Subscription TV spending increases with tablet ownership, particularly among consumers more than 35 years of age and earning more than $50,000 per year (males slightly more than females).■  For music, there is a strong preference for downloading over streaming.■  There is also a strong preference and willingness to pay for music that can be easily shared across various devices.© 2011 all rights reserved by FTI Consulting, Inc. − 10 −
  12. 12. Digital Engagement and Substitution © 2011 all rights reserved by FTI Consulting, Inc.
  13. 13. Digital Engagement with Media News and social networks are cited as the most common forms of content accessed online. Content Accessed Online   News, social networking and music lead the pack in digital consumption among respondents in both countries, though UK respondents consume fewer movies and play less digital games than do their US counterparts:   More than three quarters of respondents indicate that they access news and social networks online – a notably higher percentage than all other forms of content.   Music is the third most popular form of online content, as 60% of respondents claim to Segmented (by country) download or stream digital music.   Somewhat less than half of respondents watch TV shows or movies online.   Magazines have significantly lower levels of online viewership than news and newspapers. − 12 −© 2011 all rights reserved by FTI Consulting, Inc.
  14. 14. Engagement by Age Group “Common wisdom” assumes that digital content is for the younger consumer, but the responses show that this is not universally true – most notably for News / Newspapers.© 2011 all rights reserved by FTI Consulting, Inc. − 13 −
  15. 15. Digital Substitution All media have suffered digital substitution, led by newspapers. Tablet users substitute more.Our study asked respondents about their tendencies either to reduce or to abandon the use of conventional media whenonline media was available.   Disturbingly, many people admit either to reducing or abandoning their use of some conventional media.   In contrast, we also found that television subscribers often upgraded their subscriptions of conventional cable when presented with online digital content options. Reductions vs. Increases Tablet users reduce/stop more than non-users© 2011 all rights reserved by FTI Consulting, Inc. − 14 −
  16. 16. Digital Substitution continued Substitution is not equal across age groups or content types  More respondents said they had stopped paying for or reduced purchases of newspapers than of any other type of media.  Hard copy movies and television show rentals and purchases (including movie tickets) are also hard hit, followed closely by magazines.  On average, respondents under age 35 in the US are more willing to reduce or cancel their use of conventional media than are older groups. Changes in Media Consumption Changes in Media Consumption by Age Group© 2011 all rights reserved by FTI Consulting, Inc. − 15 −
  17. 17. TV, Movies and DVD− 16 − © 2011 all rights reserved by FTI Consulting, Inc.
  18. 18. Preferred Viewing Device & Willingness to Pay Most digitally savvy consumers, regardless of age, Until age 54, tablet owners pay to watch online TV far still prefer to watch TV shows on good old TV sets. more than non-tablet owners.Preferred TV Viewing Device Willingness to Pay for Online TV Those who prefer TV (by age):  TV is clearly the preferred device for watching, well, TV. And this preference is   Only 17% of 18-24 year olds that own a tablet have shared among all age never paid for online TV viewing groups   Generally, until the age of 54, tablet users pay to watch TV online  While TV Sets are still the preference, tablet owners are clearly shifting away from laptops to tablets  Low smartphone scores argue against the efforts of some companies to bring television to the smartphone© 2011 all rights reserved by FTI Consulting, Inc. − 17 −
  19. 19. What They Are Willing to Pay For? Approximately 40% of those who have not paid to watch TV shows online said they would pay something to avoid commercials.  Of the 83% of respondents who said the would not pay Features That Would Induce Paying for Online TV* to stream online TV, 37% of non-tablet users and 25% of tablet users said they still would not pay despite any of the offered features  44% of non-tablet owners under 24 would pay to avoid commercials  More then 48% of respondents over 55+ would not pay for online TV regardless of the features offered * Respondents who do not pay for Online TVFeatures Worth Paying For By Age – Even the young will pay to avoid commercials© 2011 all rights reserved by FTI Consulting, Inc. − 18 −
  20. 20. Increase in TV Subscriptions 24% of tablet owners and 15% of non-tablet owners claim to have increased their TV subscriptions because of increased programming available online.  7%-8% of respondents have cancelled their existing TV Subscription Changes Because of Online subscriptions because of the availability of online Alternatives* alternatives, and 12 -13% have reduced their subscriptions  However, 24% of tablet owners and 15% of non-tablet owners claim they have increased their subscriptions to include more channels or access due to the availability of online content  Possibly, the effect from exposure to new shows online has induced them to upgrade service to access those shows through their television (the preferred viewing device) * US Only  No significant differences in upgrade behavior due to income Age of Subscription Upgraders  35-44 year old tablet users upgraded the most, whereas 45+ year old non-tablet users exceed tablet users in subscription upgrades in their age group© 2011 all rights reserved by FTI Consulting, Inc. − 19 −
  21. 21. Income & Gender Effect on Willingness to Pay Gender has little influence whereas income can have a dramatic effect 65% of the top income bracket have paid to watch TV Desire for commercial free viewing for respondents online making under $25k dramatically exceeds their propensity not to pay Never Infrequently Sometimes Often Regularly© 2011 all rights reserved by FTI Consulting, Inc. − 20 −
  22. 22. Digital UsageSummary of Findings: Movies Tablet owners are twice as willing to pay to watch movies online as they are to watch TV shows online.Preferred Movie Viewing Device Frequency on Online Paid Movie Viewing  Tablet Owners  Non-Tablet OwnersMovie Features Worth Paying For (By Age) Tablet Users Non-Tablet Users© 2011 all rights reserved by FTI Consulting, Inc. − 21 −
  23. 23. Online Effect on DVD Sales and Rental More than 1/3 of respondents say they have stopped or reduced buying or renting TV shows on DVD when there was an online alternative available.Change in Purchase & rental of TV Shows Change in Movie Engagement Because ofon DVD Online Access   Respondents stopped or reduced DVD purchases or  47% of tablet owners have reduced or stopped buying rentals by 38% and 36% respectively DVDs as opposed to 36% of non-tablet owners   Tablet users stop or reduce their movie-going, renting  Neither Income nor age seem to be a factor when and DVD purchasing in greater numbers than do non- consumers reduce or stop DVD consumption tablet users  This result to some degree reflects the cannibalizing   Respondents age 34 and under also reduced or have effect of online availability of product over conventional stopped their engagement with all conventional movie packaged media distribution channels in greater numbers than did older respondents© 2011 all rights reserved by FTI Consulting, Inc. − 22 −
  24. 24. Newspapers and Magazines © 2011 all rights reserved by FTI Consulting, Inc. − 23 −
  25. 25. Newspapers - Willingness to Pay Willingness to Subscribe to print declines with age 53% might or would pay more for digital + print offer Newspaper circulation is at its lowest point since 1954, even though the number of households has more than doubled.50% of respondents do / do not take a printed newspapersubscription or single copy purchase (slightly less than UKrespondents).   Overall, 53% or respondents said “yes” or “maybe” regarding their willingness to pay for a print and digital pay offering.   Tablet users age 18-24 have a strong willingness to pay for a print + digital combination bundle.© 2011 all rights reserved by FTI Consulting, Inc. − 24 −
  26. 26. Digital News: Willingness to Pay (continued) Only 7% thought they would pay for digital news And would pay less for it than print Mixed blessing for newspapers: While more tablet owners are willing to pay for news than are non tablet users, on average they want to pay less for it.  While 74% of respondents read news in digital formats, when surveyed only 7% said that they are willing to pay for news. 13% of tablet users indicated that they were willing to pay for news online (total not shown on chart).  18% of 35-44 year old tablet users said they would be willing to pay for online news, as opposed to only 5% of those who do not own a tablet.  While tablet users are more willing to pay for online news (left chart), non-tablet users are more inclined to think digital news is the same or more valuable than print. © 2011 all rights reserved by FTI Consulting, Inc. − 25 −
  27. 27. Willingness to Pay & Content Preferences 38% of non-payers said they might pay for digital content for the right features  We asked current non-payers, what features they would be willing to pay for. On average, 56% would not pay for content regardless of features.  Tablet users much more likely to pay (38% more) than non-tablet users.  The two groups have different feature priorities. Features worth paying for Tablet & Non-tablet users have different priorities  Tablet Owners  Non-Tablet Owners More like an app… More like a web site… Tablet Users Non-Tablet Users 1.  Exclusive Content Exclusive Content 2.  Custom Content Custom Content 3.  App App 4.  High Quality Photos Breaking news 5.  Breaking news Industry-specific 6.  Regular news Local news 7.  Weather Weather 8.  Exclusive Video Exclusive Video 9.  Local Content High-quality video 10.  Industry-specific Regular news 11.  Sports In-dept editorial 12.  Book / movie reviews Sports 13.  In-depth editorial Book / Movie review 14.  Opinions / Features Opinions / features 15.  Other Other© 2011 all rights reserved by FTI Consulting, Inc. − 26 −
  28. 28. The Effect of Income & Gender on Willingness to Pay While gender has a nominal effect on decisions, income impacts the decision with 60% of respondents that make more then $150k willing to pay more or the same for online as they would for print 72% of respondents under $25k would pay more for But that same group has no desire to pay more for just print if it included an online component an online offering compared to hardcopy Yes Maybe No More The Same Less© 2011 all rights reserved by FTI Consulting, Inc. − 27 −
  29. 29. Converting Consumers to Digital Pay Models More than 50% of online respondents are paying or might pay for digital news – more than one approach required   21% say they already pay for online news access   An additional 7% said they would pay for online access   38% say they would pay for some types of news content (includes the 7%)   This group wants unique feature set and a mobile app   53% said they might pay for a digital and print combo subscription   Most are probably already print buyers   Probably the “lowest-hanging fruit”© 2011 all rights reserved by FTI Consulting, Inc. − 28 −
  30. 30. Digital UsageMagazines Unlike newspapers, where buying habits were sensitive to differences in age, magazine buying does not differ dramatically by age group, including those age groups that do not buy at all.Acquiring Hardcopy Magazines Reductions in Magazine Purchases in Light of Digital AlternativesUS Digital Magazine Consumption© 2011 all rights reserved by FTI Consulting, Inc. − 29 −
  31. 31. Music © 2011 all rights reserved by FTI Consulting, Inc. − 30 −
  32. 32. Digital UsageSummary of Findings: Music Tablet users and Non Tablet users alike indicated an overwhelming preference for the ability to share music across various devices.Preferred Method of Listening to Music Features Worth Paying for (By Age)Device & Access Preferences© 2011 all rights reserved by FTI Consulting, Inc. − 31 −
  33. 33. Contact Us © 2011 all rights reserved by FTI Consulting, Inc. − 32 −
  34. 34. Bruce Benson, Digital & Media Practice Leader Mr. Benson is a senior managing director in FTI’s Economic Consulting practice and is the global leader of FTI’s digital and media practice. He has more than 20 years of professional experience in all aspects of media and technology. He has consulted in a broad range of areas including strategy and market planning, economic analysis, operational effectiveness, intellectual property management and IT preparedness. He was also Chairman of the Board of Ziff Davis Media until its recent sale. He has just been elected to Adobe’s newly formed product advisory board to help the company focus on the media and education space. His previous background includes SVP of Corporate Strategy at Young & Rubicam, CEO of a leading digital advertising delivery firm, SVP of Sony Entertainment, and managing partner of PWC’s entertainment practice in New York. Mr. Benson is a recognized expert in media and advertising and has helped some of the world’s leading companies achieve their strategic goals, including Sony Music, Microsoft, Bertelsmann, Viacom, Young & Rubicam, Ogilvy, Harper Collins, NBC, Sesame Street, Sotheby’s and Pearson. Mr. Benson has led over 200 projects with clients and Bruce Benson as a media executive both in the US and overseas. These projects have focused on strategic planning, revenue optimization, operational effectiveness and cost containment, internet distribution and large-scale IT projectSenior Managing management. Director Prior to joining FTI, Mr. Benson was leader of PW’s media practice in New York. Key clients included NBC, Showtime, MTV, Nielsen, ABC, Sony Entertainment, Simon & Shuster, Random House, Harcourt, Pearson and 3 Times Square Discovery. He led various projects for these clients including global performance optimization, IT transformation, ad 11th Floor sales optimization and various M&A activities. New York, NY 10036 From 2003-2005 Mr. Benson led SAP’s media practice where he led their investment & development of SAP’s media solutions. While at SAP he oversaw projects at New York Times, Washington Post, Cox Ohio Publishing, Atlanta Tel: (646) 453-1289 Fax: (208) 988-1613 Journal Constitution, Toronto Globe and Mail, Boston Globe, International Herald Tribune, Times of India. His teams Cell: (203) 606-3854 also oversaw the launch of iTunes for Apple, whose transactions are settled through SAP. He also oversaw thebruce.benson@fticonsulting.com development of various TV and film rights systems, digital delivery systems and ad sales systems. Mr. Benson is also a recognized expert in digital media and online advertising. He recently worked with Sesame Street to launch their broadband portal and their historic shift from TV to the web. Sesame Street won the first Emmy ever for a website because of this work. He has advised ABC.com with ad revenue enhancement strategies, and helped NBCU and Disney with their digital distribution architecture and ad management platforms. He is also has advised T-Mobile on their market strategy for new ad-based offerings for consumers and ad-based application developers in the mobile market. Mr. Benson is a frequent key note speaker and author of many articles on digital strategy and media, and co-led conferences with key Harvard strategists on intellectual property management and copyright law. Mr. Benson has pioneered various new forms of digital distribution and advertising over the internet, including dynamic ad insertion into tablets and the tracking of ad behaviors online and off-line. Mr. Benson has submitted various patents on electronic book delivery, the internet delivery of ad-supported video content over peer-to-peer networks, and mark-up animation languages for web development. © 2011 all rights reserved by FTI Consulting, Inc.
  35. 35. © 2011 all rights reserved by FTI Consulting, Inc. − 34 −
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