World Newspaper Congress 11: Technology Session, Adam Bird

63rd WORLD NEWSPAPER CONGRESS Session: Technology Titel: The new digital paradigm Speaker: Adam Bird Mark your calendar64th WORLD NEWSPAPER CONGRESS19th WORLD EDITORS FORUM Vienna, Reed Messe Wien www.wan-ifra.org/kiev2012

The new digital paradigmPerspective on the digital futureWorld Newspaper CongressVienna, October 14, 2011CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited

The only certainty is …the pace of technological change will be relentless Number of e-mails sent Data processed per Total minutes spent on every second? day by Google? Facebook each month? 2.9 million 24 petabytes 700 billion Content uploaded to Data consumed by Tweets per day? YouTube per minute? households each day? 20 hours 375 megabytes 50 million Data sent and received Products ordered on by mobile Internet users? Amazon per second? Connectivity creates data to 1.3 exabytes 72.9 items be leveraged …SOURCE: McKinsey McKinsey & Company | 1

The digital world is changing fundamentally across multiple dimensions Technology is driving digital content to mobile and multi-device use Delivery of content is changing – (social, mobile, location), users are becoming more diverse New ecosystems and platforms are emerging – no clarity on the end game yet Younger readers are less interested in news than older readers, but all consider newspapers a good and trustworthy sourceSOURCE: McKinsey analysis McKinsey & Company | 2

TECHNOLOGYSmartphones are increasingly becoming the digital all-purpose tool Smartphone owners using phone Change as primary device for activity, 2010 2009 - 10 Percentage PPT1Non-voicecommunication 81 +2 30%Location-based of iPhone users 74 +3services even prefer their phones overAudio/video 48 +2 PCs for e-mail and InternetBrowsing/ 43 +7readingEntertainment 43 +6Commerce 34 +8 Growth in US mobile marketing spend +74% per year in 2007 -121 Percentage pointsSOURCE: iConsumer US 2009 - 10, 13 - 64 year-old Internet users McKinsey & Company | 3

TECHNOLOGYConsumers with multiple devices spend more time overall and on eachdevice individuallyTime spent on owned devices PCIndexed, PC only = 100 Mobile (includes talk) Tablet/iPad 340 Tablet usage to evolve further 282 119 ▪ Home entertain- 100 ment hub 176 ▪ Home automation 65 147 ▪ Personal assistant 100 123 18 ▪ Productivity device 82 111 ▪ Focused experi- 59 74 ences PC (and mobile PC and Smart- PC and Smart- PC and Smart- phone) phone phone and phone and iPad non-iPad tabletSOURCE: iConsumer Survey US 2010; 13 - 64 year-old Internet users McKinsey & Company | 4

CONTENT AND USERSSocial networks becoming focal points for finding and sharing contentDaily time spent on social networks,2008 - 10 Importance of social network activitiesIndexed, 2008 = 100 PC Percent of responses, top 2 boxes Mobile Keeping up 27 257 to date Searching for 22 content 166 153 Researching 22 126 products/services 100 100 Doing research 13 for work/school Making/receiving 13 recommendations 2008 09 2010 Importance increasing with tenure of membershipSOURCE: iConsumer Survey US 2010; 13 - 64 year-old Internet users McKinsey & Company | 5

CONTENT AND USERSAs content is getting personalized and turned into experiences,the user base is becoming diverse and more willing to pay for content Content is increasingly mobile, social, and user-generated Increasing share of localization, personal- ization and gamification of content Apps dominate mobile digital content and users are willing to pay The user base for digital content is diversifying, with more older users and rapid growth in emerging marketsSOURCE: McKinsey analysis McKinsey & Company | 6

CONTENT AND USERSContent is increasingly experienced using apps – IPAD EXAMPLEconsumers are learning to pay for content91% of owners havealready downloaded … the majority have already paid to … and 60% of them paidapps … download a wide variety of apps … for more than 10 apps100% = all iPad owners Top paid app downloadsPercent of users Percent of users Percent of users having downloaded paid applications Games 62 Did not download an app Books 54 100% = 100 9 Music 50 1 to 5 21 Shopping 45 6 to 10 19 News and headlines 45 Celebrity and entertainment news 44 11 to 20 25 Location and direction 42 91 Movie schedules, 41 More than 20 35 Downloaded buying tickets an app Magazines 41 Banking 39 Early adopters spend Financial updates 39 on average Social networking 37 EUR 27/monthSOURCE: The Nielsen Company, "The increasingly connected consumer – connected devices", readwrite online poll, McKinsey & Company | 7 Dec 20 2010, OTO research/FullFX conducted in October 2010 with 270 iPad owners in France

Another legacy of Steve Jobs: paying for digital content Subscription Purchasing Penetration by product Penetration by product 20 28 28 33Video1 7 10 iPhone and iPad 22 30 44 43Audio2 20 users are 8 2 - 4 times more likely toGaming3 25 32 23 31 pay for digital 10 9 contentReading4 21 29 23 14 7 4 Overall iPhone iPad Overall iPhone iPad1 Subscription for premium video content, downloading movies/TV shows over the Internet2 Streaming music subscription (e.g., Rhapsody), downloading music over the Internet (e.g., iTunes, MP3s)3 Game subscriptions (e.g., World of Warcraft, multi-player games), purchasing virtual goods associated with online games4 Online newspaper subscription (e.g., Wall Street Journal Online), digital books (e.g., books read on an eReader)SOURCE: 2011 McKinsey iConsumer survey McKinsey & Company | 8

CONTENT AND USERS Different consumersConsumers have distinct digital usage patterns Cross-experience Deep in a single experienceOnline consumer segments and attributes relative to average respondentSize of segment, percent Non-digital "Digital media "Traditionalists" junkies" 79% 3x less time on 16 more likely to be social early adopters of networks 30 new technologies 14 "Digital communi- "On-the-go workers" cators" more time spent 3x more mobile phone talk time vs. average 11 6 13 3.2x on social networking 10 "Professionals" "Video Digerati" 44% more online 2.6x more e-mail vs. "Gamers" videos than more time 2.2x average average viewer spent on video games/daySOURCE: iConsumer Survey US 2010; 13 - 64 year-old Internet users McKinsey & Company | 9

ECOSYSTEMSThe ecosystem battle will heat upFrom a"PC world" ... ... to an ecosystem battle Shipments by OS vendor Whats next? Percent (100% in million shipments) ▪ Will ecosystems converge to 100% = 55 100 an open standard or diverge? Others 4 3 How will they differ? 7 3 Microsoft 15 ▪ What kind of content will be RIM 20 consumed on which devices? 16 ▪ Which players will shape Apple Nokia 16 44 30 the way forward? – Ecosystem developers? (Apple, Google) – Content providers? (Apple, Amazon) ? 33 – Hardware providers? (Apple, Samsung) Google 9 – Social networks? Q4 2010 Q4 2011 (Facebook, Google)SOURCE: CEA; Gartner McKinsey & Company | 10

READERSTablets are beginning to influence print formatsDaily time spent reading, indexed to non-tablet/non-eReader ownerNewspaper home delivery Magazine home deliverysubscribers subscribers 112 107 100 17 100 15 Tablets/eReaders 14 18 18 19 Magazines 38 39 45 43 Books 48 38 37 30 Newspapers Without Tablet/ Without Tablet/ tablet/ eReader tablet/ eReader eReader owners eReader owners How can newspaper and magazine publishers adopt to the changes while capitalizing on their existing strengths?SOURCE: iConsumer Survey US 2010; 13 - 64 year-old Internet users McKinsey & Company | 11

READERSNewspapers can still capitalize on their reputation UK EXAMPLEof providing trustworthy content"Do you believe that news sections of generalWeb sites are as trustworthy as newspapers?"By age group, percent No Yes Newspapers should leverage16 - 24 68 32 their reputation of providing trustworthy information25 - 34 62 38 to monetize consumer demand for serious news in the35 - 44 65 35 digital world45 - 54 70 3055 - 64 72 2865+ 68 32SOURCE: McKinsey Media and Entertainment News Survey, 2011 McKinsey & Company | 12

Newspaper publishers can tackle the digital shift by building on theirbrand, delivering high-quality news, and structuring their offers Deliver the integrated news experience across platforms and media to reach different consumer segments – pricing is key Get to scale in mobile to reach consumers on high-growth platforms with an increasing willingness to pay for content Push multimedia storytelling leverage videos and images and provide an interactive news experience going beyond reading Be more social and connect with consumers when they share or search for content Leverage “big data” develop data capabilities to enhance insights and innovationSOURCE: McKinsey McKinsey & Company | 13

McKinsey & Company | 14

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World Newspaper Congress 11: Technology Session, Adam Bird

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