As digital media begins to dominate all segments of the IME industry, organizations will need to restructure their revenue and distribution methods, as well as their global strategies and organizational models.
Prepping for the New Age of Information Services, Media and Entertainment
• Cognizant 20-20 InsightsPrepping for the New Age of InformationServices, Media and EntertainmentIncreased demand for an improved digital user experience ischallenging players industry-wide to reevaluate their existingorganizational models and strategies. Executive Summary Factors Influencing Industry Trends With the convergence of technology and media Recognizing and effectively responding to and the proliferation of new business models, industry trends requires organizational transfor- information services, media and entertainment mation and complementary partnerships focused (IME) companies face a host of opportunities on optimizing core competencies. In the near and challenges. Technological advancements, future, digital media will dominate all segments of especially increased broadband access, climbing the industry, and media consumption behaviors tablet use and smartphone penetration rates, will rapidly evolve. In order to develop solutions are impacting the way content is distributed and flexible enough to address such growth, organi- consumed. These advancements have significant zations will need to restructure in order to foster implications, not only for companies’ revenue innovation and improve agility. and distribution methods but also for their global strategies and organizational models. Digitization of Media and Rising Power of Mobility/Internet Across the industry, decreased demand for tra- Consumers are progressively switching to digital ditional delivery platforms, such as TVs, DVDs downloads and on-demand consumption of IME and physical books, and an increased call for an content. The number of U.S. households with improved user experience, through heightened both broadband connectivity and at least one access to mobile devices and elevated interac- 3G mobile device has quadrupled in the past tivity via social media, are challenging industry five years and has increased more than 600% players to re-evaluate their existing organization- globally.1 The proliferation of new devices and the al models and strategies. This paper discusses digitization of content will continue to impact the industry trends and provides recommendations way media is consumed. For example, by 2014, that will enable companies across the spectrum 33% of all media and entertainment spending will to position themselves for the industry’s changing be digital, compared with less than 10% a decade climate. ago.2 cognizant 20-20 insights | april 2012
The emergence of 3G and 4G networks, supported networking, which represents not just a profound by advanced infrastructure and enriched by a behavioral shift but also an illustration of the growing array of mobile applications, will notably power of shared information and communication. increase the capacity for data flow. This will For example, the television series Sons of Anarchy result in an acceleration of mobile advertising and X Factor have successfully integrated social and also the convergence of online and mobile media sales and marketing approaches into their applications. Evidence of this trend can be seen products; Sons of Anarchy aired an episode- in television with the advent synched second-screen application that allowed The shift toward of Web-enabled TV, which will fans to purchase items directly from specific be a catalyst for new forms of scenes, and X Factor allowed viewers to vote fordigital media compels content consumption that will contestants and ask questions of judges during IME companies enable consumers to stream live broadcast through Twitter. to focus on areas or download content at their Social networking on various platforms, including convenience. that can drive mobile devices, is now being embraced by tra- both efficiency For all types of content ditional media and viewed as complementary creators, this change will to existing offerings rather than as an alternate and effectiveness, certainly have an impact medium. Integration between the two enriches such as strategy on operations and revenue the overall consumer experience but demands analysis, workflow streams. Thus, the shift toward more agile and dynamic content delivery digital media compels IME platforms. Mobility and social networking areredesign, automation companies to focus on areas driving additional demand for access to infor- of content creation that can drive both efficiency mation and content, which many consumers are and distribution, and effectiveness, such as willing to pay for, as evidenced by the $3-per-title strategy analysis, workflow rental offerings by Warner Bros. on Facebook. and utilization of redesign, automation of outsourcing and content creation and distri- By enhancing their digital and social media offerings, content providers are improving shared services. bution, and utilization of out- consumer access, boosting the viewing sourcing and shared services. experience and creating customer buzz and Disintermediation of Content Distribution loyalty. In addition, they are finding opportuni- As digital transformation steers the media ties to create additional revenue streams through industry into new territories, companies are either a subscription or pay-per-use model. increasingly engaging their consumers in product development. Preparing your Organization for the New Age of IME While the industry was traditionally built on busi- These evolving trends present IME players with ness-to-business (B2B) transactions, industry numerous risks and challenges. However, there players today operate by building relationships is now tremendous opportunity and competi- directly with consumers in a business-to-custom- tive advantage for organizations that are willing er (B2C) landscape, as evidenced by initiatives to comprehensively analyze their business and from content providers to embed social media transform their content creation and delivery connectors within their content. This trend can capabilities to address new-age needs. also be seen in the recent purchase of Flixster by Warner Bros. and the development of applications The following are key recommendations for from studios (e.g., UltraViolet) and broadcast- performing this analysis. IME businesses that use ers (e.g., HBO GO and ABC Player), which have these guidelines will ensure their costs, processes eliminated the barriers that previously existed and organizational structures are ready to between these companies and consumers. leverage tomorrow’s landscape. Focus on Social Media and Consumer Experience • Define and analyze core competencies for Through social media platforms, interactions have your business resources (people and tools): increased between content creators, distributors Future-proofing an IME company starts with and consumers, resulting in more customized and a top-to-bottom assessment of the business’s interactive product development and distribu- core competencies — the areas that are critical tion. This trend is reflected in the rise of social to the business and provide competitive advantage. Revisiting which areas are central cognizant 20-20 insights 2
to your business and add the most value to goals and incentives, segregation of depart- your product or service will drive key decisions, ments and incompatible tools and processes such as when to acquire, with whom to partner, across the organization. which areas to outsource and what activities should be kept in-house. >> Goals and incentives: Competing report- ing structures often exist across territories Identifying non-core tasks allows businesses and departments, which lead to dissimilar to leverage strategic partnerships in order goals that can hinder to focus on key capabilities. Moreover, when a streamlined strategic When content new business models arise and need to be objective and work- providers confuse supported, organizations can turn to their core flow. Additionally, these competencies to understand when a “build vs. structures inhibit time- non-core competencies buy” model is needed. to-market, create incon- with non-important sistent branding world- tasks or processes, When content providers confuse non-core wide and can cause competencies with non-important tasks or process efficiencies they may overlook processes, they may overlook areas that that disrupt business areas that would easily would easily lend themselves to an outsourced partner relationships lend themselves to an or shared service solution. Often, there (e.g., multiple points of are processes and tasks within the value contact for customer outsourced or shared chain that are critical to the business but do support) and incur un- service solution. not provide a distinguishable competitive necessary overhead advantage, such as copy-editing processes for costs. For example, business partners might publishing, quality control and metadata tasks receive the exact same asset file and meta- for servicing divisions and digital distribution data from separate territory offices for the processes for asset delivery, such as ingestion same content provider. Yet, siloed incentive and archiving. By looking at these critical structures can perpetuate inefficiencies. but non-core activities as an outsourced or The incentives given to shared-service opportunity, content providers resources in particular When evaluating an are able to leverage specialized knowledge, territories should be organization end-to- standardized tools, repeatable processes and cohesively aligned to meet a larger organiza- end, it is important to consistent methodology, while eliminating resource redundancies. tional goal. look for opportunities Additionally, leveraging partnerships for non- In addition to differing to unify and core activities allows organizations to reallo- goals and incentives standardize processes cate resource time to more strategic, poten- across global terri- tories, there are also across business units tially revenue-generating tasks. For example, to address the plethora of new business cases of misalignment and territories. models facing the industry, companies can across windows, which create innovation departments, or matrixed have historically led to cannibalization organizational groups focused on innovation, (theatrical vs. home entertainment) or inflex- which support prototyping and implementing ibility of release windows (print vs. electronic new services/products and drive thought lead- publishing). Understanding the motivations ership throughout the company. This struc- of these departments and those who lead ture provides direct oversight of new business them will often uncover the causes and solu- models, as opposed to cross-departmental tions for fragmented departments within an task forces, which may inefficiently spread organization. work across various departments without true focus and accountability. >> Organization structure: Recently, there has been an increase in the centralization• Develop a unified and global organizational and collapse of departments across content structure: When evaluating an organization providers, such as combining sales and mar- end-to-end, it is important to look for oppor- keting into one consumer productions divi- tunities to unify and standardize processes sion; combining domestic and international across business units and territories. Spe- sourcing; bringing home entertainment, digi- cifically, a disjointed global workflow is often tal and TV under the same leadership, etc. caused by several factors, including differing Another trend is to modify the way products cognizant 20-20 insights 3
are developed, such as publishing companies over from the physical distribution model, organizing by customer segment rather than since there was greater dependency on tech- product segment. The ability to restructure nologies and formats of the local market. these areas is dependent on the following However, the growth of digital distribution key factors: and operations lends itself to the opportuni- »» Shared strategic objectives: Where can ty to evaluate tools and processes to enable economies of scale and a flexible workforce. there be a unified strategy across these For example, studios should consider the organizations? Can similar assets and pro- user of a single digital asset management cesses be leveraged to reduce effort and repository for marketing collateral through- resource duplication? out the organization to improve asset reuse »» Geographic dependencies: Are there local and streamline associated processes and re- relationships, legal parameters, language sources. requirements and/or time-zone dependen- cies critical to the organization’s workflow • Build organizational competency around social media: According to an Experian that necessitate an international pres- Simmons report, 98% of online 18- to 24-year- ence? Is it important to understand con- olds already use social media each month, sumer behavior or cultural norms within as do nearly three in four online seniors and local territories for product development? 82% of online adults aged 55 to 64.3 This »» Time to market: Will centralization impact trend has changed the way content providers the time to market required for product must market and distribute their products. distribution? Marketing spend is slowly shifting from tradi- »» Skill requirements: Can the necessary tional avenues, such as billboards, TV, terres- skills to support the organization be filled trial radio and newspaper ads, to online media by a centralized structure? and digital initiatives. As digital continues to become more prevalent, organizations must The greater the dependency on local markets ensure that their social media strategies are to drive business decisions, customer leveraged across multiple windows. support and products, the stronger the need for a decentralized organization. However, Ready to Implement: there should be a consistent strategy Three Key Questions developed across depart- When partnering with our IME clients on imple- As digital continues to ments that is driven and menting the small- or large-scale organizationalbecome more prevalent, overseen the digital dis- example, centrally. For change required for future success, we have observed three factors in the implementation organizations must tribution strategy can be and change management activities that lead to ensure that their driven by the domestic successful organizational adoption and support: social media strategies officeresources located by and implemented 1. Does the initiative have executive buy-in are leveraged across worldwide that report and support? A critical factor to successful multiple windows. directly to the executive organizational change is ensuring the effort team domestically. has an “owner” and champion to see the change through, from inception to implemen- >> Tools and processes: A key opportunity tation. The individual appointed as champion for content providers is to consolidate should lead the committee that will support processes and technologies that support the the change and be empowered to make digital supply chain. For example, many ser- adjustments and decisions based on feedback vicing and distribution groups use differing throughout the process. Some companies have technologies within and across territories, created roles such as chief product officer and/ which interrupts the inability to collaborate or chief content officer as a fundamental way effectively on operations and distribution. to drive product strategy and see the organiza- For example, multiple asset inventory data- tional vision through to completion. bases and spreadsheets, requiring numerous resources to support, are used to collect the 2. What is the business continuity plan? Deter- same information within the organization. mining a plan for business continuity (i.e., Many of these incompatibilities were left keeping your existing business stable during cognizant 20-20 insights 4
the transformation) is an important and tion. Investing in the knowledge and skill set sometimes overlooked step in the prepara- resources will have an immediate impact on tion for organizational change. Commonly, a training, recruiting and productivity. company’s best resources are pulled into the transformation program, yet their day-to-day Is Content Everything? operations still need to be maintained. To avoid For companies in the IME space, “content is king,” over-taxing individuals who will also be respon- but it is not enough to stand out given continuous sible for implementing change, it’s important industry changes. IME organizations are, to find the balance at the individual resource therefore, challenged to take advantage of new level between transformative execution and and varied distribution platforms and strategic business-as-usual operations. Leveraging stra- partnerships to gain competitive advantage and tegic partnerships can also help to support this realize organizational and process effectiveness. balance. Executives must take a close look at their organi-3. Do the skills of our resources match our zational structure and vision to determine if they needs? As the organization is remodeled are properly positioned to meet the future needs to react to current trends, it’s important to of the business. evaluate skill sets and knowledge acquisi-Footnotes1 “Seventy-Three Percent of Global Media and Entertainment CFOs say Digital and Mobile Content are Greatest Future Revenue Opportunities Despite Current Profit Pressures,” Ernst & Young, June 17, 2010, http://www.ey.com/GL/en/Newsroom/News-releases/Seventy-three-percent-of-global-media-and- entertainment-CFOs-say-digital-and-mobile-content-are-greatest-future-revenue-opportunities-despite- current-profit-pressures.2 “Global Entertainment and Media Outlook: 2010–2014,” PricewaterhouseCoopers, 2011.3 Social Networking Watch, http://www.socialnetworkingwatch.com/all_social_networking_statistics/.About the AuthorsCandice Lu is a Director in Cognizant Business Consulting’s (CBC) Information Services, Media andEntertainment (IME) Practice. She has over 10 years of consulting experience in the entertainmentindustry, providing expertise to film studios, production companies, broadcasters and music labels.Candice co-leads the Domain Process sub-practice within CBC’s IME Practice. Before joining Cognizant,Candice spent four years at Andersen Business Consulting in its Media and Entertainment Practice.Candice holds an MBA in strategy and entertainment with honors from the University of SouthernCalifornia and a B.A. in economics from the University of California, Los Angeles. She can be reached atCandice.Lu@cognizant.com.Vanessa Fiola is a Senior Manager in Cognizant Business Consulting’s IME Practice, with six years ofexperience in media and entertainment consulting, providing expertise to film studios, broadcasters,publishers and performing rights organizations. She also co-leads the Domain Process sub-practicewithin CBC’s IME Practice. Prior to Cognizant, Vanessa spent nearly 10 years in the high-tech and tele-communications industries. Vanessa graduated from the University of Missouri with a degree in English.She is a certified Agile scrum master and has spoken at industry events (Henry Stewart DAM) on the useof the Agile methodology within media projects. She can be reached at Vanessa.Fiola@cognizant.com.Karen Mahal is a Manager in Cognizant Business Consulting’s IME Practice, with over five years ofconsulting experience in the entertainment industry. She is a member of the Domain Process sub-practicewithin CBC’s IME Practice. Karen holds a B.S. in information management and technology from the Schoolof Information Studies at Syracuse University. She can be reached at Karen.Mahal@cognizant.com.Krishna Sandeep is a Consultant in Cognizant Business Consulting’s IME Practice, with approximatelythree years of business development, market research and consulting experience. Sandeep holds anMBA from IIFT New Delhi, India. He can be reached at Krishna.Sandeep@cognizant.com. cognizant 20-20 insights 5