Future Of Media Report2008

: : FUTURE OF MEDIA : REPORT : : JULY 2008

: : FUTURE OF MEDIA : REPORT : : JULY 2008 WELCOME We are entering the media economy. The traditional boundaries of the media and entertainment industry have become meaningless. Today almost every business and social activity is a form of media. An increasing proportion of our social interactions happen across media channels. Every organization is now a media entity, engaged in creating and disseminating messages among its staff, customers, and partners to achieve business objectives. As the physical economy becomes marginalized and economic value becomes centered on the virtual, media encompasses almost everything. At the same time, many media organizations are experiencing severe challenges, as content proliferates, audiences change behaviors, advertising revenue erodes, and new competitors emerge. Others are prospering as they tap swiftly growing sectors, leverage amateur content creation, tap the power of social networks, and scale production costs. Meanwhile adjacent : : FUTURE OF MEDIA 2008 : PARTNERS : : industries such as telecom, financial services, mobile phones, consumer electronics, professional services, and even automobile Strategic Partners are becoming media participants. Each year Future Exploration Network runs the Future of Media Summit, linking Silicon Valley and Sydney with video and cross- continental discussions, and launches an accompanying report. The striking impact of the 2006 and 2007 Future of Media Reports means this year’s report has a lot to live up to. We are confident Partners the new frameworks and ideas we are contributing will again provide substantial value. Over the last years we have helped many media organizations develop and implement effective strategies. We thrive on helping companies to create the future of media. However it is also exciting to take these issues and conversations into a broader sphere. Welcome to the conversation. Ross Dawson Chairman Future Exploration Network Page 2

MEDIA: A GROWTH MARKET SIZE OF GLOBAL MEDIA AND ENTERTAINMENT MARKET IN 2024: $US 5.7 trillion (2008 dollars) Source: Future Exploration Network SIZE OF GLOBAL MEDIA AND ENTERTAINMENT MARKET IN 2008: $US 1.7 trillion Source: PricewaterhouseCoopers Media, entertainment, and related industries are positioned at the center of massive global growth. The current positioning of some media companies in a rapidly changing market means they are not experiencing this upside. Others are doing fabulously well in tapping people’s almost insatiable desire for content and connection. In this report we explore the growth and opportunities available to all participants in the vast landscape which is media. Fastest growing advertising markets 2007 - 2010 Global advertising revenues Source: Zenith Optimedia Source: Zenith Optimedia US$ billion 600 0 2 4 6 8 10 12 14 16 18 20 USA 500 China Russia 400 US$ bn Brazil UK 300 India Japan 200 South Korea 100 South Africa Philippines 0 0 10 20 30 40 50 60 70 80 90 100 2005 2006 2007 2008 2009 2010 % Internet Outdoor Radio Cinema Television Magazines Newspapers Page 3

Media Consumption 7 Driving Forces Shaping Media Source: Carat 100 Behavioral Advertising Source: eMarketer 90 4000 4 Internet 1 80 Digital TV 3500 70 Analogue TV Increasing Media Consumption Personalization 3000 Games Hours per week 60 Increasing media consumption Humans are Media is becoming personalized. Ultimately this is 2500 Wireless intrinsically media animals. As we get greater access about user control, in enabling every possible choice in US$ 50 2000 Outdoor Media to media and content, we are discovering that our what, when, and where people consume media, and its million 40 Digital Radio appetite for information and entertainment is virtually insatiable. formatting, filtering, and presentation. At the same time, real-time 1500 Analogue Radio It is commonplace for people of all ages to consume multiple information on viewers enables highly targeted advertising based on 1000 30 Cinema media at the same time, with television, internet, newspaper, behaviors, location, and other profile data. The fate of personalized 20 500 Print messaging, and other media frequently overlapping. advertising will depend on how societal attitudes to privacy evolve. 0 10 Implications: Implications: 2005 2006 2007 2008 2009 2010 2011 0 Average total media consumption will exceed waking Users’ expectations for control over their media will increase. 1900 1920 1940 1960 1980 2000 2020 hours. Most media will be consumed with partial attention. Abuse of personalized advertising will create a backlash. Some Advertising impact will decrease. will opt-out, and others will opt-in if sufficient value is created. 2 5 Fragmentation US Internet audience reach New revenue models At the same time as we are consuming more Source: comScore, Media Metrix media, every existing media channel is being US TV Fragmentation Within the current trend away from subscription Platform-A fragmented, and new ones are being added Source: Media Dynamics and Bear Sterns Advertising.com and towards ad-supported business models, the 60 14 apace. In the example of television in this chart, we watch ever Yahoo! Network way that advertising is sold is dramatically changing. Google Ad Network more television, but the proliferation of new channels means 12 Speci c Media As illustrated, the vast majority of the online players with the 50 continually less viewer time per channel. Now that the Internet ValueClick Networks greatest reach are advertising networks, not stand-alone sites and mobile are creating an explosion of new channels and 10 Yahoo! such as Google or Yahoo! Unbundling sales and content is 40 Tribal Fusion content, audiences are being divided into smaller and smaller weekly Google allowing far greater scalability of content production costs. 8 set usage (hrs) segments. 30 Casale Media Network The promise of micropayments for content may re-emerge DRIVEpm within a decade. 6 Implications: adconion media group time per Tra c Marketplace 20 Implications: Current mass media markets are ephemeral. 4 channel (hrs) AOL Media Network interCLICK Revenues per channel will decrease. In all except 10 MSN-Windows Live Advertising aggregation will be central to the media 2 a handful of cases, production costs will need Tremor Media Advertising Networks landscape. Media companies will segment and to scaled down. 24/7 Real Media unbundle ad sales and content creation. 0 0 Web Property ADSDAQ 1950 1960 1970 1980 1990 2000 2005 Burst Media 0 10 20 30 40 50 60 70 80 90 100 Year % of US online population Newspaper readership by age 3 User generated content 6 Source: Technorati, Flickr, Alexa, Comscore, www.internetworldstats.com Source: Journalism.org, Scarborough Research 350 Participation Generational change 80% Early talk about consumer-generated media has become a The chart shows that each generation is fairly consistent 70% 300 stark reality over the last two years, with an explosion of media in its media consumption patterns, however that each 60% 250 participation across blogs, photos, videos, social networks, group behaves very differently. The average audience age and more. The costs of quality content creation are plummeting. Already of traditional media such as television and radio continues to increase. 50% 200 a large proportion of content available is non-professional, and people’s Over the medium to long-term, generational change will result in million 40% media activities are increasingly focused on participatory channels such as dramatically different profiles for media consumption and participation. 150 social networks. 30% Implications: 100 Implications: 20% Media channels will be increasingly age-segmented. Advertisers 50 An infinite supply of content. Increased fragmentation of attention. will accelerate their shift to new media outlets. Sharemarket 10% Pro-Am (professional-amateur) content models valuations will reflect age profiles of audiences. 0 0% 2005 2006 2007 2008 will emerge. 1999 2000 2001 2002 2003 2004 2005 2006 Global IP tra c 7 Flickr photos (x 0.1) Number of blogs Source: Cisco 18 - 24 35 - 44 55 - 64 Facebook visitors YouTube visitors 50 45 Increasing bandwidth 25 - 34 45 - 54 65+ 40 In developed countries the Internet has now shifted from dial-up to broadband in the home. 35 A rapid pace of increase in bandwidth will continue indefinitely. It will not be too long before the 30 majority of developed country homes receive over 100Mbps. At the same time mobile bandwidth is Exabytes 25 soaring, with a variety of technologies contributing to pervasive high-speed access to content. (1018 Bytes) 20 15 Implications: Total IP bandwidth 10 Consumer 5 Video on demand anywhere, anytime. Personal clouds will allow music and video collections to be accessed anywhere without local Consumer video 0 storage. The rationale for allocated media spectrum and infrastructure will fade. 2006 2007 2008 2009 2010 2011 2012 • Strategy • Thought Leadership For additional Future of Media Resources • Sponsored Content www.futureexploration.net

Future of the Media Lifecycle HOME LIFE MOBILE STORAGE PERSONAL CLOUD STREAMING RECOMMENDATIONS VIDEO WORDS PHOTOS TIMESHIFTING PLACESHIFTING VIDE MAG A O A ZIN ER RS E M DE S CA ER TEM LPAP UN REA SYS PC WA L RE IVE S IC O M PHON e BO O K U E RS TE VID M O AL HANDHELD PORTABLE WSER E PRECIPITATION L PICTURE MEDIA BRO L AP AL VIDEO INTERFACES OF PARTICIPATION DI CORDER GAME RECOG URE IG FRAMES CENTER TO GEST P S P R DA R YE PE ITA CO GIT NIT ES RE PL A SPA MUSIC SS REC VO NEW NS LA OG IC IO N D O LE G E ITION O N E FLAT SCREENS VID TV INTERFACES S IMM OU PROOBI G A E RS LE RDS NE ION M WIRELESS ME I SS A T JE A C N AT ULT VE BO E LE TO S ETHERNET KEYWIR TE R SIM TRAFFI INTE UPnP C O DE ERE BILL RAC S VI WH BO T HOME AP A HOME MEDIA Y INTELLIG IV S LIGHTI ENT NETWORKS M ER RD E WE EV G DIFFUSION ATH PIN NG OF MEMES LOCATION OUTDOOR ALERTS DIFFUSION OP ER COAX PERSONA LINK ILE POWERLINE TO OF MEMES BASED MEDIA MEDIA SH MESSA LIZE OB LON M G - F OR M GE D OF S S F N ER TIO S DIREC TIME-BASE D TV / VIDEO CONVERSATION GAMES SEA OF CONTENT COMMENTARY MUSIC NEWS Creative Commons Attribution-Share Alike 3.0 License Created for: Strategy For diagram explanation, Summit registration • Strategy Thought Leadership • Thought Leadership : : Future of Media : Summit 2008 : : For diagram explanation and additionalof Media Resources: and other Future Future of Media resources: • Sponsored Content Content Sponsored Silicon Valley July 14 | linked by video | Sydney July 15 www.futureexploration.net/fom08 www.futureexploration.net

Future of Media: Strategy Tools Flow Economy Strategy Process - Summary 1. Define your space Finite players play within boundaries, • What is the “total customer experience” you participate in creating? infinite players play with boundaries. 3 Examples: Strategic repositioning • Which elements of the flow economy do you currently provide in the Flow Economy within this? 1 James Carse CONNECTIVITy INTERFACES • Who provides the other flow economy elements required? Apple • What is your current relationship with these providers? Apple has proved very effective at Flow Economy Framework repositioning itself across the flow economy. Most prominently, it has used The Flow Economy Framework encompasses all its strong positioning in Interfaces (e.g. iPod, Mac) 2. Redefine your space activity based on the flow of information and ideas. to shift to Content (iTunes). It has also built direct • What is driving change in the flow of information and value in the space? The diagram shows its six elements: Standards, Relationships with its iTunes customers whereas • How can you redefine the total customer experience? Relationships, Connectivity, Interfaces, before distributors held all customer relationships. • What are competitive drivers within each of the flow elements required? Content, and Services. All six elements are Apple’s adoption AAC as the default music encoding Standard on iTunes provided some lock-in as it was a • How can you leverage your existing positioning into new sources of required to deliver value to customers. revenue or value? STANDARDS RELATIONShIPS less common though still open standard. For iPhone Each of these elements can be run as a stand- it has selected and generated revenue from selected alone business. However the greatest value partners for Connectivity (AT&T in the US), and is is unlocked in how they are combined. Only a now taking part of the Service revenue for iPhone 3. Reposition handful of companies have the capacity to play in apps provided by a broader developer community. • Build internal capabilities. 2 all six elements of the flow economy, and even then they • Acquire existing businesses. must rely heavily on alliances. The heart of strategy in the British Sky Broadcasting (BSkyB) • License content or technology. flow economy is in leveraging existing strengths to move BSkyB began with part ownership of the satellites into a higher-value strategic position. As the landscape • Build alliances with complementary firms. providing the Connectivity for TV delivery, develops, this repositioning is a continuous process. creating and buying Content, and using these • Outsource business activities. to create customer Relationships. In the early 1990s it 3 CONTENT SERVICES sold its satellite ownership and since then has used the Astra satellites to provide the necessary Connectivity. Its NTT DoCoMo exclusive live TV Content rights for the FA Premier League The flow economy framework is especially relevant More information since 1992 has been leveraged into strong subscriber growth to telecoms providers that need to reposition from Full details on the Flow Economy and many new Relationships. In 2001 BSkyB introduced commoditized Connectivity into higher value framework and strategy process can be In uncertain times, don’t try to predict the Sky+, a combination set-top box and digital video recorder, spaces. DoCoMo has distinguished itself by developing found in Chapter 7 of Living Networks. future. Systematically explore possible futures. providing an Interface to generate greater revenue and Standards including W-CDMA and i-mode, providing it with Ross Dawson build more entrenched Relationships. BSkyB is now shifting local market differentiation and access to international markets. Free chapter download from: into new Services including broadband and phone. It is also Its alliances with phone manufacturers allow it to control the www.livingnetworksbook.com distributing its Content over new channels including mobile Interfaces used by its customers, creating more embedded Scenario Planning for Media using Sky Anytime. Relationships. i-mode’s staggering success after its 1999 launch was largely attributable to its model of allowing Classic scenario planning is one of the most powerful tools for rigorous third-party Content and Services providers access to the PLATFORMS long-term strategy development in the media industry. In the face of system, with just a low margin for DoCoMo. DoCoMo is now multiple uncertainties, including technological development, consumer you have to learn the rules of the providing financial Services through its DCMX mobile OPEN behavior, standards battles, regulation, and many others, a well-designed game. And then you have to play credit cards, and, as other mobile companies, seeking scenario planning process assists the development of robust business better than anyone else. to leverage its existing customer Interfaces to strategies. provide search functionality. OwNERShIP Albert Einstein PEOPLE PLATFORM Generic scenarios are of limited use. Scenarios need to be developed POwER PLAyS around specific business issues and key decisions. A typical scenario planning process would include: Game Theory: Strategies for Openness STRATEGy STRATEGy STRATEGy STRATEGy • Define objectives and key strategic decisions MAP 1 2 3 FRAGMENTED CONCENTRATED • Identify driving forces and critical uncertainties The inexorable shift to openness dominates the media strategic landscape today. All successful platforms provide rich programming interfaces, open standards are swiftly • Select key dimensions being adopted, data portability is gaining momentum, most content is available on RSS COMPETITOR A wAITING FOR TITANS • Create scenario framework feeds, and controls on intellectual property are being loosened. ThE FUTURE CLASh • Develop distinct, plausible, complementary scenarios The extraordinary pace of these trends means that media strategy is becoming more challenging. New business models are required, competitive responses must be swift, and COMPETITOR PROPRIETARY • Test existing strategies across scenarios strategic choices need to be made and implemented in real-time. B • Generate new strategic options In this environment game theory is extremely relevant and a valuable strategic tool. • Define a core strategy and contingent responses Game theory studies how multi-player situations may evolve as participants respond to COMPETITOR C each others’ actions. This can be done using mathematical modelling, or more simply as a • Build strategic responsiveness across the organization framework for thinking through strategic options, their impact on the industry landscape, and optimal short and long-term strategies. • Strategy • Thought Leadership For additional Future of Media Resources • Sponsored Content www.futureexploration.net

: : FUTURE OF MEDIA : REPORT : : JULY 2008 SNIPPETS MEDIA SNIPPETS More than 57% of online video viewers Roughly one-fifth share links to the videos of all U.S. households are they find with others disconnected from the Pew Six in ten (59%) are Internet and have never not comfortable used e-mail. when websites use Parks Associates behavioural information to tailor advertisements or content. US newspaper Harris circulation is the same as in 1978, when there were 100 million fewer France has the people in America largest number of IPTV Newspaper Association subscribers in the world, with of America three of the world’s four largest IPTV service providers (Free, In 2007 YouTube Orange France Telecom and Neuf consumed as much Cegetel). The remaining service bandwidth as the provider out of the top four is There are 1.4 entire Internet PCCW in Hong Kong. million new in 2000. dailyIPTV broadband users Daily Telegraph in China every month. China Mobile Almost 70% of Thirty seven percent journalists read blogs of consumers say regularly, while 20% say they would rather pay they spend over one hour The median age of for online content per day reading blogs a US live television than be exposed to Marketwatch viewer is 50, compared advertisements to 38 for the entire Deloitte population. Magna Global Page 10

ABOUT FUTURE EXPLORATION NETWORK Future Exploration Network assists major organizations globally SERVICES to gain insights into the future and develop strategies that create Strategy consulting competitive advantage. Its unique services are delivered from its Future Exploration Network applies a range of tools and deep in-house expertise, complemented by its network of global approaches to assist its clients to develop clear, actionable best-of-breed experts. strategies in highly uncertain environments. We have deep Clients of Future Exploration Network’s key executives include expertise in applying scenario planning to build robust strategies. ABN Amro, Capgemini, CNET, Ernst & Young, IBM, KPMG, Lend Lease, Macquarie Bank, Microsoft, Morgan Stanley, News Research Corporation, and SAP. Deep research into technological, social, and business trends supports clients’ strategic thinking, decisions, and implementation. Technology landscapes help organizations LEADERSHIP to plan long-term positioning, product development, and Ross Dawson technology strategies. Chairman Thought leadership content Ross Dawson is a globally recognized We create content for leading organizations that will reach business strategist and authority on and engage attention-poor senior executives and support key the future of technology and business, messages on technology and business trends. These can be the best-selling author of Living delivered in a wide variety of content formats, including print, Networks and Developing Knowledge- presentations, documents, audio, video, and flash, and delivered Based Client Relationships, and a frequent so they reach target audiences. international keynote speaker. His work is regularly featured in leading print and broadcast media worldwide such as CNN, Presentations and workshops Bloomberg TV, Washington Post, Reuters, SkyNews, ABC TV, and Keynote speeches and executive workshops can be delivered Channel News Asia. Ross also writes the highly influential Trends by key Future Exploration Network executives Ross Dawson, in the Living Networks blog Richard Watson, or other world-class presenters from our network to stimulate, provoke, entertain, and provide input into specific strategic decisions. VIRTUAL CONSULTING MODEL TAPS WORLD’S BEST Events Future Exploration Network has extensive in-house resources for consulting, research, and content creation. We complement these We create focused, relevant, highly interactive conferences core resources by drawing as required on our diverse network and events that bring together the best minds in the field. of global best-of-breed experts. This allows us to deliver unique, FEN organizes both public events, and custom-designed world-class services for projects of any scale. events for key sponsors. Go to www.futureexploration.net for other free publications including: • Future of Media Report 2006 • Future of Media Report 2007 • Web 2.0 Framework Future of Media Report 2008 is published under a • Executive Insights into Enterprise 2.0 Creative Commons Attribution-ShareAlike 3.0 License Report Design: redk.com.au Page 11

Contact Us Future Exploration Network Sydney : : +612 9994 8011 San Francisco : : +1(415) 315 9566 London : : +44(0)20 8133 3638 Email : : fen@futureexploration.net www.futureexploration.net

Future Of Media Report2008

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Future Of Media Report2008 — Document Transcript

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