Succeeding in a Fragmented Media and Entertainment Market

© Copyright 2008. Yankee Group Research, Inc. All rights reserved.

Succeeding in a Fragmented Media and Entertainment Market

May 6, 2008

Michael Goodman

Director, Digital Entertainment

Yankee Group

[email protected]


© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 2

The media and entertainment market is fragmenting as a result of ubiquitous

connectivity

This is fundamentally changing the production, distribution, consumption, and monetization of movies, TV shows,

games and music



Agenda

• Macro trends

• Who is the Anywhere Consumer?

• Why are they important?

• Conclusions and recommendations

• Question and Answer



Ubiquitous connectivity's impact on the media & entertainment ecosystem

UbiquitousConnectivity



Distribution

ConnectedDevices

DigitalContent

Consumers



Key issues affecting the media & entertainment industry

1. Monetizing ubiquitous content: Ubiquitous connectivity means digital assets are everywhere—how do content owners control, promote and monetize them most effectively?

2. Cross-platform distribution: From a few well-understood silos, ubiquitous connectivity is creating new paths to market and profit with growing cross-platform distribution options; highly competitive choices with differing capabilities, shifting power structures and evolving economics.

3. Anywhere Consumer™ 2012: With a greater diversity of devices and access to content and each other, Anywhere Consumers are increasingly less loyal, more experimental, and demand greater control over how, when and where they access content and interact with their communities.

4. Anywhere Brands: In the emerging Anywhere environment, ubiquitous connectivity has created a world where content, media and consumers are everywhere. As a result the value chain for advertising and brand-building is changing dramatically, with new players emerging and roles changing.



Key issues affecting the media & entertainment industry

1. Monetizing ubiquitous content: Ubiquitous connectivity means digital assets are everywhere—how do content owners control, promote and monetize them most effectively?

2. Cross-platform distribution: From a few well-understood silos, ubiquitous connectivity is creating new paths to market and profit with growing cross-platform distribution options; highly competitive choices with differing capabilities, shifting power structures and evolving economics.

3. Anywhere Consumer™ 2012: With a greater diversity of devices and access to content and each other, Anywhere Consumers are increasingly less loyal, more experimental, and demand greater control over how, when and where they access content and interact with their communities.

4. Anywhere Brands: In the emerging Anywhere environment, ubiquitous connectivity has created a world where content, media and consumers are everywhere. As a result the value chain for advertising and brand-building is changing dramatically, with new players emerging and roles changing.



Who is the Anywhere Consumer?

Anywhere consumers lead a digital lifestyle, demanding access to news & information, entertainment, friends and

family and commercial enterprises, unbound by time, location or device



The Anywhere Consumers presence is being felt around the world

56% of Internet users in France have shared photos with friends

and family in the past month

Apple has sold over 100 million iPods

There are 1.157billion broadband users and 2.57 billion

mobile users worldwide

In 2006 advertising expenditures on new media

outgrow traditional media in the US

There are over 170,000 hotspots globally

Source: TVB, IAB, InternetWorldStats.com, Yankee Group, 2008

26% of Chinese households will subscribe to digital

television by 2011

By 2010, 82% of mobile users will be on 2.5G or 3G networks

In the US 123 million Internet users a month

watch internet video

29% of Internet users in Spain Interact with friends through social networking

web sites



Pirates are quintessential Anywhere Consumers

43%

10% 11%

68%

23% 25%35%

41%

Subscribe topremiumchannels(i.e.,HBO)

Watch Video onDemand (VOD)

Watch videoonline severaltimes per day

Somewhat/veryinterested inmobile video

Services consumed

Non-Pirates Video Pirates

• Pirates consume abnormally-high volume of content, making them media companies’ best customer

• Pirates have the greatest need for consumption flexibility

– They supplement legitimate consumption with piracy, when content is not available, or can’t be easily consumed on the desired device

• Content owners can curb piracy by giving “pirates” access to content

– At a reasonable price

– Without burdensome consumption restrictions

– In any geographic locale, at any time

Source: Yankee Group Anywhere Consumer: 2007 U.S. Entertainment Survey



As consumers become more connected it effects how they interact with different forms of entertainment

U.S. Addressable Market (in Millions)

Networks 2006 2008 2010 2012

Mobile Subscribers 233.0 273.3 293.0 300.1

Active Mobile Data Users 106.8 157.1 174.4 181.0

Internet Users 210.2 226.8 247.6 270.3

Devices owned

Connected Consoles ----- 18.1 26.6 30.3

Digital Audio Players 65.3 81.5 83.1 85.0

Digital Video Players* 28.7 50.2 64.3 69.3

Handheld Game Systems 38.3 45.4 51.4 52.9

* Includes DAPs, Sony PSP and dedicated video players

Source: Yankee Group Forecasts, 2008



How do connected consumers spend their time?

Average Perceived Time Spent per Day by Activity

Total(HH:MM)

Teens(HH:MM)

Moms(HH:MM)

Watching TV 3:36 3:38 3:50

Surfing the Web 3:12 2:58 3:41

Reading Newspaper/Magazine

1:36 1:33 1:55

Talking on Phone 1:24 1:22 2:02

Listening to Radio 1:20 2:16 2:20

Listening to Music (CD, Internet, MP3, etc.)

1:18 2:56 1:42

Talking on Cell Phone 1:18 2:13 1:02

Watching DVD/Video 1:18 2:05 1:38

Playing Video Games 0:54 2:25 1:00

IM 0:42 1:41 0:59

SMS 0:24 1:09 0:39

Total 17:02 21:46 18:07

• Consumption is a function of time and access






ActivityTotal

(HH:MM)Teens

(HH:MM)Moms

(HH:MM)

Watching TV 3:36 3:38 3:50



1:36 1:33 1:55




1:18 2:56 1:42




IM 0:42 1:41 0:59

SMS 0:24 1:09 0:39

Total 17:02 21:46 18:07


• Time spent on various activities vary by segment






ActivityTotal

(HH:MM)Teens

(HH:MM)Moms

(HH:MM)

Watching TV 3:36 3:38 3:50



1:36 1:33 1:55




1:18 2:56 1:42




IM 0:42 1:41 0:59

SMS 0:24 1:09 0:39

Total 17:02 21:46 18:07


• Time spent on various activities vary by segment

• TV and Internet are always the top two activities




Today the television and the internet peacefully coexist

Percent Respondents

6%

21%

23%

47%

51%

57%

69%

73%

20%

41%

15%

45%

32%

70%

61%

60%

8%

38%

16%

42%

32%

66%

65%

62%

SMS

Read newspaper

Listen to radio

Read magazine

IM

Talk on phone

e-mail

Surf the web

Total

Moms

Teens

Which of the following activities do you do while watching TV?




Increasingly consumers want greater control over what they view and when they view it

• User generated videos (57%) are the most popular from of streaming video followed by clips from TV shows (54%) and movie trailers (51%)

• In addition to internet delivered video, DVRs and VOD also provide on-demand solutions

– 43% of online households have used VOD from their cable or IPTV service provider

– 27% of online households own a DVR

• The challenge for broadcast and cable programmers is it maintain their brand in an on-demand world

Percent Online Users

1%

3%

3%

12%

34%

Copy video from my PC to mymobile phone

Recorded a TV program to a PC

Copy video from my PC to aportable device (e.g. iPod or

similar device)

Download video

Watch streaming online




For TV content, broadband video is just another DVR

• Thirty eight percent of consumers who watched video online in the past month, watched episodes of TV shows

• Women prefer online TV for practical reasons

– Eighty seven percent of women, who watch full TV episodes online, do so because they missed the broadcast, compared to 80% of men

– Thirty four percent watch because they were interrupted, compared to 29% of men

• Men watch TV online for sentimental reasons

– Forty-two percent of men who watch TV episodes online, do so to see an episode again, compared to 28% of women

– Twenty four percent like watching older shows, compared to 11% of women

% of consumers who watched full TV episodes

83%

56%

36% 35%31%

18%11%

Why Do You Watch TV Episodes Online




Advertisers must bring less disruptive, better-targeted ads to TV

• Ad-skipping will continue to grow as DVR penetration increases with time

– DVR ownership increased to 27% of US households, compared to 20% in 2006

• Consumer will time-shift their consumption to avoid ads

– Fifty three percent of DVR owners wait to start watching the show, to skip the commercials

• Ad-skipping is slightly less severe in men

– Women are less patient, with 47% fast forwarding always, compared to 37% of men

% of DVR owners

49%

33%

15%

2%

42%40%

14%

2%

Always Most of theTime

Occasionally Never

Frequency of skipping commercials

2006 2007




Limiting functionality does not enhance engagement

• Consumers dislike ad formats that interrupt their video

– Fifty seven percent found picture-in-picture ads, which conceal part of the screen very/unacceptable

• Less intrusive formats are more likely to gain consumer favor

– Fifty two percent of DVR owners found advertiser’s logo displays very/acceptable

– “More information” ad button found even more support, with 64% of DVR owners finding it very/acceptable

% of DVR owners

58%

77%

78%

Can't FF ads atbeginning andend of shows

Can't FF adsduring on-demand TV

shows

Disable FFCapability

During Ads

Somewhat/Not at all Acceptable




% Respondents

77%

7%

12%

Use mobile phone to watch video

Interested in subscribing to mobile videoservice

Aware of mobile video service

Mo

bil

e U

sers

Mobile video’s business model is misaligned with consumers usage patterns

• Early results show that mobile users are snacking on video – watching 1-2 hours a month

• Most consumers will not pay ~$15 a month for a service they are only using for an hour or two

• Advertising is required to remove the financial burden from consumers and make mobile vide a success

In order to succeed business models must be aligned to consumer behavior




Mobile billing paves the way for digital media

% mobile phone owners who bought and downloaded content to mobile phone

61%

22%

12%

3%

Add to mobilebill

Credit card Bank account PayPal

When Purchasing Entertainment on Mobile Phone, How Do You Pay?

• Thirty percent of mobile users have purchased and downloaded content to their mobile phone

– Ninety percent of US consumers own mobile a phone

• Females are more pragmatic, with 65% preferring payment added to mobile bill, compared to 57% of males

• Although they want to paying by adding charges to their mobile bill, males also favor credit card payments

– Twenty eight percent of men who bought and downloaded content to their phone, paid with credit card, compared to 17% of females




Conclusions and recommendations

Multi-channel Video Providers– Launch online properties for video syndication. Programmers are looking for online audiences.

Service providers that are usually also the broadband providers have those audiences. Launching online properties similar to Comcast's Fancast and offering programmers a distribution outlet will help solidify a service provider's position in the online entertainment value chain.

– Connect the set-top box to the internet. Service providers are uniquely positioned to deliver PC video to the TV. Bridging the PC-TV divide is inevitable. Being the first movers in this space, service providers can stake their place in the market and negotiate more favorable distribution deals with the programmers.

Programmers– Protect your brand. Media companies must maintain and enforce their brands in cross-platform

environments. The role of the media brand cannot be overstated, because it is the thing that unifies the content with the experience.

– Design for usability. Usability is the branded experience. Ubiquitous broadband connectivity means that viewers have dozens of choices for the programming they seek. The only way to monetize fragmented, cross-platform audiences is to maintain the audience from one platform to another. Media companies must make it easy for the viewer to remain loyal to their brands and properties.

Advertisers– Standardization is required. Standardization is one of the key obstacles in shifting from a world of

30- and 60-second video ads to interactive overlays, tickers, bugs and telescopes. Advertisers and agencies are challenged--both in terms of media planning and implementation--when each vendor and media company has a slightly different implementation of common advertising format.



Charting the Evolution of Anywhere

Thank You

Michael Goodman

Director, Digital Entertainment

Yankee Group

[email protected]

Date post:	21-Oct-2014
Category:	Marketing
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Succeeding in a Fragmented Media and Entertainment Market

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