Media Predictions 2010 - WordPress.com › 2010 › 03 › media.pdf · Deloitte TMT Predictions...

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Media Predictions 2010 Jolyon Barker Global Industry Leader TMT Mexico, March 2010

Transcript of Media Predictions 2010 - WordPress.com › 2010 › 03 › media.pdf · Deloitte TMT Predictions...

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Media Predictions

2010

Jolyon Barker

Global Industry Leader TMT

Mexico, March 2010

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Deloitte TMT Predictions 2010

• TMT Predictions provide an in-depth look at the emerging issues that will impact the

Technology, Media & Telecommunications sectors in the coming year

• Whilst we cannot be 100% right all of the time; we have a good track record of

success. This is our 9th year of Predictions. Amongst the 2009 forecasts were: the

popularity of 3D cinema; the rise of the netbook and the threats to network capacity

by increasing demand for mobile broadband.

• We are providing a point of view – but we’re only asking that you consider this – we

do not demand that you agree with us

• Why are we doing this - we are not a firm content just to be functional experts – we

think it’s essential to understand the business that we’re in as that’s what our clients

need us to do

• So what does 2010 hold, and what will that mean for those in the Technology, Media

and Telecoms sectors?

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Media Predictions 2010

• Linear’s got legs: the television and radio schedule stays supreme

• TV and the Web belong together, but not necessarily on the same screen

• eReaders fill a niche, but eBooks fly off the (virtual) shelves

• Publishing fights back: pay walls and micropayments

• The shift to online advertising: more selective, but the trend continues

• Music as a service rises up the charts

• Video-on-demand takes off - thanks to the vending machine

• One step back, two steps forward for 3D TV

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Media Predictions 2010

Linear’s got legs: the television and radio schedule stays supreme

TV and the Web belong together, but not necessarily on the same screen

eReaders fill a niche, but eBooks fly off the (virtual) shelves

Publishing fights back: pay walls and micropayments

The shift to online advertising: more selective, but the trend continues

Music as a service rises up the charts

Video-on-demand takes off - thanks to the vending machine

One step back, two steps forward for 3D TV

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Linear’s got legs: the television and radio schedule stays supreme

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Linear’s got legs: the television and radio schedule stays

supreme

In 2010 more than 90% of all television watched and over 80% of all audio

content consumed will be broadcast.

Linear will prevail despite the following technologies:

• Personal video recorders (PVRs)

• Pay-per-view

• On-demand television

• Podcasts

• On-line music services

This is counter to many predictions foretelling the imminent demise

of schedulers,

disk jockeys and broadcasters.

Predictions, 2010 - A focus on the media sector

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Linear’s got legs: the television and radio schedule stays

supreme

For the mass market, the vast majority of content consumed is likely to be linear:

The supremacy of linear is likely to be due to one key factor:

Ease of use (inertia)

Linear's lead may well extend in 2010: the causes could be:

• The purchase of a new piece of television equipment (PVR, HD TV);

• The commencement of a new service (high definition, new movies channel);

• The availability of on-demand. It can increase the overall demand for scheduled

programming;

• Failure of high profile online video sites. They could result from the inability to make

advertising-funded online video pay;

• The introduction of charging for previously free non-linear services.

Television weekly consumption

• Linear: 20-30 hours

• Non-linear: 90 minutes to 2 hours

Radio weekly consumption

• Linear: 20 hours

• Radio is likely to remain more popular than Internet usage, and in some countries the majority of citizens are not expected to listen to pre-recorded music on any given day.

Predictions, 2010 - A focus on the media sector

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Linear’s got legs: the television and radio schedule stays

supreme

Misinterpretation of market data:

In 2010 many surveys of media consumption are likely to report self-reported data, where

respondents tend to reflect their idealized selves:

• Over-emphasized documentaries and news

• Under-stated viewing of traditional media

• Inflated usage of new media and devices

• Some linear consumption overlooked.

Comparisons maybe non-equivalent:

• Non-linear consumption may appear greater, as the numbers reported are larger;

• Like-for-like comparison in viewing hours would show the contrary.

• Broadcast is measured by viewers

• Online video metrics include page impressions, page views, unique users and requests.

Little distinction is made between a clip and a program.

In 2010 most consumers of content will likely remain beholden to the schedule, and with

hundreds of million of people spending 40% of their waking hours listening to television or

radio, linear is likely to remain dominant for many years to come.

Predictions, 2010 - A focus on the media sector

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Deloitte bottom line

The broadcast industry and the equipment manufacturers should:

• Bear in mind that consumers not always take up the options offered to them by

advances in technologies;

• Remember that the behaviors of early adopters do not always become

mainstream;

• Realize that consumers appear quite content to purchase devices and subscribe

to services which they then hardly ever use;

• Offer greater choice via non-linear, as long as monetization is focused more on the

option to choose;

• Consider that the scheduler and the content timetabled are a fundamental

component of the social fabric in many societies.

Linear’s got legs: the television and radio schedule stays

supreme

Predictions, 2010 - A focus on the media sector

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TV and the Web belong together, but not necessary on the same screen

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In 2010 we will see intensified efforts to converge the Web and TV. By year-end 30% of

broadband enabled households are likely to interact with what they are watching on

television via a form of computing device.

• Some web-based applications that will become accessible via the TV screen are: Social

networks, weather information, content streaming services.

• The range of internet-enabled televisions and set-top boxes is likely to increase.

• The penetration of ancillary Web-connected devices will rise (games consoles and media

players).

• The most popular approach to converged Web and television consumption is: the

combination of existing television sets and standalone browser-enabled devices.

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TV and the Web belong together, but not necessary on the

same screen

Predictions, 2010 - A focus on the media sector

OR OR OR+

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Until now:

• Content optimized for PCs does not display well on television;

• Content created with the assumption of a keyboard and mouse has proved hard to manipulate via standard remote controls;

• Few televisions are Internet connected.

But in 2010:

• Websites are being built specifically for access via televisions;

• Websites are being built specifically for control via televisions;

• A growing range of next generation televisions are being launched (integrated broadband + TV widgets), PVRs and game consoles have Internet access.

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TV and the Web belong together, but not necessary on the

same screen

Predictions, 2010 - A focus on the media sector

Little progress has been made so far in getting Web-based content onto televisions:

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TV and the Web belong together, but not necessary on the

same screen

Predictions, 2010 - A focus on the media sector

Part of the reason for the triumph of the pragmatic approach is the mismatch between the

consumer desire for concurrent consumption of the Internet and television integration, and

the typical ten-year renewal cycle for televisions.

But people want to combine the Web and TV today:

Also, superimposing a Web application on top of a TV image may block the view of the

image, and sharing commentary on a program with others in the room may not be very

appealing.

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Deloitte bottom line

• The main agents of the fusion of television and the Web are likely to be the user, the

content provider, and advertisers rather then a integrated device.

• Internet enabling of televisions is likely to create value.

• Functionality, from catch-up via a big screen to remote software upgrades, is likely to

be valued.

• One of the major beneficiaries of increased simultaneous usage of the Web and

television may be advertising:

− In 2010, global television advertising is expected to be worth $180 billion, and

global online advertising is projected at $63 billion.

− Commercials viewed on television can direct viewers instantly to websites.

Online and television together could result in 47% more positivity about a brand

than using either in isolation.

− Television producers should create websites that not only support programming,

but also feed off viewers’ eagerness to react to what they are watching.

TV and the Web belong together, but not necessary on the

same screen

Predictions, 2010 - A focus on the media sector

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The shift to online advertising: more selective, but the trend continues

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Online advertising spending share will grow from 10% at the end of 2009 to 15% by the end

of 2011.

Two lines of opinion:

• Forecast of a continuing shift to online (not impartial);

• Forecast that the online share gains of the last 5 years are about to slow, halt or even

reverse.

Year-over-year online advertising revenues have fallen in each of the first 3 quarters

of 2009. But:

• Even though online growth was negative, it continues to gain share (online fell 5%, a

smaller decline than almost any other advertising category);

• The overall online figure was negative, but that weakness was largely caused by areas

other than search and video; search grew by almost 7% for the first three quarters of

2009: its relative growth rate widened even during the recession.

Predictions, 2010 - A focus on the media sector

There is a possibility that the recession has not slowed the growth of online share, but

accelerated it.

The shift to online advertising: more selective, but the trend

continues

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The shift to online advertising: more selective, but the trend

continues

Analysts expect advertising spending to grow about 2% in 2010

Advertising buyers believe that:

• Online spending of “more bang for the buck”

• Online is currently too small a portion of their spending

• Online is the only solution that allows advertisers to measure the effectiveness of their

spending

• The gains in online seen in the past five years will in fact gather speed in the next five.

Predictions, 2010 - A focus on the media sector

Any category of advertising that allows for measurement of spending effectiveness is

likely to be relatively successful.

Online categories with the greatest growth

• Search

• Click

• Social network

• CPA (cost per action)

Traditional media losing share to online

• Less affected: Broadcast, Specialty TV/cable

• Affected: Radio, Outdoor

• More affected: Papers, Magazines

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Deloitte bottom line

There are two possible scenarios:

1. Online advertising continues to gain share in 2010 and beyond. The media

and advertising industry should carry on doing what worked in the last five years

2. Online advertising becomes a disruptive technology: online takes market

share from existing players, lowers prices and causes the market to contract.

Industry players should:

• Plan for a possible sharp and permanent reduction in revenues and margins;

• Consolidate, control cost even more aggressively and seek new business

models;

Traditional media companies should:

• Explore tactics that will allow them to bridge a period of continuing advertising

market share losses;

• Restrain cost growth lest EBITDA margins be further compressed;

• Embark on a two track strategy: 1) developing an earning-positive online

platform that supports their traditional business; 2) embracing tools, technology

and a new business model that matches the “perceived” advantages of online.

Creative companies should:

• Charge on the basis of results, not budgets.

The shift to online advertising: more selective, but the trend

continues

Predictions, 2010 - A focus on the media sector

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Music as a service rises up the charts

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In 2010 subscription music services should finally start to thrive – the number of paying

subscribers should exceed 10 million for the first time.

The growth in subscription music services is likely to be because of greater levels of

functionality, and becoming accessible via more platforms:

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Music as a service rises up the charts

Predictions, 2010 - A focus on the media sector

Total revenues 2010

Subscription music services –

$100 million

CDs global sales -$14.4 billion

Digital downloads -$ 6 billion

More useful More used More valued

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• Online and offline access via portable media devices:

− Extension of the service to portable devices – in particular the smartphone

− Enabling the music service to follow its owner blends ease-of-use, choice and

portability.

• More accommodating approach to licensing from industry players:

− Music services may be offered licensing deals similar to those offered to radio stations

(rather than on a per track basis).

• A greater number of subscription music services:

− New major new music services are expected to launch (pure-plays and technology or

media companies diversifying their revenue streams).

This would result in a service that blends the best elements of radio, music video, CD and

MP3 players, while exploiting the different capabilities of the devices used to access the

service.

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Music as a service rises up the charts

Predictions, 2010 - A focus on the media sector

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New features by end of 2010

To push users towards premium tiers, free services may be downgraded:

• Limited number of tracks per day

• Advertisements attached to free tracks played at higher volumes.

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Music as a service rises up the charts

Predictions, 2010 - A focus on the media sector

• Live recordings or tracks from televised talent showsExclusive material

• Narrated by the individualCelebrity top 10 lists

• Documentaries or interviews to put the music into perspective

Search functionality

• For tracks currently playingClick-to-purchase

Variable streaming quality

Expert + algorithm-generated recommendations

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Deloitte bottom line

Premium subscription music services should be regarded as complementary and

positive, a means of arresting the decline in recorded music revenues.

The music industry should note that:

• The annual revenue per music subscriber is up to $180, higher than that of a

heavy CD buyer;

• Subscription services could convert music freeloaders to consumers;

• The success of premium music services will depend on positioning (added value,

not money saved);

• The offer of complete catalogues is likely to be critical, but all services may suffer

some omissions;

• Music services are likely to be selected on the basis of their momentum;

• The content should be manageable to be useful (music to be more like radio to

show off the choice available)

• CD revenue falls should be managed without undue sentiment or haste, although

in decline, it is still likely to generate billions of dollars in revenue for several years.

Music as a service rises up the charts

Predictions, 2010 - A focus on the media sector

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Video-on-demand takes off - thanks to the vending machine

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Video-on-demand takes off - thanks to the vending machine

2010 should see strong growth for video-on-demand (VOD), with the vending machine

driving this growth.

At some point in the future, the Web should become the most efficient means of distributing

long-for content, but in 2010, the vending machine focus is likely to be the principal driver

for self-service long-form VOD.

Predictions, 2010 - A focus on the media sector

By year end 2010:

Estimated 30,000 vending machines deployed in the

U.S. alone

Each machine holding up to 700 units

Each machine generating up to $50,000 a year

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Video-on-demand takes off - thanks to the vending machine

By year-end 2009, the most commercially successful approach to self-service long-form

video distribution was a hybrid of Web-based self-selection and postal delivery. In the U.S.

in 2009, over 2million DVDs were mailed daily to over 11 million subscribers.

Predictions, 2010 - A focus on the media sector

+

Key drivers for the success of the DVD vending machine:

• Price: $1 per night

• Ease-of-use: Familiarity and accessibility

• Immediacy of the delivery: at the push of a few buttons

Challenges of the vending machine model in 2010:

• Restricted access to DVDs

• Launch of lower-cost DVD rental plans or comparably-priced pay television bundles

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Deloitte bottom line

Content owners should:

• Determine whether low-cost rentals are the cause of revenue declines or simply

coincidental;

• Consider how low-cost rental vending machines could drive complementary

revenue streams (ability to purchase the DVD outright, vending machines

specialized in new-release DVDs, new releases rented at a higher price in the first

week or two weeks after release.

Content distributers should:

• Keep a close watch on the progress of network-delivered VOD (the volume of

Internet-connected PCs and ubiquity of sufficiently fast download speed, should

one day permit network-delivered full-length video);

• Note that file sizes are also expected to grow (DVD – 9 GB, HD DVD 25GB).

The content industry should:

• Note the different motivations for companies wanting DVD rental machines on their

premises: generate rental income from third party vending machine distributors;

generate additional revenues from their consumers; increase overall footfall and

frequency of customer visits, with DVDs rented at cost or even less.

Video-on-demand takes off - thanks to the vending machine

Predictions, 2010 - A focus on the media sector

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