What media companies must do to manage content fragmentation
Content fragmentation presents huge challenges – and big opportunities – for media enterprises.
If the explosion in the volume of content produced is one of the defining trends of the Internet era, then the fragmentation of content is the other. Across all segments of the media industry, we are seeing content fragmentation, from broadcasting (streaming services are making content available across multiple platforms and devices) to publishing (where book publishers are trying to bypass retailers to sell directly to customers). In advertising, for instance, the market is fragmented across formats such as search, classified and video adverts (see Figure 1).
The initiatives in this article all present opportunities for media businesses in an era of content fragmentation. But in each case, many media organizations will need to adapt significantly how they do business in order to thrive in this environment.
Content fragmentation is one of three themes that we believe will be central to the digitization of the media and entertainment industry over the next decade. The other themes we examine are personalization and contextualization, and partnerships and industrialization.
OTT and OTT 2.0
As consumer tastes are becoming increasingly globalized, demand has soared for over-the-top (OTT) services such as Netflix or Hulu that offer subscribers access to a far greater range of TV series and films from around the world than would be available on national broadcasters.
Netflix has been the most successful subscription-based OTT service, launching services in around 50 countries.¹ It has differentiated itself by using data to offer better recommendations and even to decide what content to commission or license. The company employs 300 people to maintain and improve its content recommendations, spending $150 million a year. It commissioned the highly successful House of Cards series (winner of six Emmys) in 2014 partly because insights from its data analytics suggested it would be successful. The success of House of Cards more than doubled the number of Netflix subscribers from 27.5 million in 2012 to 61 million in July 2015.
Alongside the growth in OTT services, broadcasting is being changed by another trend – the growth of the second screen. It’s rare to see a program that doesn’t put a Twitter hashtag up on screen, to encourage conversations about the show on social media. At present, viewers turn to independent apps, such as Twitter, on the second screen but we see potential for OTT operators to offer integrated services for both the first and second screens, which we are calling OTT 2.0. This new breed of second-screen services and apps for movies and TV programs will seamlessly mix action on the first screen with information about the movie or TV show, social features and the opportunity to buy related merchandise on the second screen. These OTT 2.0 services can become a new source of revenue for content creators, aggregators and online platforms that provide either free or paid-for content for the second screen.
Communities of content
The popularity of social media continues to grow. Using social media takes up a quarter of the time UK and US consumers spend on their smartphones. One reason that social media appeals to users is that it allows them to build up communities focused on particular interests.
Advertisers recognize the value of these communities, but smart marketers have realized that instead of interrupting these groups, they should listen to them and observe them, so that they can adopt a strategy that fits the context and behavior of users for each specific platform.
As advertisers build their strategy around communities of content, social media is starting to compete more strongly against search for advertising revenue.
WeChat, an instant-messaging service operated by Chinese Internet giant Tencent, is providing an insight into how communities of content (such as chat users) can be integrated with other services. WeChat, which has around 550 million active monthly users,² employs Quick Response (QR) codes to allow users to follow other users or download apps. The QR codes send users to Tencent’s own App Store, thus driving business to this part of the Tencent empire.³ WeChat is also integrating news, payment, shopping and taxi services into the app.
Intellectual property frameworks for the digital age
For consumers, digital means abundance. Many users do not understand or accept artificial scarcity of content caused by laws, regulations and issues surrounding rights. In 2011, 23.8% of global bandwidth was taken up by copyright infringement. Users are also increasingly turning to VPN access, with 410 million people worldwide browsing the Web anonymously in this way.
Widespread copyright infringement and VPN use pose a number of challenges for the media industry. First, most of the value in the sector is still built on selling and managing rights to content across time windows and different forms of media. Secondly, the use of VPN access is distorting analytics that are crucial to the digital advertising that funds many media services.
The mismatch between current intellectual property frameworks, media industry business models and customer behavior is creating problems for cable operators, broadcasters and OTT services.
The industry faces a choice between defending outdated intellectual property frameworks – through better encryption and prosecutions of copyright infringers – and evolving legal and commercial frameworks to better meet the needs of customers.
EU antitrust regulation
Traditional intellectual property frameworks are under attack, and not just from consumers looking for instant access to content anywhere in the world. Regulators too are looking at certain practices relating to limiting rights in different geographies. In July 2015, the European Union’s top antitrust authority issued formal complaints against six American studios and Sky TV in the United Kingdom, alleging that they were breaching European competition law by blocking viewers in other European countries from watching films on Sky’s UK and Irish pay-TV services.⁴
Media is one of six industries (along with automotive, consumer, electricity, healthcare, and logistics) that have been the focus of the World Economic Forum’s Digital Transformation of Industries (DTI) 2016 project. An overview of the DTI program can be found here.
Our in-depth findings about the digital transformation of the media and entertainment industries are available in a white paper, which can be downloaded here.
To explore a selection of related articles and case studies, please select one of the tags below.