IBM Business Consulting Services

IBM Institute for Business Value

Media and
Entertainment
Media and
entertainment
2010
Open on the inside, open on
the outside: The open media
company of the future
 About this paper
This paper, a collaborative discussion by thought leaders from the IBM Media and
Entertainment practice, will discuss why industry and market forces will propel media
businesses to become more open to business partners, customers and consumers
– opening content reserves and formatting, production processes, packaging and sales
options – without opening the company to increased vulnerability.

The paper begins with an executive summary, followed by a future scenario of the media
and entertainment business as we envision it circa 2010. The next section discusses the
direction of media and entertainment industry trends, followed by a section analyzing the
implications of those trends. The paper concludes with our strategic recommendations
for becoming the open media business of the future.

IBM® Institute for Business Value

IBM Business Consulting Services, through the IBM Institute for Business Value,
develops fact-based strategic insights for senior business executives around critical
industry-specific and cross-industry issues. This executive brief is based on an
in-depth study by the Institute’s research team. It is part of an ongoing commitment
by IBM Business Consulting Services to provide analysis and viewpoints that
help companies realize business value. You may contact the authors or send an
e-mail to [email protected] for more information.
Media and entertainment 2010
Open on the inside, open on the outside: The open media company of the future

The open media company of the future: Large trends affecting the media and
Executive summary entertainment industry will compel
In the 2001 paper Vying for Attention, IBM media and
entertainment strategists contended that because
companies to open up access to
human attention is bombarded relentlessly with media content in more ways than ever.
and messaging, it has become an increasingly scarce Successful companies will create
and valuable resource. The battle to capture consumer
attention has now become entrenched. For media and
leaner, more transparent organizations
entertainment companies, the leading edge of success that cater to more platforms, more
over the next several years will be cost-effectiveness in devices and more users wanting to
gaining and retaining attention.
edit, compile and share.
We foresee a continuing onslaught of new kinds of
content, media forms and devices. Successful media
Between now and 2010, digital technologies will become
companies will vie for attention by allowing business
more powerful and affordable at every user level, in digital
partners, customers and consumers more freedom to
networks and in product offerings. An increasing segment
manage their own media and entertainment experi-
of consumers will be able to compile, program, edit, create
ences. They must also be able to negotiate rapid shifts
and share content; as a result, they will gain more control
in markets, economic climates and technology innova-
and become more immersed in media experiences.
tions. Key enablers of the media business we envision in
2010 are:
We foresee growing participation in media experiences
• Open standard information technology that enables well beyond traditional media, in three additional sectors
virtually seamless interoperability with legacy and we have labeled multi-media, “big” media and pervasive
partner infrastructure media. Successful companies, in transforming their
• Digital content management and distribution systems business models to serve these four distinct channels
that open protected pathways deep in the media and behaviors, will continue to reposition and restructure.
organization – to index, catalog, meta-tag, search, They will focus on the core components that create value
retrieve and track digital content usage based on for their customers and consumers, divest unneeded
access rights – around the clock, with little need for properties, improve the monetization of assets – and
human intervention importantly, join with other players to achieve scale, lower
• Advanced data analytics that create vital business costs and offer value-added products and services.
intelligence, helping media firms develop value for
business partners, customers and consumers
• Strategic deployment of an “attention loop” that
will evolve in step with significant developments in
consumer behaviors and media business models.
We call this business model the “open media company of Partnership strategies will enable companies to optimize
the future” – a dynamic media business that: cost, revenue and capital utilization – feeding shareholder
• Opens the media experience: Leverages advances value by driving economies of scale. Success will require
in technology to provide customers and consumers a executive foresight, the strategic integration of partner
more involved experience with the media firm competencies and realtime technologies for managing
cross-enterprise processes and workflows.
• Opens content reserves: Develops accessible, flexible
digital content systems that can enable distribution to Recommendations: Our ten strategic guidelines for
virtually any media context players evolving toward becoming the open media
• Opens content creation and distribution: Establishes company of the future:
digitized processes that monitor and incorporate input
1. Get your digital house in order: Create or convert
from customers and consumers to garner their attention
content to digital formats
• Opens content packaging, bundling and sales strat-
2. Manage content for optimum flexibility and asset
egies: Utilizes variable pricing models that enable
value
partners to advertise and share profits, and enables
consumers to access content through more compelling 3. Be open for distribution, no matter where or when
release schedules. 4. Be open for delivery – in multiple packages, with
variable pricing and always-on customer service
While, at present, digital technologies undermine the 5. Open digital doors – to contribute, produce or author
traditional economics of the media business, new dynamic content
digital technologies will support improved business
6. Create new product windows and business models
intelligence, enabling the open media firm to identify
higher-value business components and assets. In the 7. Manage openly and communicate in realtime through
foreseeable future’s uncertain markets, companies will digital infrastructure
employ advanced data analytics to adapt and respond 8. Leverage a new depth of business intelligence made
to changing conditions. Digital management capabilities possible by digital technology
will likely become a core competency and differentiator.
9. Use partnership strategies that drive efficiency and
optimize customer attention
Consumers will continue to become more knowl-
edgeable, shifting the burden to providers to know more 10. Become an on demand business.
about the media habits of individuals as well as larger
segments. An “attention loop” will enable successful The open media company of the future will result from
companies to determine the optimal match of digital the confluence of new media technologies, changing
content and access rights to consumer needs and customer and consumer behavior patterns driven by
demands – and to create reciprocal relationships with more digital capabilities at affordable prices, and new
alliance partners, vendors and suppliers, customers developments in business systems enabling digital
and consumers. content management, business intelligence and on
demand response to customers and consumers. The
past’s closed and proprietary media and entertainment
business models will give way to open media business
strategies that will enable forward-looking companies
to exploit significant opportunities for profitability within
these trends.
Scenario: “I want it my way…”
2010: Media pervade everything, everywhere. Technology The future will see more open,
just keeps getting better, smaller and cheaper – raising reciprocal relationships and more
expectations and putting business models up for grabs
with every new spike of popularity and innovation in media
ways to interact and customize at
and entertainment. Brands and channels proliferate, as every point of the media value loop
companies roll out new technology and new forms of – among brands, creators, suppliers,
content to high demand – and quickly see them trans-
formed, as sophisticated users experiment, combining
distributors, delivery systems,
formats and platforms unpredictably. Markets are more customers and “experiencers” of
fragmented than ever. The quest for customers’ and media content.
consumers’ attention – and ROI – is a moving target; but the
opportunities for creative ventures keep media businesses Everyone has at least one small device that makes phone
continually repositioning, restructuring, partnering for scale calls, serves as a voice-activated computer terminal and
and using advanced data analytics to locate hot new niches. connects with public workstations and the wireless networks
blanketing most metropolitan areas. Digital wearables and
At every level, from the global distributor devouring
jewelry carry more bytes than the desktops of 1999. Digital
satellite capacity to the everyday user with a small device
text-to-speech, speech-to-text and “courteous” speech
that captures global content wirelessly wherever he goes
translators help keep the peace, but some people never
in major metro areas, businesses and consumers in 2010
learn – they talk to their devices as they would to their dogs.
are unencumbered by wires and cables. Workers can
“Open checkbook! Sixty-two fifty to GasCo; six hundred
access all personal computer files from many locations
seventy to Warehouse-O-Rama. Balance it!” is background
without lugging a laptop. Businesses and individuals are
noise in public or the household.
programming customized schedules and playback options
for media, information and entertainment, taking full Now more content is available in more formats than ever,
advantage of a variety of new software that helps combine and everybody wants something different from every piece
multiple types of media effortlessly. of content. A university professor has videotaped his analysis
of a news event and wants to intercut it into a primetime
Wall-sized screens display gigabytes of digital information
news broadcast downloaded for his classroom. Fans flock
– offices and homes let users wallow in scores of programs,
to the neighborhood movie theater to see digital Webcasts
sales presentations or work files spread out at once, and
of world championship tournaments or Broadway shows
theaters wrap audiences in dazzling imagery. Work groups,
in realtime – it’s almost like being there; these events pack
classrooms or individuals can use wireless remote controls
several sections of the multiplex. Organized groups subscribe
and keyboards or voice technology to work with wall-high
to an online service that provides profanity-free versions
files or view broadcast content, films or zoomed-in book
of top-selling music, books, films and other content. Other
pages in ergonomic comfort. Media companies are providing
subscription groups want the same content in its original
user-friendly tools to manipulate multimedia personal files
versions, but customized for a plethora of devices. With digital
– video messaging, Webcast social events, virtual soirees or
media, repurposing is cost effective, helps build more niches
political gatherings – digital power is pervading every aspect
and gets more mileage from content assets. Online distri-
of human communication.
bution and management systems track all rights and licensing
IBM Business Consulting Services

by users, employing biometric identifiers tied to payment on complex variables such as age, sales tracking, promotional
schemes (for large downloads) and subscription package fees schemes or even the rarity of archival content. Data analysis
(for less exclusive content). helps companies determine the potential value of assets, and
digital management systems perform search, retrieval, sales,
Enthusiasts from around the globe spend hours together rights management and customization functions in a nearly
in realtime, playing interactive online games that feature “touchless” system with little human intervention – and lower
characters from pop songs, books or movies. They joust distribution costs. In 2010, some independent artists and
from hundreds of types of platforms, devices and networks, producers are offering all their music, short videos and movies
all served by the standardization of digital formatting and completely free, making money instead from tie-ins, product
realtime language translation. At any hour of the day and placements, Webcast concerts and events with pop stars and
night, businesses and individual users are customizing media fan merchandise.
services from wireless computing modules, mobile devices,
public kiosks and virtual reality stations. Media pervade every- Customers can purchase and download the rights to a book
thing; and media companies are doing business everywhere, and have it configured for one or more types of devices, or
anytime in 2010. delivered in traditional hard or soft cover within 24 hours;
they can order the film of the book, the soundtrack or only
There are still powerful media brands, but even big conglom- one song, the liner notes or a single quotation to use in a
erates rely on outsource providers to handle just about variety of formats, from a term paper to a wall poster. Online
everything that isn’t directly brand-related – production, sales accounting systems automatically invoice the huge data feeds
and distribution, marketing and customer service – whether of digital content ordered by network and cable broadcasters
physical or online. Each conglomerate relies on a tightly from distributors – and streamline payments, as well. Those
focused stable of specialized businesses linked online around millions of micropayments aggregate to a sizeable revenue
the globe on a need-to-know basis. High-speed data services stream from the sale of new or archived digital content, much
are used as utilities, like gas or electricity, replacing the need of which never has to travel to a theater, retail store or TV
for servers and maintenance in-house. station – it’s delivered online.
Other companies have organized around their core media Media companies survive or fail in 2010 based not just
specialties, becoming best-in-class for a key service such as on creative content, but on creative intelligence – about
accounting and rights management, or a profitable creative customers, markets and the value of digital assets. In an
activity like animation, production or publishing. With digital era of “pervasive media,” users around the world are confi-
media and online links, specialist companies can serve clients dentially tracked for their opinions, preferences and tastes
in many locations. The traditional media centers of Hollywood in media and entertainment; actively or passively, they help
and Manhattan still serve as business centers, but traditional shape the content they experience, how and when they want
production facilities are becoming more useful as theme parks it. “Open standards” system architecture, advanced data
and malls, as businesses strip away non-core activities and analytics and an open business strategy that monetizes
drive down real estate and labor costs. rapid shifts in technologies and user demands help media
Conglomerates, traditional studios and publishers are opening businesses exploit rapidly developing niches, create new or
up their inventories, putting old and new digitized content online aggregated revenue streams and customize open relationships
for variable fees. The same song costs more, or less, depending with content creators, distributors, customers and consumers.

4
 Media and entertainment 2010

From vying for attention to pervasive media “I want what I want, when I want
Between now and 2010, the increasing affordability,
it” will be the bywords of 2010’s
saturation, transmission speed and massive data
storage capacity of emerging digital technologies will “pervasive media” environment.
enable new formats and functionalities, multiplying and Business technology will enable
deepening the connectivity of users around the globe.
media companies to address rapid
Digital networks and devices will continue to load
more megabytes per year at more affordable prices. changes in the market, while consumer
Businesses will be able to offer new tools to customers technology will provide users a richer
and consumers, and will realize greater efficiencies by
media experience.
managing content, inventory, production and marketing
on an “on demand” basis. Consumers will be able to
Patterns of media consumption will rapidly evolve. As new
compile, edit, produce, create and broadcast complex
technologies continue to roll out and spark new interactiv-
content and manipulate huge files from the comfort of
ities, media firms will respond by developing sophisticated
their homes and personal budgets.
systems to manage content and rights, help safeguard
access and customize the management of evolving
The battle for human attention will remain pitched:
customer and consumer relationships.
innovations will continue to cascade rapidly to market.
The glut of choices, channels, brands, traditional media
The matrix in Figure 1 illustrates the growth of new
and archival content must now compete with customers’
behaviors in media experiences and consumption to
and consumers’ new enthusiasms for interactive media,
2010, behaviors that we anticipate will shape markets
on demand scheduling and publishing, and steadily
– and demand responsive strategies from media firms.
increasing thirst for the rich, interactive experiences
digital technologies make possible.
The vertical axis represents the growth of technology,
from legacy analog systems to the increasingly digitized
As broadband access and digital media capabilities
environment. Along this axis, content and formats once
become not only more pervasive, but also more inter-
controlled by media broadcasters and distributors are
active, media companies will respond proactively to the
moving toward an open market for delivery systems
threats of digital copying and margin erosion – by 2010,
outside the control of the industry. Popular adoption
we anticipate that many of the legal lines in the sands
of “killer apps” that permanently alter the environment
of content ownership will have been redrawn and an
defines the playing field – as the MP3 phenomenon
assortment of new safeguards will have been developed.
demonstrated, a music production format created for a
Unprecedented new digital management technologies
specific use inside the film industry was wildly adapted for
will help owners sort, store, catalog, retrieve, distribute
peer-to-peer music sharing by a booming demographic
and track inventory and customer information and
group with adolescent scruples. The open market for
determine the value of assets and customers.
technology development creates opportunities for new
killer apps and content, but it demands flexible respon-
siveness from media businesses.

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IBM Business Consulting Services

Figure 1. All paths lead to the pervasive media environment of the future.

Digital
Multi-media Pervasive media
environment
• Platform-independent digital media • Ubiquitous immersive experiences
• Mass customization of content • Increased consumer content creation
• Media firms vie for attention of time- and feedback
challenged, often disloyal customers • Individualized customization of content
and consumers • Continuous business, customer and
• Niche players use digital to challenge consumer analytics drive relationships
established media in specific markets • Dynamic, value-based pricing of content
Technology

Traditional media Big media

• Passive consumption of content • “Pull” relationships; media retains
through increasingly digitized control
channels • Content delivery/formats that
• Media-directed “push” relationships encourage increased interactivity/
• Focus on broadcast distribution participation
• Continued audience fragmentation • Emphasis on building customer and
Analog/digital • Legislation and investment in digital consumer relationships
environment rights management

Directed Consumer experience Immersive

Source: IBM Business Consulting Services analysis; IBM Institute for Business Value analysis, 2004.

The horizontal axis shows trends in the experience of The upper-left quadrant (Multi-media) finds an open
media consumption, moving from the traditional media- field for technology dissolving these assumptions, intro-
directed system to the open, immersive environment of ducing rapid, innovation-fueled growth in media and
the future. Media companies must interact with the “hot” entertainment – multiplexes, DVD, Internet, cable, satellite
new combinations of technology, devices and behaviors and high-speed transmission, personal video recorders
that will be unpredictably driven by open markets and a (PVRs), satellite radio – and correspondingly diminishing
determined sense of user entitlement. shares of human attention. The battle for human attention
demands that providers aggregate ever-smaller slices of
The lower-left quadrant (Traditional media) represents the attention from a multiplicity of channels.
traditional contract between providers and users. It is a
“one-way street” – media companies create and push The lower-right quadrant (Big media) shows more inter-
content in a limited number of formats controlled by the activity between the media company and the consumer,
distribution media towards passive audiences. Media such as channels and offerings within ISPs and Web
companies build mass markets and own distribution portals, a wider range of content on DVDs versus video-
systems to push content. tapes, and data-gathering methods such as “cookies”,
opt-in marketing or customer relationship management
(CRM). But the underlying business models remain
lodged in the analog era.

6
 Media and entertainment 2010

Figure 2. Consumer media spending will continue to grow.

Global media and entertainment consumer revenues 2004-2009 CAGR 2004-2009

968.4 Total 8.4%
1,000
904.2
835.8 127.3 Books 3.4%
765.3 122.8 Newspapers 1.4%
800 66.2
701.8 118.5 65.2 46.0 Magazines 2.9%
646.6 114.4 44.7 54.6 Video games 16.5%
64.3
US$ millions

110.8 43.4 49.8 256.5

600 63.4
107.5 43.7 229.6
62.6 42.2 Internet access 17.1%
61.9 41.0 34.3 199.9
39.9 169.9
27.5
400 25.4 15.7 Radio 5.5%
141.7
14.2 15.0 56.3 Recorded music 8.3%
116.6 13.6 51.9
12.9 42.9 47.2
12.0 39.7 TV distribution 8.1%
37.7 158.2 169.6
200 125.8 136.2 146.9
115.0
53.3 55.2 57.3 TV networks 4.3%
46.4 49.1 51.2
104.1 111.7 118.9 Filmed entertainment 7.1%
84.2 90.6 97.2
0
2004 2005 2006 2007 2008 2009

Source: PricewaterhouseCoopers Global Entertainment & Media Outlook, 2005-2009.

The pervasive media environment is the future direction of pervasive media environment is erupting from the conver-
media and entertainment gence of many factors, such as:
The upper-right quadrant (Pervasive media) represents • Demand: increased overall consumption of media and
the coming era – consumers and businesses are fully entertainment
connected, immersed in media all the time. Businesses
• Power: a greater number of megabytes of content will
will be able to respond through online connectivity and
be carried by smaller, ever-shrinking physical formats
deliver electronically at any hour around the clock. Many
and devices
forms of media will be “parallel processed” – in use simul-
taneously – such as watching TV and e-mailing at the • Liquidity: the easy portability, interoperability and
same time. Media companies will be able to multi-cast, “shareability” of digital media
deploying three or four channels in the same space • Unpredictability: relentless innovation in media
as one analog channel, bringing even more content technology, software and player devices
to market. Users will be inundated with choices. The
• Ubiquity: multiplying channels, bigger broadband
“pipes” and spreading connectivity in globalizing
markets.

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IBM Business Consulting Services

Case study: IBM and digital radio technology enabling FCC chairman manages attention:
switchovers becomes producer of own program-
Despite its enormous market potential, digital radio may
be the best-kept secret in digital media. Classic FM, the
ming schedule
first fully digital UK broadcaster, is at the forefront of this TiVo, the personal digital TV recorder,
revolution in the UK with its installation of Jutel RadioMan, has received a favorable review by
a comprehensive media asset management solution
designed primarily for major broadcasters. It enables
FCC chairman Michael Powell. In
digital content to be created, scheduled, organized and an interview with the Sunday New
broadcast simultaneously to multiple media channels,
York Times Magazine, Powell said
including radio, Internet and wireless systems. Integrated
with IBM technology, Radioman’s editorial and production that, as a result of TiVo, “I’m my own
toolkits add quality to the station’s transmissions, allowing programmer, not NBC. I’ve got a
increased productivity and a variety of new services and
conveniences for producers, journalists and presenters,
system looking all around the 300
including synchronous text, picture and HTML information channels I have. And picking out the
flow and support for multiple languages. Its scalable stuff I like, putting them together and
system integrates and manages program planning,
production, archiving and retrieval. With RadioMan, letting me decide whether 24 is on at
Classic FM aims to integrate its output across digital radio 9:00 p.m. or 9:45.” 3
and new media platforms, providing its listeners with
increased access to program data and a range of new Traditional passive consumers – will choose among media
facilities, adding value for the listener while increasing companies’ predictable mass-market offerings, but will
the commercial potential of the station. The merging of use several platforms or flexible viewing schedules with
radio broadcasting via traditional, digital and Internet affordable devices. Using digital content management
1, 2
technologies is revolutionizing the industry.
and delivery systems, content providers may make it
simple enough for traditionalists to choose different edits
of the same content for children or adults.
Media consumers, to varying degrees, will be increasingly
involved in the creative process Contributors – will experiment with more options and
By 2010, the impacts of new technologies will have more innovative platforms, providing feedback passively
sidelined predictable market assumptions, fueling the “I through purchase choices and data collection, and
want what I want, when I want it” behavior of the upper right actively through suggestions, opt-ins or invitations to
quadrant. Although traditional passive consumption will participate online.
continue to represent a large market share, digital media’s
capabilities will engender new forms of interaction, power- Producers – will program content and devices that they
fully compelling media companies to become digitized and purchase from multiple sources, making uniquely person-
responsive, and enabling even traditional consumers to alized digital play lists or collections for their own tastes.
make content more individually meaningful: These tech-savvy users will port content files among a
variety of devices, and compile chunks of content from
many sources into their own playback formats.

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 Media and entertainment 2010

Authors – will utilize Web tools to tailor content to business Technological innovation: Expanded possibilities – squeezed
or personal interests, seeking self-expression or control. media margins?
Media companies will provide affordable advanced tools The rapid pace of technological innovation is a deep
to this growing slice of active users, such as special blog developmental trend driving the media and entertainment
(Web log) sites, multiplayer online games, user-group industry environment. Due to developers’ large-scale
“theaters” or conference centers and downloadable aims to serve the global economy as a whole and exploit
production components – music, cinema and TV samples, free-market opportunities, the force of technological
streaming video or digital photo illustrations. development remains outside the control of media firms.
Technology’s prime imperative – that computing power
Users who contribute or interact as producers of their own will drive down labor, production and distribution costs by
programming or authors of content will not cease to enjoy managing more and more of the transactions of a service-
passive consumption; they will add new skills and redefine based economy – have been half a century in the planning
the amount of time they spend enjoying media passively. and massive build-out (see sidebar, “Technological
innovation”). With high-speed and digital technology now
Digital technologies present the opportunity, and the achieving acceptance and saturation – and providing the
challenges of scale that go with innovation, to maintain seemingly instantaneous responsiveness that at last keeps
or acquire an ever-larger inventory not only from tradi- pace or exceeds users’ speed of thinking, reacting, mousing
tional content producers, but also from digitally-equipped, or keyboarding, businesses preparing for the transformative
sophisticated users who author some content that media future will realize the need to reengineer processes to reap
companies may find profitable to acquire and manage. the greatest efficiencies from technological innovations.

Case study: Pathfire Digital Media Gateway (DMG) Networks

Pathfire, Inc. is an example of an open, flexible programming phenomenon at the business rather than the consumer level.
A leading provider of multi-channel and multicast digital media distribution and management solutions, Pathfire provides
satellite feeds from broadcasters to their affiliates. Pathfire enables major broadcast networks, station groups, cable
companies, syndicators, advertising agencies, content providers, stock footage houses and other media companies to
reduce the cost of migrating to a digital content model. Its automated digital platform is backwards compatible with legacy
systems, eliminating the need to schedule and monitor content downloads in analog formats. Its broadband feed allows
affiliates to receive and store vast amounts of content on a server, like the PVR technology for consumers – on a business-
to-business scale. Affiliates can search, retrieve, select and program from broader choices those parts of the content they
believe will drive the greatest value, including content from other affiliates. The Pathfire system operates digitally with little
human interaction, slashing capital investment and labor costs and allowing automatic content management, delivery and
4, 5
back-end invoicing in a security-rich, always-available digital distribution environment.

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IBM Business Consulting Services

Technological innovation: The transition from analog to distributed digital platforms

Phase one: Digital formats (1996-2001): Continuously improving digital platforms, networks and software, such as MPEG formats,
DVDs, CDs, PVRs, video game consoles, etc., affect media and entertainment distribution and value. Powerful market forces in
overall economy drive innovation beyond control of media companies.
Phase two: Technology integration (2002-2006): Web services, grid computing, P2P/distributed computing and other
improvements to identified needs from phase one. On demand strategies and middleware enable companies to respond more
flexibly to customers and competitive shifts. Greater ROI from technology investments through enhanced standards, utilization
and processes, more reliable autonomic (self-healing) systems, reduced network downtime and automating as many functions
as possible.
Phase three: Transformation (2006-beyond): Exponentially more advanced and powerful systems transform value creation:
• Business intelligence – Improved data capture, analytics and knowledge management = better-informed business decisions
• Economies of scale – Reengineer scale and processes around new technology capabilities = reduced operating expense
• Partnerships – Digital ecosystems with other firms = shared costs, greater value
• Increased productivity – on demand and utility computing; multiple support technologies working more seamlessly.

The relentless driver of technology development means Media companies are already under duress from an
that complexity will continue to characterize the M&E uncertain macro-economic environment, the fragmen-
industry to 2010 and beyond. As more and better tation of markets and the multiplication of channels.
networks are deployed, new technologies and devices Between now and 2010, they will also bear the brunt of
are rolled out, content and users become more sophis- resolving multiple turf wars – digital piracy, ad-skipping
ticated and broadband saturation is achieved between technologies, PVR recording, DVD duplication and other
now and 2010 for most of the developed world, Moore’s incursions that threaten traditional profit models. From the
6
Law will continue to help consumers at most socioeco- college student constructing megabyte-rich pranks, to
nomic levels to afford more technology – from home the local cable network aiming to compete against larger
entertainment centers to tiny mobile devices capable fish, to the giant studio seeking to make Oscar history,
of data streaming. Not only do we anticipate that the all levels of users will be able to do more with digital. The
convergence of these trends will continue to burden media and entertainment business will be exponentially
human attention, but also that increased complexity in the more challenging.
marketplace can only feed consumer expectations that
more, more and more should always be available, acces-
sible and affordable.

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 Media and entertainment 2010

Figure 3. Increased broadband penetration: A key enabler of new consumer behaviors.

CAGR
2004-2009
500 Global broadband subscribers by region
438 Total 29.2%
450
13.1 Latin America 54.3%
Broadband subscribers (millions)

400 375

9.7
350 305

300 7.0 269.4 Asia Pacific 36.0%

237
250 225.7
4.6
200 176 177.0

122 2.7 129.7

150
1.5 90.0 EMEA 25.6%
100 82.3 93.5
57.8 70.0
44.0 57.5
50 29.9
45.4 56.9 62 United states 13.8%
32.5 39.1 51.5
0
2004 2005 2006 2007 2008 2009

Source: PricewaterhouseCoopers Global Entertainment & Media Outlook, 2005-2009.

Figure 4. Consumer spending for new media will grow rapidly.

$500
U.S. consumer media spend (US$ billions)

CAGR
$450 1998-2007

$400 15.8%

$350
New media*
$300
3.1%

$250 Traditional media**

$0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Note: *New media are consumer media that were widely available only after November 1992 (i.e., the release of MPEG-1). New media includes CDs, DVDs, satellite TV, digital TV,
digital music downloads, satellite radio, video game consoles (i.e., Sony Playstation, Microsoft® Xbox, and Nintendo GameCube), consumer ebooks and online newspapers.
**Traditional media includes box office and VHS filmed entertainment, analog broadcast TV, cable and radio distribution, non-CD and VHS recorded music (including music
videos), and printed consumer books, magazines and newspapers.
Source: PricewaterhouseCoopers, Entertainment & Media Outlook: 2003-2007, Global Overview, May 2003; Veronis Suhler Stevenson Communications Industry Forecast &
Report. Seventeenth Edition/Twenty-first Edition, 2003; IBM Institute for Business Value analysis, 2004.

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IBM Business Consulting Services

When digital users can skip ads, can advertising As choices continue to expand and time remains limited,
survive? attention will become an even scarcer resource
The glut of overchoice and competition will become
In an interview with Linda Wolf, chair and even more intense; media companies must continue to
CEO of the Chicago advertising giant Leo vie for the customer’s attention. Even as new genera-
Burnett Worldwide, The Wall Street Journal tions mature who have been computing all their lives,
the sheer volume, complexity, global connectedness
asked her “how worried” the industry should and ever-expanding fabric of computing technology will
be about digital technologies that enable present extraordinary demands for strategic filtering, from
users to program their television viewing to the individual managing his e-mail and personal portal to
the media conglomerate attempting to achieve scale and
skip the commercials. “[Ad-skipping] won’t profitability. Customers crave trusted brands to filter the
eliminate advertising,” Wolf replied. “I believe glut of choices, but they will rapidly abandon brand loyalty
it will raise the bar… Consumers are much if their needs are not met, or just to try the next big thing
– leaving media companies vulnerable.
more in control and it’s incumbent on us as
advertisers and marketers to reach them in a In the pervasive media environment of 2010, customers
way that is entertaining and compelling. It’s all will have more influence in the media company value
chain; companies will form an attention loop to gather
about new creativity.” 7 continuous feedback and optimize value. A significant
portion of content will be packaged and delivered based

Figure 5. Attention will continue to shift from TV stations to cable.

22 21.4 CAGR
20.9 96/97 - 06/07
20.5
20.1
19.6 All cable 5.3%
20
18.9 19.0
18.3 18.1
18 17.5 17.4
Day ratings

15.8 15.7 15.6 15.6 15.5

16 16.9 15.4
16.2
15.3
14 All TV stations -2.0%
14.0

12 12.8

0
96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07

Note: Ratings are for Monday-Sunday, 24 hours per day, September-August.

Source: Veronis Suhler Stevenson Communications Industry Forecast & Report. Seventeenth Edition/Twenty-first Edition, 2003.

12
 Media and entertainment 2010

Figure 6. As the number of channels multiply, audiences – and attention – fragment.

Average number of channels viewed
25 Percent of channels viewed 40%

35%
Average number of channels viewed

20
30%

Percent of channels viewed

25%
15

20%

10 15%

10%
5
5%

0 0%
11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-100 101-110 111-120 120+

Number of channels received

Source: Veronis Suhler Stevenson Communications Industry Forecast & Report. Seventeenth Edition/Twenty-first Edition, 2003.

on customer demand, device and delivery requirements, The open media business of the future – open
making customer responsiveness the killer app of 2010. on the inside, open on the outside
Digital content that can travel across platforms will no
2010: there will be more tools in the hands of more
longer be welded to the distribution medium (fans may
creators, more digital content and easier transportability,
not have to miss their favorite television show while waiting
bigger broadband pipes – and more competition for
in an airport when they are able to watch it wirelessly over
scarce consumer attention. Successful companies will
their PDA).
resist the instinct to circle the wagons; instead they will
open up the way they create content. They will open new
Media providers themselves will also need to filter ways to manage, store, catalog and break down content
processes, networks and resources, acquiring new ones into product units. They will open up the distribution of
or relinquishing traditional ones to remain lean, focused content, the delivery and packaging and availability of
and responsive in the pervasive media environment. How content elements. They will build scale and reduce costs.
will companies profit, given the demand for this level of And they will create open, reciprocal relationships with
responsiveness? suppliers and customers, allowing more freedom in the
ways they combine content and delivery.
The media business will shift definitively from a product-
line focus to a customer focus. The next section will Back when video rental became popular, studio owners
examine some of the implications of these trends. feared that home video rental would destroy their
businesses. Ultimately, the new stimulus of home viewing

13
IBM Business Consulting Services

Figure 7. Each of these characteristics will contribute to the “open” media firm of the future.

• Improved technology and programming will allow • Virtually “anytime, anywhere, anything” media
consumers to have a more involved experience

• Content is more accessible and flexible, to be • Open the content reserves

distributed or delivered to any media context

• The content production process will be digitized, and

will include more consumer input • Open the content production process

• Consumers will pay variable prices for access to

premium content, available over much longer time • Open the packaging, bundling and sales strategy
release windows for content

Source: IBM Business Consulting Services analysis; IBM Institute for Business Value analysis, 2004.

resulted in increased overall consumption of filmed the novelty of new tools and capabilities will ultimately
8
entertainment. In the same way, we expect a rush of produce new forms of consumption, delivery and creative
revitalizing interest along the entire media and enter- competition.
tainment product/service chain to result from greater
reciprocity between media companies and the users who Figure 8 compares the implications of these trends in four
will be experiencing high-speed digital tools for creating major areas: consumer sophistication, digital technology,
and sharing. Avid participation by consumers, online inter- partner strategy and business models.
activity and open systems among business alliances, and

Figure 8. Overview: Trends in media and entertainment, 2004 - 2010.

Consumer sophistication Digital technology

• Consumers have more freedom and more control of • New methods of creating and distributing content
content consumption • Content standards and networks mature
• The consumer base becomes increasingly • Technology leveraged to drive scale and scope
knowledgeable • Home and portable electronics give more control to
• Consumer usage is key to consumer intelligence consumers
• Rights management influences consumer access • Content management is a critical differentiator
and behaviors

Business models Partner strategy

• Business models adapt to the new environment • Service providers and intermediaries emerge and evolve to
• Economics of the media business change better serve customers
• Advantage arises from business intelligence • Partner management becomes the basis for new cost
• Business models adapt and respond more flexibly to structures and revenue generation
new usage patterns • Business partners interconnect and collaborate to drive
• Scale is achieved by asset aggregation scale and increase value of offerings
• Business focuses on sustainable, differentiating value • Businesses integrate to manage cross-firm processes
and workflows

Source: IBM Business Consulting Services analysis; IBM Institute for Business Value analysis, 2004.

14
 Media and entertainment 2010

Total spend on filmed entertainment, Interacting with other users and with the companies that
produce content will become easier than ever through the
including box office, home video high-volume, always-on broadband capability. Consumers
and broadcast, is one of the fastest- will have improved control, choice and freedom for every
growing media and entertainment dollar spent on media. DVD is a good example – for the
same price as owning a VCR, the owner of a DVD player
revenue streams. U.S. spending of receives much more functionality. Avid demand for digital
US$45 billion in 1997 is projected to music is also evidence that when increased benefit is
more than double, to US$98.2 billion, available, users will quickly adopt it. These new technol-
ogies will give customers and consumers greater access
by 2007.9 to influence what is produced, how it is produced and
what formats they prefer.
“Experiencers” of media will want more interaction
with content and delivery systems
The convergence of new technologies will give The impact of interactive, immersive
businesses and consumers an unprecedented ability to media experiences – and users at many
control, manipulate and configure content on large and levels affordably equipped to participate,
small screens. From professionally produced content to
elaborate multimedia productions in the workplace to customize, create and distribute content
virtual scrapbooks for personal expression, more experi- – will rock markets and business
encers than ever will find it affordable to use sophisticated models between now and 2010.
digital equipment. They will configure content, such as
film or television comedy scenes or music selections, to Successful companies will respond by
make play lists or anthologies, or combine with their own forming open relationships along the
content, such as intercutting an episode of a popular media creation and distribution chain as
sitcom with personal digital footage.
well as with audiences.

Figure 9. Non-traditional music distribution channels will boom, at the expense of music retail stores.
$16,000 CAGR
2002-2007
U.S. revenue (US$millions)

$14,000
Digital tracks 295.1%
$12,000
$10,000 Subscription 124.8%
services
$8,000
$6,000
$4,000 CD sales -1.6%
$2,000
$0
2002 2003 2004 2005 2006 2007

Digital tracks and subscription services as a 0.6% 2.4% 5.6% 11.3% 20.4%
percent of U.S. music revenues
Source: Bernoff, Josh. From Discs to Downloads, Forrester TechStrategy Research, August 2003.

15
IBM Business Consulting Services

In the copyright infringement arena regarding film, we

The recent history of music downloading has been a test have already seen a legal claim against a video store
case of what can happen when filmed, animated or taped that removed controversial language or scenes from
entertainment is widely digitized. Feature films require popular films and retaped them, for rental to conservative
huge files, but greater market saturation by the larger families with teen children.
11, 12
Although film directors justi-
pipes of broadband adds to film producers’ legitimate fiably want to protect the integrity of their work, an open
concerns that their work in digital formats could be easily philosophy and digitized content will permit them the win-
copied and disseminated or substantially altered. win solution of making their own judicious edits to give
various types of viewers more choices, thereby retaining
Music piracy: Consumers shrug. more slices of the market. Some types of content will be
“What is it about digital media that makes people think
customizable in more ways than others. Lighter-weight
the work is free?” asked one indignant letter to the editors
entertainment may be issued in several storylines to suit
of U.S. News and World Report in response to a July 14,
various demographic groups – when the delivery system
2003 article about illegal file sharing – but the rest of the
is digital, production is simplified.
published responses were less sympathetic to traditional
distribution business models:
How should your company approach monetizing the new
“…I play in a band… that has recently released an album consumer capabilities and demands? Strategic choices
that we are encouraging fans to download from our Web and business models will revolve around identifying your
site. This is the future plain and simple. Many consumers business’ core competencies, prioritizing the asset value
think the recording industry has overcharged them far too of your inventory and transforming business models,
long…”
release windows and variable pricing strategies for the
“…the entertainment industry, ignoring for years the pleas digital market.
of concerned parents about explicit material peddled to
their children, is now crying for moral behavior…” We foresee that wireless networks will emerge as
“…The problem with the record industry is not the important media for content distribution. In addition to
Internet and file sharing; it is that the industry’s paradigm cable and satellite high-speed broadband packages
is as dated as the horse and buggy. There are a lot of for homes and data streaming to portable devices, we
people willing to pay a dollar or two to download a song anticipate widespread deployment of wireless networks
they really want but not willing to drive to a record store for telephone and Internet devices by 2010. Cometa,
to pay $18 to buy a song on a CD with eight or 10 other a shared venture of AT&T, Intel and IBM, has already
10
songs they have never heard…” announced plans to install wireless antennae “within
five minutes of anyone in the top 50 U.S. metropolitan
13
areas.” Retailers will experiment with whether to provide
When music companies were challenged by digital free wireless services as an incentive to patrons. “When
copying, they reacted first with legal actions to protect I first went to London to study,” says a university student,
copyrights; but they are now responding as well to “the big-name coffee shops along the Fleet Street
consumers’ desires for greater interaction with their product financial district were offering free Internet; but by spring
by creating easy ways to pay for downloads and gain term 2003, they had started to charge as much as £5
14
access to rare archives. It took a technology company like for access.” Hotel chains are now scrambling to offer
Apple Computer, through its iPod player and iTunes service, wireless access in guest rooms – about a fifth of laptop
to show the traditional music industry how to create differ- computers sold in 2002 were equipped for Wi-Fi commu-
entiated value that customers would pay for. nications; that share is expected to reach 91 percent by
2005, according to the market research firm International
15
Data Corp (IDC). By 2010, newer generations of wireless

16
 Media and entertainment 2010

transmission such as Wi-Max (802.16) or IEEE 802.20, The future’s higher production
another standard currently in development, are projected
to be able to blanket geographic areas up to 30 miles capacities at more affordable price
per tower. Such increased saturation and coverage points will enable smaller businesses
would not only compete with existing networks in dense to produce more content that can be
urban areas; they would also be able to compete for the
“last mile” extension of cable modem or DSL networks.
16 gathered to serve more niches. Skilled
Broader coverage and availability will permit easier entry editors/content managers can deploy
into the media and entertainment sphere by non-tradi- digital multimedia devices to serve
17
tional players vying for attention.
niche markets, such as language- and
Consumers will want to transport many types of digital interest-group subcultures. Content will
content flexibly between devices, such as being able
be able to flow more easily upward from
to use a music selection in an earphone player, in the
car stereo, on the home entertainment system and on the grass roots as well as downward
the computer to insert into e-mail. They can already from the media elites, opening doors to
port televised instructions for practical outdoor tasks to
fresh creative approaches.
a wireless device set up in the driveway. They can use
blogs to contribute to breaking news, set forth ideas and to-employee or business-to-consumer commerce.
opinion or create a following for the written word. They Distribution designed to prevent unauthorized access can
can enter multi-player “gamespheres” via computer or iTV, also be used to protect sensitive business records within
and create characters with which to interact with strangers and beyond an organization. Digital storage facilities will
around the globe in a shared virtual community. As tradi- support relationships with outsource providers such as
tional cinema houses morph into digital transmission online order fulfillment companies, so that the core brand
centers, new revenue streams can be developed from can remain lean and the assets are protected when
renting their high-resolution screens for special events handled for downloading, streaming and transfer through
like concerts, plays, sporting events and synchronized wireless networks to target devices and on demand
business meetings for employees around the globe. media production. Other technologies that will safeguard
digital transactions include content mastering, clearing-
Between now and 2010, we anticipate that media house and content hosting software.
providers will have made progress in resolving the
licensing situations users present. Digital analytics and These advanced capabilities will enable the streamlining
advanced customer relationship technologies will help of the core business, so that content ultimately can
media firms to connect content usage patterns with penetrate more niches and more user levels than before.
specific individuals and groups, finding new ways to While technology will give smaller businesses the chance
monetize digital content usage and still remain profitable. to compete with graphic interface qualities formerly
reserved for larger organizations, excellent players will be
Technology will promote interactivity and responsiveness to purchased by larger brands to serve in tightly focused
ever-smaller niches alliances as outsource partners, sharing costs and risks.
Advances in electronic media management systems will Successful companies will build not just niches, but inter-
be able to help protect digitized assets – whether they active services allowing access, customization and many
are books, video games, music, streaming audio or video, ways to package the content – aggregating share by
filmed entertainment, software or other formats – through increasing the number of channels and offering content
their entire lifecycle, for business-to-business, business- over more channels.

17
IBM Business Consulting Services

variety of packages and delivery methods. A researcher,

Animation case study: Digital technology opens up the
for instance, may belong to a dozen newsgroups through
playing field
work and home, or a music fan to a variety of digital
Innovation in the jaw-dropping special effects and animation
that theater-goers have come to expect, long inhibited by music clubs with differing archives, but each may want
the dominance of proprietary production methods, will to make compilations that suit personal usage goals,
yield decisively to the growing challenge of “open standard” combining content from many sources. The good news is
digital animation technology and free market labor. that complex software fronted by sophisticated, yet simple
Threshold Digital Research Labs is producing cutting-edge user interfaces are in development that will support a
feature films, television animation and live action visual flourishing repertoire of user capabilities.
effects for theme parks and location-based events, major
studios, networks and advertisers. Through collaborative BBC digitizes its archives
solutions developed with IBM, increased computing power The British Broadcasting Corp. plans to permit free
delivers Linux- and Windows-based variable processing downloading of select material from its archival properties
and a shared service model for render cycles. Threshold’s for private use in the United Kingdom. Using home- or
business model retains IP ownership of the visual objects, library-based broadband connections, users could access
but establishes quality standards for outsourcing digital the planned BBC Creative Archive to help with schoolwork
animation production to the lowest-cost bidder from or augment their own multimedia presentations. The United
anywhere around the world, reducing production costs and Kingdom’s largest broadcaster, BBC operates a vast portfolio
creating dramatic discontinuity in the economics of the tradi- of public TV stations, cable channels, an Internet news
18, 19
tional business. service and national radio networks as well as international
television stations. In announcing the plan, a BBC spokes-
person called it a “second phase of the digital revolution,”
Digital technology will enable media companies to create in which government, public institutions and corporations
content of extraordinary quality, stability, storability and help create public as well as commercial value in their
20,21
revolutionized production; but these areas will require holdings. Writing in Wired, Danny O’Brien said some BBC
substantial costs for massive undertakings such as execs are exploring the idea that BBC can avoid many of the
feature-length films as well as for converting archives costs of hardware and “fat pipes” by using P2P networks
– any potential savings on the creative end must accrue where its most popular files can be shared by users, who
over the long term. However, lower costs through digital will create their own DVDs to match demand. Open licenses
technology will take place in the realms of inventory, for non-BBC-owned popular content would be key to making
supply chain, distribution, back-office and security the archive possible going forward. Obtaining permis-
processes, where strategic innovations can increase sions would go more easily, he noted, if BBC will “start
efficiencies and productivity. fresh [with] a new model – a modified Creative Commons
license, a blanket deal with rights holders” that would allow
The digitization of content, networks and devices will unlimited sharing without loss of intellectual property rights
or resale of the asset. According to O’Brien, the “treasure
drive demand for intraplatform compatibility, so that users
trove” of BBC archival content will excite innovations from
can access content on a variety of devices wherever
the growing open source coding community, who will be
they may be, and combine content acquired through a
eager to mine “long-forgotten documentaries, science
programs, and investigative reports [that will] suddenly be
22
searchable, scene by scene, word by word.”

18
 Media and entertainment 2010

Users will continue to push in the direction of unlimited rather than supporting multiple functions in-house or
access, and are unlikely to reduce the sheer volume of across many locations. Support players can achieve scale
attempts to get around the “honor system.” We anticipate through specialization in one or two functions; advanced
that new combinations of media and delivery systems technology can enable the necessary encryption, security
with the express intention of getting around stated limita- features, rights management and accounting procedures.
tions of content transportability will continue to surface.
The industry will continue countering with lawsuits and Figure 10 contains an end-to-end view of a fully
tracking methods, such as a 2003 legal victory allowing developed digital media system for the creation,
copyright owners to require that Internet service providers management and distribution of content in a virtually
23
divulge the names of file-sharing offenders. But such “touchless” online environment – requiring little human
after-the-fact mechanical enforcement efforts point to a interaction – that is always open for business.
need for solutions embedded within technology that will
keep both sides happy. This model is a vision of capabilities that we anticipate
will be fully developed for strategic integration with
By forming a leaner, more focused organization, brand legacy systems by major players in 2010. Digital platform-
and content owners will be able to achieve new value universal standards will allow content traveling online
through organizing around the core business and estab- to be managed and tracked throughout all enterprise
lishing securitized online links to back-office providers, processes, from creative to order fulfillment. Content

Figure 10. Open media businesses of 2010 will develop a strategic blueprint for digital business technology.

Content enters the digital media Digital media is

management and distribution chain delivered to

Create Manage Distribute and transact Set-top box

Retail
Video Creative Content Rights Infra- Content LAN display
Text services manage- manage- structure aggregation
PC
ment ment services system WAN
Images Formatting system systems Wireless
Storage Content Cache gateway
Audio
Indexing Production distribution Kiosk
Interactive and search systems Transac- Streaming Media
Other data engines tion server server gateway
Other

Return network

Business and operational support systems • Analytics • Integration middleware • Content security

Source: IBM Research, Digital Media Factory, 2002: IBM Business Consulting Services analysis; IBM Institute for Business Value analysis, 2004.

19
IBM Business Consulting Services

enters the system or is created in digital form (or An “open” strategy will truly revolutionize the way
converted from analog archives), where it may be digitally companies think about content. As movie producers
repurposed to serve a variety of platform or network eventually found after the introduction of video, deploying
requirements. Content is indexed, meta-tagged (digitally samples of content widely is likely to stimulate, not erode
labeled), catalogued and stored for online accessibility sales – if the digital means are in place to manage the
to both individuals and retailers so that the provider can deployment, tracking and invoicing of content in a variety
respond on demand, formatting content to meet customer of units, such as a few bars of a song or the karaoke
needs, applying variable pricing strategies built into mix of the song or the Japanese cover of the European
the system, and transacting and distributing content for version. Other on demand packaging might include
the customer. an anthology of all of a given artist’s work of the past
decade; in publishing, licensing would revolve around
Digital media management can help perform massive what devices it will be read or played on and which
bookkeeping and distribution tasks nearly seamlessly. A famous voice will read the book or article – the same
digital spine contains back-end business analytics with content can be rendered into a variety of voices with
realtime updates, rights management, accounting and digital voice technology in much the same way that we
CRM, as well as access and restriction functions that will change the “boink” sound of our computer today from a
help protect digital content end-to-end. pull-down menu.

Strategic focus on attention will be key to profitability in an By 2010, digital management and distribution systems
“open” environment will be able to make on demand content formulations
In the pervasive media environment, the fickle consumer affordable for a broader spectrum of audiences. Telcos
must be courted, understood and catered to. Media and music providers already offer brief song samples
companies must seek to understand the user experience, as ring tones; such offers may soon extend across a
from consumers to outsource partners, and undertake wider array of content (TV soundtracks, movie dialog
ongoing feedback, R&D and increasing use of interactive or a novelist reading a famous line) and a wider array
forms of content. Attention may be managed by means of platforms – a signature on voice mail, a distinctive
of advanced data analysis. New capabilities can store telephone signal, an identifier on e-mail, a password
and analyze all known transactions of your customers, confirmation on voice recognition systems at the garage
public information such as opt-ins, preferences, available or front door. Can there be any better advertising? Fans
marketing data or permissions granted through credit- can pay to download a full version of a song or acquire a
card tie-ins. Fans and audiences of your content can be movie or novel after being seduced by brief samplings of
cultivated and targeted more successfully; deep analysis friends’ and coworkers’ theme content. When companies
and knowledge management will permit your company to interact successfully with fans instead of making them
assess and deploy both new and archival content with a the enemy, digital management technology could enable
clearer view of actual market potential. the increased interest in the medium and resulting
volume of sales we witnessed through the video rental
phenomenon.

20
 Media and entertainment 2010

Case studies: Championship sporting events leverage on Since digital technology can lower the cost of producing
demand infrastructure copies, the price of the content can be determined
Half a million attend the famed lawn tennis championship according to analytics that vary in a number of ways to
games at Wimbledon, and millions more tune in through optimize profitability. Variable pricing strategies, managed
the press, radio, television and Internet. The tournament electronically in a content management model that
lasts two weeks, or for as long as it must to complete includes business analytics to continually track sales
all events, so its year-round Web site must withstand and demand in realtime, can assess value in finely tuned
a massive 250 percent spike in user traffic during the increments. In today’s payment schemes, the newest
tourney, when 24/7 demand for accurate, realtime infor- content generally costs the most, older content less. In
mation must transverse diverse platforms and devices and
the digital management era ahead, older content may be
integrate multiple disparate systems across global time
worth more to avid fans responding to market conditions,
zones. IBM built and manages e-business on demandTM
publicity or the scarcity of various content for which
infrastructure not only to serve up scores, statistics,
a fan may be willing to pay a premium to round out a
Real-Time Scoreboards and a wealth of other content to
personal collection.
avid fans, but also detailed, online Order of Play and a
constantly refreshing array of historical and up-to-the-
Behind the scenes of managing the attention of
moment statistical analysis and player information to
24 customers and targets and paying closer attention to
broadcast commentators.
their requests, market behavior and trend indicators is
The 120 events of the three U.S. PGA Tours, as well the computing power to manage billions of bytes per
as events of the International Federation of PGA Tours millisecond. Through open standards infrastructure that
and World Golf Championships, leverage on demand allows legacy business systems to interoperate with those
systems to manage peaks and valleys of demand for
of alliance partners and outsource businesses, media
online tournament information, such as scoring and shot
firms will be able to take advantage of technology innova-
data, tour news, statistics and Webcasts. IBM developed
tions developing outside the media industry. For example,
and hosts Linux-based “virtual servers” to deliver utility
services like grid computing or utility computing allow
computing capacity as needed at variable pricing to accom-
businesses to access giant servers on demand, without
modate heavy traffic periods and scale back during the
25 having to maintain vast computing power in-house.
remainder of the year.

Set-top boxes may provide ratings

The revolutionary advantage to digital content
management is its ability to manage inventory and distri- info: Gemstar-TV Guide is working
bution on demand. The digital back-end system should with Nielsen Media Research on a
be designed to retrieve, prepare, deliver and invoice the
system that could deliver information
content on demand in a security-rich IT environment as
an order is received online from a customer or consumer. from digital set-top receivers to
An open media company provides a wide array of produce ratings information on
purchasing choices online (from samples of content to
programs and commercials. An
notes or packaging to full physical or electronic formats),
electronically repurposes digital content for a wide range executive of the company said that
of user devices and automatically adjusts the pricing and an upcoming trial, to be conducted in
delivery methods.
ten of Nielsen’s top 50 markets, would
gather information from 550 boxes
installed in at least 300 homes.26

21
IBM Business Consulting Services

Plugging into a utility computing system is much the same How will media businesses thrive, as
as using an external utility for gas or electricity – costs
fluctuate with actual usage, on demand, improving a firm’s users and customers demand more
ability to create value for customers and shareholders. content-rich, high-bandwidth interactive
experiences? This section explores
What will it take to become an open
media business?
our strategic recommendations for
Pervasive availability of digital technology will change the
becoming an open media business.
behavior of media experiencers – and their relationship
to content providers. Although traditional passive media 1. Get your digital house in order: Create or convert content
will not die, more technology in the hands of more avid to digital formats
users will push the traditional business model toward Media developers should exploit the future’s data-rich,
extinction. Survival and profitability will revolve more than pervasive media environment by creating content in (or
ever around high-quality, interactive relationships among converting archives to) platform-universal digital formats
content creators, media businesses and individuals that can be played on a wide range of user devices.
– inside and outside the company – supported by Digitization will help companies reap wider distribution
comprehensive digital media management to provide of more bytes of content in multiple formats; one user
protection, manage rights and optimize profitability. Our may want an entire book or film, but only for a small-
recommendations will discuss each aspect of the media screen handheld device; another may want a quotation
value chain pictured in Figure 11. or a 30-second clip; another, full resolution for high-

Figure 11. The open media company will embrace the “attention loop.”

• Multiple channels “I want to interact with

• Variable pricing the content, how I want
• Promotions it, when I want it.”
• CRM
• Data mining
Create or convert
Consumer inventory into digital
Content formats that can
• Intermediary relations Consumer be distributed over
marketing creation
• Content packaging Enterprise any network to any
• Deeper partnerships (Finance and consumer or partner
• New revenue splits accounting, HR,
Procurment, IT)
Content
Sales and
management
No matter what platform service
• Storage
or format, your business Content • Labeling (meta-tagging)
is open for distribution distribution • Cataloging
on media networks – • Search access systems
and non-media networks (retail and individual)
like DSL • Rights management

Source: IBM Business Consulting Services analysis; IBM Institute for Business Value analysis, 2004.

22
 Media and entertainment 2010

definition TV. Each of these formats can be managed on Take a deeper look at price points. Price calibration influ-
demand, with variable pricing structured into a digital ences perceived levels of quality, but some content, even
management system. of recent releases, should be offered at a lower price
because it will never produce much profit; conversely,
The conversion of analog content to digital management the “sleeper” that performs beyond expectations could
is an investment. Media firms need to develop a contain greater ultimate value. For example, the critically
comprehensive strategy for prioritizing the conversion acclaimed film, “O Brother, Where Art Thou” was rated
27
to digital management – content with the highest ROI 59th most popular by Variety in 2001, but its soundtrack
or the shortest payback time should be converted first. was judged independently by the public, garnering
28
Companies making incremental investments will be able triple-Platinum RIAA certification and winning five
29
to lower the costs of indexing, cataloging and meta- Grammys and multiple top awards, including Album of
tagging processes to optimize the value of the content the Year from both the Country Music Association and
30
that they digitize. These two processes are prerequisites the International Bluegrass Music Association. Work with
of a progressive conversion that will include access strategic technology partners to develop not just variable
rights, rights management, asset valuation and variable price strategies, but also the deeper analytics to identify
pricing strategies. demand indicators that are independent of traditional
measurements. Recommendation 8, below, discusses
Importantly, digital formats can help companies create advanced data analytics.
flexible choices for customers and consumers, as well
as variable pricing tied to demand to drive optimum 3. Be open for distribution, no matter where or when
profitability from archives and new content. Rights will In the open media business of the future, platform-
be tied to the person, not the device, so that portability universal digital management will help your business cut
and transfer of the content from one device to another costs by moving bytes through an online configuration
becomes easier with the development of universal and distribution system that can respond to broad-
digital standards. casters and customers with ordering and fulfillment
processes available around the clock, every day of the
2. Manage content for optimum flexibility and asset value year. Your business strategy and distribution system
In the pervasive, digital environment, an open approach will should enable the configuration of content for multiple
enable owners to reap more aggregate ROI from content types of media networks, including cable, satellite,
that is flexibly managed so that it can be sold in long form DSL and other significant systems as they emerge.
or in parts, for multiple types of distribution online. Successful media producers of 2010 will undertake
ongoing research and development to support more
The attitudes of a significant number of users toward delivery devices and systems, with an eye to the antici-
file sharing will likely carry over to other forms of digital pated increased penetration of home networks and
content, but with digital media management, owners can home theaters.
use built-in defensive strategies that go beyond today’s
packaged approaches. A digital media management strategy will include rapid,
multiple sorting capabilities to optimize the access and
search functions, cross-referenced with CRM, digital
memory of customers, realtime data analysis, rights

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IBM Business Consulting Services

management, dynamic pricing and inventory reporting. Since online distribution costs significantly less than
To reap the rewards of a 24/7 distribution business online, the traditional physical development and distribution
open standards technologies allow outsource partners, cycles, build ways to take advantage of grassroots
customers and consumers to make transactions virtually digital experiments and contributions. Establish simple
anytime, anywhere. online production and promotion resources with virtually
seamless, online digital media management. Encourage
4. Be open for delivery – in multiple packages, with independent publishing initiatives – comedy blogs, online
variable pricing and always-on customer service game characters, short feature films, new music – as a
Although mass media will not die, exploiting more way to develop markets.
channels and more niches will enable the same content
to be deployed in more ways simultaneously. Advanced Digital tools in the hands of consumers will enable
data analytics are one of the features of digital media media companies to identify content or devices that
management that will help your business deliver to the might stand up to mass marketing before making the
proliferation of niches in a fragmented market. Realtime significant investments in scripting or advertising to
data analysis can help your business to: mass-media standards. If your company owns significant
digital content resources, offer pathways to aggregate
• Determine an optimum channel mix
small fees, such as online workshops for compilers,
• Offer multiple ways to package digital content for a digital scrapbookers and anthologists, and promote their
variety of formats, platforms and devices “albums” online.
• Utilize variable pricing – the same content may be
worth more to a user at different stages of the product 6. Create new product windows and business models
or customer lifecycles With routine functions out of the core, focus on your main
• Use CRM more effectively, with more information concerns: content and strategy. Use data mining to assess
available online and collected through multiple the value of inventory, to evaluate markets, to improve
touchpoints. processes and performance, to target consumers and to
edit consumer profiles.

Customers to providers: “I want what I Evolve strategies around the timing of release windows,
want, how I want it, when I want it.” balancing the features of various delivery systems with
the nature of content. Monetize content by compressing
cycles and windows, since digital pilfering – and a
5. Open digital doors – to contribute, produce or author
shortened premium profit window – must be counted
dynamic content
as part of the cost of doing business. Give your fans
As technology continues to put devices, megabytes
choices, to buy pieces of content, buy the entire work or
and digital capabilities in the hands of consumers,
buy extra content. Some music distributors and others
digital media analytics can help the traditional forms of
are experimenting with creating new windows – offering
new device and product development and even talent
prerelease digital singles, or selling only albums initially
scouting. The largest investments in content are in the
and individual tracks later.
creation, marketing and distribution of physical media, but
costs can be slashed in the digital distribution of online
media and in aftermarkets for headline releases.

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 Media and entertainment 2010

We anticipate that start windows for the release of various Filmed entertainment release windows
media products will creep earlier and end later – with
the availability of some highly popular content extending continue to compress, with theatrical
indefinitely. Further, as digital technology advances day-and-date releases increasingly
distribution opportunities, older forms may be rendered common, home entertainment
obsolete. As Figure 12 illustrates, physical rentals may
be extinct by 2010. The goal is to optimize each content windows starting earlier and earlier,
asset’s total value through a combination of price points new windows appearing and some
times release windows strategies. threatened altogether.

“Day-and-date” release builds anticipation, forestalls piracy

Warner Bros.’ third “Matrix” picture was released at the same time worldwide in 80 countries and 107 territories, utilizing more
than 8,000 prints for the U.S. market and more than 10,000 internationally. Counting on the proven success of the first two
episodes to appeal to its predominantly young, male fans, who would flock to see the “Revolutions” installment no matter the
hour, the opening took place at 6 a.m. in L.A., 9 a.m. in New York, 2 p.m. in London, 5 p.m. in Moscow, 10 p.m. in Beijing and
11 p.m. in Tokyo. The picture was released in 43 unique languages, only 14 of which were dubbed. Although Warner’s executives
indicated the approach would not work for all films, the anti-piracy climate and the lowering of international trade barriers may
31
entice other studios to follow their lead.

Figure 12. As digital delivery options proliferate, some windows compress and others face extinction.

Current
Theatrical – domestic Emerging

Current
Theatrical – international Emerging

Current
Sell-through – domestic physical Emerging

Current
Sell-through – international physical Emerging

Current
Sell-through – digital* Emerging

Significantly diminished
Rental – physical by 2010

Current
Rental – digital** Emerging

Current
Pay TV Emerging

Current
Network TV/Syndication
Emerging

Other windows ? ? ? ? ?

0-12 3-6 6-9 9-12 12-15 15-18 18-21 21-24 24+

Weeks Months Months Months Months Months Months Months Months

Notes:*Download-to-own to STB, iPod, media center, disc, etc.**PPV, VOD.

Sources: IBM Business Consulting Services; Industry Interviews with studio executives; Sanford Bernstein, “The Long View,” February 25, 2005.

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IBM Business Consulting Services

We anticipate that media businesses will reposition in one or two low-cost labor environments rather than
and restructure as they adapt to the new environment spread throughout your operations. And utility computing,
and focus on their core activities. Winning companies using an outsource provider for network operations and
will divest unneeded assets and join with other alliance maintenance, can enable your company to negotiate fixed
businesses to create economies of scale and make new costs for services.
business models work. We expect an era of continued
deals and realignments with specialists, as mass players Since infrastructure investments can be undertaken
search for their competitive advantages. incrementally, key strategic considerations revolve
around your company’s priorities. Successful companies
7. Manage openly and communicate in realtime through will determine what business components create the
digital infrastructure most value in the short term, and what components to
Content is the heart of your business, surrounded by add next. The effect of adding new digital capabilities
a focused strategy and a deep relationship with your can be exponential. Winning companies will develop an
identified market. Put a digital backbone in place, so infrastructure strategy to prioritize which new compo-
you can focus on core M&E research and development. nents, when added to existing ones, will most likely
Having a digital business infrastructure based on open aggregate value.
standards technology gives your company options that
were unworkable in traditional business models. 8. Leverage a new depth of business intelligence made
possible by digital technology
Use digital management systems to remove or outsource As your company begins to add more digital infrastructure
routine functions and production. A digital spine integrated and services to gain and hold customer attention,
both horizontally across operations and vertically with business intelligence can be key to creating greater
customers and consumers can significantly reduce efficiency. Business intelligence can be gleaned system-
investments in labor-intensive, back-office tasks such as wide, once your company begins to utilize more digital
order fulfillment, accounting, human resources, customer systems through open standards and middleware technol-
relationship management and information technology. ogies, content development and management, online
New technologies can keep outsource providers close security features, front- and back-office systems, customer
and transparent even though they may be centralized relationship and alliance partner management systems.
With routine functions out of the core, focus on your main
concerns: content and strategy.
Open standards give your business
Relevant, up-to-the-minute data can be selectively
systems the ability to interconnect restricted or made accessible online to those who need
regardless of platform with legacy to know, globally throughout your enterprise. Connections
systems, business partners and with alliance partners can also provide market and
customer intelligence. The exponential effect of shared
customers, and to utilize Web services intelligence can be honed to help your company focus on
to communicate globally in realtime. strategic initiatives, satisfy customers by appealing closely
to their interests and make ongoing determinations of the
value of assets, partnerships and customers.

26
 Media and entertainment 2010

Pay attention to your customers and consumers. Gather 10. Become an on-demand business
ongoing feedback, both passive and active, to understand The emerging media and entertainment environment
what they want and get their attention. Use more inter- will be characterized by rapid and continuous disconti-
active forms of content. Understand the value of adding nuities, posing several challenges for media companies.
“entertainment” value to more and more forms of content. It is a demanding revenue environment, with intensive
Be open to cataloging some forms of content that are and specialized competition. There are continuing
created by non-media firms, such as reality-based or pressures on costs and returns, a significant amount
consumer-authored content. Find the “virtual Hollywood of unpredictable demand and high business risk.
and Vine” – monitor new media behaviors to discover the Successful organizations will accelerate value creation
front edge in content and consumption. by becoming on demand businesses. The on demand
business model provides a new way of organizing and
9. Use partnership strategies that drive efficiency and managing the enterprise, with each business component
optimize customer attention serving a unique purpose, collaborating with other
As your company focuses on its core competencies components based on agreed cost and service levels.
and divests unnecessary capital investments, develop Each component will be focused, responsive, variable
partnership and alliance strategies to drive efficiencies and resilient.
and scale and add value to your offerings. An alliance
should be undertaken to create an asset value or to drive For a media and entertainment company, on demand
an economy of scale that cannot be accomplished in- offers some specific opportunities. We have grouped
house. If an outsource specialist provider can offer order these on demand opportunities into five core capabilities
fulfillment or back-office processes more efficiently and that media and entertainment executives should execute
at lower cost than doing it inside, this alliance can help to drive shareholder value:
drive efficiency. Another company may have a recognized • Consolidate overhead. Consolidating overhead through
brand in a new segment or channel that your company shared standards and processes allows companies to
would like to exploit; this relationship can help drive value. focus on core businesses
• Integrate operations. Tightly integrating operations strat-
We foresee the emergence of more boutique companies
egies should garner increased operational efficiencies
that will provide specialized functions cost-effectively in
and improved asset utilization
partnership with giant brands, as well as the breakup of
overextended conglomerates lacking a tightly focused • Optimize business customer and partner offerings. By
strategy. Your company should focus in-house on the optimizing business customer offerings, companies
products or services that differentiate it sharply from should see increased revenues and new cost savings
competitors. Business intelligence will help determine • Drive direct-to-consumer relationships. Direct-to-
where your partnership efficiencies may lie; and digital consumer relationships built through mass-customized
systems can help you communicate seamlessly and offerings should help to increase loyalty
continuously monitor access, rights and security.
• Prepare for integrated media. Create integrated and
flexible operating environments designed to deliver
near-term efficiencies while hedging future margins.

27
IBM Business Consulting Services

We believe that these on demand approaches offer Technology’s growing pervasiveness,

a comprehensive roadmap for driving value in the
coming marketplace, and that they address managers’ user-friendliness and affordable power,
and shareholders’ high expectations of new initiatives. and consumers’ growing desires to
“Open” methods of managing media and entertainment interact more with digital technology,
companies place these approaches in an even broader
context, including transactions and partnerships outside will continue to make human attention
the core media and entertainment industry – such as a scarce resource for the foreseeable
relationships with retailers, telcos or technology providers, future. The combination of new
for example. In this context, an on demand business is
an enterprise in which business processes – integrated technologies and increased consumer
end-to-end across the company and with key partners, appetites will drive continual change
suppliers and customers – can respond with flexibility and and large-scale investments.
speed to any customer demand, market opportunity or
external threat.
The open media company of the future is a right-sized,
The open media business of the future: brand-owning business with a deeply strategic approach
Conclusion to alliances and an essential mix of elements for the core
business. The on demand model will grow in influence
In an environment of uncertain economic growth,
and power between now and 2010 – a responsive, resilient
narrowing margins, rapid digitization and the threat
business that can refine, outsource or change components
of piracy, successful companies will adapt to an era
and providers flexibly and identify, analyze continuously in
of continued repositioning and restructuring among
realtime and react readily to market changes.
mass players and specialists, as companies focus on
their core strengths. Winning companies will divest
To remain profitable, media and entertainment companies
unneeded assets, join with other players to achieve
must respond to the convergence of technological
scale and make new business models work based on
innovation with the consumer’s imagination and sense of
competitive advantage.
entitlement, as these key trends evolve to meet the open
environment made possible by digital technology. The
Media companies will open up new ways to create,
open media company’s information architecture should be
manage and distribute content. They will open new ways
designed to integrate people, processes and technologies,
to store, catalog and break down content into multiple
in every location – both inside and outside the company
product units, as well as the delivery, packaging and avail-
– including providers, suppliers and customers.
ability of content elements. They will integrate, manage
and protect content, services and business models
For more information
through open-standards digital technology. And they
To learn more about IBM Business Consulting Services,
will create open, reciprocal relationships with suppliers
contact your IBM sales representative or visit:
and customers, allowing more access and granting
ibm.com/bcs
more freedom in available ways to combine content
and delivery. To obtain additional information, please visit:
http://www-1.ibm.com/services/us/bcs/html/
bcs_whatwethink.html

28
 Media and entertainment 2010

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