This article originally appeared in the 2013, No. 1, issue of The journal of high-performance business Industry Report Media & Entertainment The eyes have it Guess who controls the future of TV By Robin Murdoch, Youssef D. Tuma and Marco Vernocchi Television is about to undergo the same kind of disruption that occurred with the introduction of the smartphone. What will change when the largest screen in the home has a big say in how we consume content, information and services over the Internet? accenture.com/outlook
Picture a typical nine-year-old watching TV today. She probably has a tablet in her lap, ready to check out videos related to the Animal Planet special she s watching. Or perhaps she s borrowed her big sister s phone so she can vote on this week s episode of Dancing with the Stars. for instance, the pressure the cable companies are facing from so-called over-the-top (OTT) providers, such as Netflix and Hulu, which send their content through the Internet. In short, we re now seeing the collapse of the walls that previously excluded new entrants to the TV business. 2 By the time she s old enough to head off to university, however, her TV viewing experience will be markedly richer. By then, she may be inviting her friends over to watch the sitcom filmed by her classmates and loaded into her home s cloud-based content library. After her friends leave, she might pick up the easy-to-use TV remote to take a high-resolution tour around the Beijing neighborhood where her big sister lives. Or maybe she ll search for a favorite scene in one of the Twilight movies. Good-bye to the familiar old TV set? Au contraire. For years now, the demise of the popular appliance has been predicted as the Web has claimed more and more of our screen-viewing time. The fact is, the TV is here to stay. Its role in delivering compelling viewing experiences collective and individual will continue. However, the big screen in the living room is indeed undergoing a metamorphosis, because what goes on behind the screen is changing dramatically. For most of us, the TV will develop as an even more valuable vehicle for entertainment and, increasingly, for education and information. But for business leaders up and down the media value chain from filmmakers and broadcast channels to Internet service providers to last mile communications operators the reinvented TV is a huge disruption. There will be winners businesses that quickly grasp the nuances of the resulting changes in the creation, financing, production and delivery of content. But others may find themselves facing fierce new competition. Take, So how can the TV still be relevant in a tablet and smartphone age? To be sure, TV viewing time has become fragmented the result of busy lives that see consumers recording, for example, the Boardwalk Empire episode that the school board meeting forced them to miss. And of course, screen time today is shared with laptops, phones and tablets. Accenture s latest research on consumer viewing habits finds that fully 62 percent of TV viewers are concurrently using a computer or a laptop and 41 percent are using a mobile phone messaging friends about a sitcom joke or fact-checking politicians claims, perhaps. Coupled with the widespread availability of high-speed wireless Internet, today s viewing experience is more interactive, more consumable and far more sharable in real time. Dominant medium But the truth is that the living room screen remains a dominant communications medium, and will continue to be so. There is still no substitute for the collective viewing experience of watching the big game or the season finale of a popular drama. Plus, the new Accenture study reveals that young people are much more engaged with TV than might be supposed. Even 25-to-34-year-olds view, on average, almost 140 hours a month of traditional TV programming more than 20 times as many hours as they spend watching video on the Internet or on their phones (see chart, page 9). And nearly half of all users still sit down in front of the TV not their smartphones or tablets to watch
Reinventing TV: Nine key questions for established media players There are dramatic changes in the television industry going on behind the screen (see story). Traditional media players must respond by reinventing themselves, a process that begins with self-examination. Crucial questions for the C-suite management team include: 1. Should traditional media and entertainment companies reinvent themselves as consumer businesses? If so, how? 2. Can new digital economic models be made to work for all parts of the media value chain? 3. How might new OTT offerings threaten the subscription pay-tv giants? 4. What new types of partnerships and collaborations should media businesses consider in order to better match consumers new digital experience requirements? 5. Will new industry business models sustain investments in high-quality content or will profits be channeled elsewhere? 6. How can the ad industry s traditional players collaborate to move toward a new world of multiplatform advertising? 7. How can data and analytics be used to galvanize new business models? 8. Should traditional vertically integrated media companies resist or embrace open platforms? 9. How do content companies maximize revenue across linear and on-demand as the balance shifts toward the latter? 3 some type of OTT video content. Another relevant measure: YouTube users average five or so hours of video viewing per month a figure that is dwarfed by the time they spend in front of the TV. Bottom line: Television still has great power to pull audiences. And big changes are coming that will continue to engage viewers. Not too many years from now, we will be able to use the TV unit to access an entire ecosystem of content richly immersive, far more of it fully interactive and all of it on-demand via the Internet. It will be easily sourced from content catalogs and accessed with a handheld device a next-generation smartphone, perhaps, or a dedicated device that is as simple and intuitive to use as today s remote. Just as significantly, individual consumers, armed with highperformance hardware and software, will become content creators, able to provide more of what the news channels deliver. (Think of higher-quality versions of the public s mobile-phone news bulletins of Hurricane Sandy s devastation.) At the same time, the major movie studios are meeting the growing demand for premium video content. Look at the money pouring into blockbusters $150 million to produce Skyfall, the latest James Bond film, for example, and the estimated $250 million spent on the newest Batman movie, The Dark Knight Rises. These movies are being engineered during original production to maximize the downstream opportunity in extras, web videos, apps and so on. And, increasingly, content is as likely to be distributed by an Amazon or a Google as it is to show up courtesy of Bravo. King of content Network executives and cable operators don t need to look far to see what is rocking their world. The easy answer, of course, is technology from the TV hardware to the social media with which to share content to the cloud services that make it effective to store vast amounts of data. The fact is, however, that the consumer is the undisputed king of content. Over the past decade, control of the viewing experience has shifted rapidly to the one who holds the remote. TiVo and many other digital recording systems have made it easy for people
UK viewers now get all channels digital TV In the summer of 2012, the British public got another way to watch telly. The new Internet TV service, called YouView, has been hailed by some industry insiders as the natural successor to Britain s current model of free-to-air TV. Some researchers expect that 3 million UK homes will have YouView by 2015. YouView combines the United Kingdom s free-to-air digital channels with on-demand content, all delivered without subscription. An easy-to-use set-top box brings together IP and broadcast TV technologies, making them accessible to viewers through a single consistent and intuitive user interface. The service is backed by a consortium of seven partners, including the country s main terrestrial broadcasters (BBC, ITV, Channel 4 and Channel 5), two ISPs (BT and TalkTalk) and a network services provider, Arqiva. The service s big innovation happens behind the screen. Its application platform gives consumers access to a vast array of content options. For example, if the box is connected to a broadband line from a partner ISP, then an application providing that ISP s IPTV service will appear automatically. As the number of content sources in its ecosystem grows, YouView s attractiveness to both consumers and to potential new content, devices and service providers will continue to increase. At launch, more than 140 content providers had signed up to add their content to the YouView platform; today, more than 300 providers are interested. YouView is not simply another version of a web-enabled TV service. It features a single, consistent, intuitive user interface (integrating on-demand, catch-up and broadcast TV). It includes a unique content discovery platform: a central catalog that allows global search, browsing by genre/popularity across content providers, and a backwardlooking electronic program guide (EPG). Unlike a lot of smart TVs, it doesn t zone off on-demand content in a separate section that you access from another menu the whole lot is integrated, notes one reviewer. Its open application platform can be used by any participating content provider, offering consumers a tremendous range of content. It also upgrades easily, accepting new features over time such as behavioral targeting and predictive recommendations generated by analysis of social media data such as itunes Genius music recommendations. YouView provides a strong springboard for innovation. Its unified and open ecosystem is expected to disrupt the existing TV business model, affecting content providers, broadcasters, ISPs, advertisers, set-top-box manufacturers and many other technology enablers. And it offers abundant opportunities to create new products and features, becoming increasingly attractive to consumers and providers of content, devices and TV services. To date, consumer feedback on the user interface has been very positive. UK telecom company TalkTalk just one of multiple sales channels for YouView signed up 29,000 YouView customers in the first month after launch. A thousand new customers are signing up each day for the service, according to a TalkTalk spokesperson. 4 to choose when they watch their favorite programs. But consumers also want to be able topersonalize the services they consume, with search, recommendations and social features becoming increasingly integrated across media. Accenture found that 64 percent of them prefer using genres that is, content types such as spaghetti Westerns, cartoons and others as search criteria for finding new video content. And 43 percent prefer finding new video content by using personalized recommendation engines that track what they ve watched and suggest similar content. In a similar vein, 28 percent of users have already created video playlists on their current video services, such as Netflix and YouTube. These companies make it ever easier to do this, particularly by using historical behavior to recommend relevant viewing experiences. The story is much the same with music services such as Pandora and Spotify as well as Amazon.com with a whole range of merchandise. At the same time, consumers are becoming distributors. Social media users have an average of 3.2 friends who post videos at least once a day;
Screen of choice TV is still the primary device for watching full-length shows and live content in both the United States and the United Kingdom. Portion of US and UK viewers who watch video content over the Internet, on each device 70% Full-length movies and TV 4% 32% 7% 65 Live content 6 30 5 12 Short videos/clips 24 74 12 9 TV User-generated content 15 49 PC/laptop Mobile/smartphone 9 Tablet Source: Accenture analysis 5 almost four out of 10 consumers post video online via social media. More than half of the respondents polled by Accenture would be interested in recommending video to others as part of belonging to a video service. This is not just about controlling content; it s about content creation as well. The term prosumer is entering the language to describe talented amateurs who use sophisticated but affordable consumer technology to produce quality news reports or instructional videos, for instance. Today, aspiring adventurers can buy a GoPro camera for less than $300, attach it to their mountain bike or scuba mask, and capture astonishingly high-quality video that is easily edited on any laptop and just as easily shared via social media. Indeed, the growth in so-called user-generated content has exploded. YouTube now has more than 800 million unique users every month, and while the vast majority of them are watching, growing numbers of them are posting content that they or others they know have generated. The capabilities are developing so quickly, and spreading so widely, that it s safe to say that prosumer content will soon provide serious competition for some genres of professionally produced content news footage, for instance, and some reality TV shows. Consumers are even changing the funding of content creation (see sidebar, page 6). If those technology-enabled factors are pushing the media industry from one side, its key sources of revenue notably advertisers are pulling it on the other side. Increasingly, businesses expect to be able to measure what they get for their investments. Traditional media has always had a hard time delivering precise measurement, and
Not waiting for deep pockets By 2010, a movie director named Steve Taylor secured funding to create a film adaptation of Donald Miller s book, Blue Like Jazz. The following year, the film lost the support of a major investor, forcing Taylor to stop production. That s when two fans of the book stepped in. To raise the $125,000 required to resume production, they created a Kickstarter webpage called SAVE Blue Like Jazz! (the movie). The campaign reached its funding target of $125,000 in 10 days and blew past it, becoming the most successful Kickstarter fundraiser of 2010. In total, $345,992 was raised by 4,495 backers an average of just $76.97 each. In April 2012, Blue Like Jazz opened nationwide across 136 screens. In just eight weeks before distribution internationally and through rental and cable channels it had netted half of the movie s total budget. It is just one of several examples of crowdfunding. The trend is borne out by Accenture s recent consumer research: 36 percent of digital consumers would be willing to donate small sums to fund their favorite movie or TV program. 6 while the explosion of Internet media is exacerbating the situation by further fragmenting viewing attention, it is also creating opportunities for better measurement. Following the money So who wins in a new media world? The consumer does, of course. But the other winners are likely to come from outside the boundaries that have defined the industry over the past half-century. It is not a stretch to say that companies such as Amazon and Google will make big gains, as will others that grasp the significance of the disaggregation of traditional media value chains and the development of new forms of media value creation and consumption. We ve already seen the arrival and growth of businesses that offer new ways for consumers to access digital content. New entrants like YouTube and Netflix are also now creating their own content to differentiate their brand and sidestep the battle for content rights. Amazon, Google and Apple already offer consumers access to significant amounts of content, even though it is not at the core of any of their businesses. For instance, Google s core business is search, yet it streams more than 4 billion hours of video per month via YouTube. Apple generates the vast majority of its income from sales of its devices, yet it made $2 billion in revenue in the third quarter of 2012 alone from its itunes Store, App Store, the ibookstore, sales of ipod services, and Apple-branded and third-party ipod accessories. The newcomers are following the money. They understand that success in the media sector has revolved around premium content, and that it will continue to do so in the future. Which explains YouTube s announcement, in October 2011, of a $100 million investment in premium channels and the announcement by Netflix in May 2012 of its plan for a $185 million, five-year investment in original content. Just two examples of Netflix s investments: The new season of Arrested Development, releasing shortly, and House of Cards, the US version of the UK political series of the same name directed by David Fincher and starring Kevin Spacey. The tectonic shifts underneath the media industry will permanently reshape the landscape, altering everything from the flow of advertising dollars to the makeup of the industry itself. To that last point: Some of the writing may already be on the wall. In recent months, some pure OTT content providers have gone from strength
For further reading Accenture Video-Over-Internet Consumer Survey 2012: Winning the Battle for Consumer Trust, Accenture 2012: http://www.accenture.com/usen/pages/insight-video-over-internetconsumer-survey-2012.aspx Taking The Pulse study, Accenture 2012: www.accenuture.com/pulseofmedia to strength. Netflix now has more subscribers than many pay-tv operators in the United States. That is an astonishing statistic, given that Netflix was founded only in 1997. At the same time, the most forwardthinking of the traditional operators are making significant moves to properly position themselves in the new media world. budgets across platforms. They are getting some help from increasingly sophisticated customer data collection and analytics tools, which are beginning to enable new forms of cross-screen targeting and measurement. To a large extent, digital removes the guesswork from traditional advertising models digital data is more accurate and more granular than its analog predecessor. Changing Faces: The TV Company of the Future, Accenture 2012: http://www.accenture.com/us-en/ Pages/insight-changing-faces-tvcompany-future-summary.aspx For more related content, please visit www.accenture.com. 7 To take just two examples: British Sky Broadcasting is making its existing content offerings available on as many devices as possible, and YouView a new open-platform system that makes IP and broadcast TV technologies easily accessible to viewers through one intuitive user interface is backed by such industry giants as BT and the BBC (see sidebar, page 4). Removing the guesswork Traditional subscription models are not the only ones at risk from the new media model. Advertising will also have to accommodate the steady shift to digital content and the inexorable move to OTT content, together with the fact that more and more content is being viewed holistically, with digital entertainment experiences encompassing TV, film, web video, gaming and apps. Thus far, the managed migration of rights to new platforms has preserved traditional TV advertising and pay-tv subscriptions as the greatest drivers of revenue. But the industry may be about to change too fast for that to remain true. Possible signs of things to come: Subscriptions could well shift away from bloated bundles to à la carte options that allow consumers to pick and pay for exactly the content they want and no more, from a range of different providers new Internet-based players among them. Already, chief marketing officers everywhere are scrambling to reallocate and optimize marketing But there is still much to do before the typical marketing department is able to effectively use sophisticated analytics to deliver premium, personalized, interactive advertising, and create a richer, more detailed understanding of specific consumer groups or fan bases that will respond to new offers. So what does the new face of TV mean for today s established media businesses? The ascent of the consumer requires business models that are built around consumer needs rather than those of a particular channel, platform or advertiser. A single shared view of the customer often across different channels is a prerequisite for a successful, consumer-focused multiplatform strategy. The businesses that adapt successfully will need to try different approaches concurrently. They ll need to create and run with hybrid business models and constantly reevaluate their place in the media value ecosystem perhaps taking on new roles so they can spot and capture new revenue opportunities. In short, players all across the media value chain now have to plan for a new and fundamentally different media delivery architecture. Ten years from now, the TV will still be one of the largest pieces of furniture in the living room, and it will still have a central place in family life. But the TV business overall may be unrecognizable certainly when compared to the operating models and industry makeup that prevail today.
The decisions that new entrants are making today up and down the media value chain are already forcing some serious rethinking within the established media industry. The traditional broadcast networks those most at risk of disruption must act more promptly and assertively than they are accustomed to if they are to survive in the new world. But the decisions being made by the Amazons and Googles have ramifications far beyond the media business itself. They will color the choices that advertisers business-to-business as well as business-to-consumer will have to make. They will have an impact on the world of education. They may well change the directions of development of a host of new content-delivery products. And they could even reshape the role of media as it reflects and affects public policy. About the authors Robin Murdoch leads the strategy group within Accenture Communications, Media & Technology. He is based in Seattle. robin.murdoch@accenture.com Youssef D. Tuma leads Accenture Digital Services for the United Kingdom. He is based in London. youssef.d.tuma@accenture.com Marco Vernocchi leads the Media & Entertainment group within Accenture Communications, Media & Technology. He is based in Milan. marco.vernocchi@accenture.com Outlook is published by Accenture. To paraphrase the old political maxim: Where TV goes, so goes the nation. The views and opinions in this article should not be viewed as professional advice with respect to your business. The use herein of trademarks that may be owned by others is not an assertion of ownership of such trademarks by Accenture nor intended to imply an association between Accenture and the lawful owners of such trademarks. For more information about Accenture, please visit www.accenture.com Copyright 2013 Accenture All rights reserved. Accenture, its logo and High Performance Delivered are trademarks of Accenture.