A little while ago along with my usual ranting and ramblings I actually was strapped down and forced to write in a cohesive and structured manner. This of course goes against the grain of what I do - as I like to ramble on and on and go off in various tangents (I'm like that when speaking as well :) - but when asked by Miss D & Miss B to create a white paper on my thoughts of where the media industry is going I started rambling on like a loon - and then the bombshell - 1500 words!! On THIS topic!!! This is almost a novel with the number of ideas, concepts and models that I have rumbling around my head... luckily Martin came to my rescue and helped make it a readable piece rather than the 2million rambling words that it could have turned out to be!!
Even after this was written back in February / March we have already seen Coldplay deliver their new single for FREE!! Free concerts - so with more to come maybe you need to speak to us ;)
Anyway - the paper is out there somewhere if you want the full on version with pictures or even a free chat with us on this topic then email talktous@conchango.com and we'll set you up ;) - so below is my words and thoughts - nicely edited and delivered to you!! Enjoy!
With customers increasingly accessing music and movies for free, 2008 is shaping up to be a critical year for digital media across the world. How can content owners and resellers respond to the challenges that face them?
The past five years have been marked by a propensity for content owners and resellers to avoid tackling the issues associated with the protection and distribution of their content. Both parties seem to have forgotten or even ignored the most salient element in this whole marketplace – consumers who have traditionally paid for their music and movies.
This stance has led to customers becoming increasingly frustrated and confused by what they can or cannot do. Ironically, it has even driven them to explore the wonders of
peer-to-peer services. As a result, more and more are being turned ‘to the dark side’ as the only place where they can freely access content ranging from the latest music releases through to US television series that are yet to be on air in the UK.
Waking up to the challenges
So what is changing? Why is 2008 turning out to be such an important year? At last, content and rights holders are waking up to the public’s growing
appetite (one that will increase by 40% this year*) for digital content. The result is that growing numbers of
retailers and re-sellers are delivering unprotected content to users – especially in the music sector.
It’s a sign that the market is recognising that
consumers want to be in control; they do not want content owners or digital rights management to dictate how, why, where and when the user should use their content. This is a massive step in the right direction but what else can we expect in the coming months?
Well how does ‘Music will be Free’ sound? Perhaps not everything, and maybe not all the classics and genre-defining music, but free to a point!
How free music adds up to a profitable business
How can giving music away make commercial sense? Well, looking at some basic
principles of digital business, where a digital master file is created and then simply copied, it’s easy to see that the more content is delivered, the more money is being made. However, the real issue is where does this free music come from – and is it really free?
The answer, of course, is not so simple. Yes, music will be free in essence but in return for their ‘free’ music, consumers will be subjected to targetted advertising or sponsorship to some degree that will in essence pay the labels for their content.
This is neither new or a radical shift. What it is, however, is a new business model and dimension to the ever-growing race for digital dominance. Not everyone will be able to compete in this space – as there are specific rules and applications of this model that will eliminate some of the ‘me too’ players in this space but others will step up to the mark and create a new model of excellence for this media.
Goodbye DRM, hello MTR
DRM (Digital Rights Management) is all but gone from the music industry and with it the protection and limitations that have crippled the user and their overall acceptance of this medium. However, as one piece of the puzzle disappears, another will rear its head.
This time, however, the technology is not there to hinder or disable, it is there to enable
and enhance each user’s experience and enjoyment of their media.
MTR (Media Tracking & Reporting) is the initiative that will enable this to happen. Naturally, there will be the usual outcry that that it is just the same as DRM but that sentiment misunderstands the
benefits of the technology. The power of MTR is that it enables
users to share music, track its progress around the globe and report back. As a result, it can transform a single, unobtrusive track into one that is shared among 3 million people across the world.
All signs indicate that the summer of 2008 will be the real tipping point for the music industry. This is when new, innovative business models will appear to take advantage of this huge, connected
market. The consumer will be the winner along with those labels that accept and participate in this new, exciting age.
Entering the movie world
Other types of media such as movies are an all together different beast. Movie production can run into hundreds of millions of dollars and costs are recouped through the tried and tested method of cinema release, rental, pay-per-view, sell-through and retail.
Even if a movie fails to perform well at the box office, the additional sales channels mean that the movie makers/ rights owners still have a chance to get their investment back.
If it ain’t broke..?
So why should movie makers and distributors consider changing a successful sales model? Well, we live in a fast-changing digital world, a world where film fans increasingly want to watch a movie at home when it’s still on cinema release.
There may be reasons why the consumer isn’t sitting down in the front row with a bag of the finest popcorn and a gallon of coke but is willing to pay the same ticket price to watch that movie in their front room. Suddenly you have another stream of income at a premium price point and here again lies a new business model that can be leveraged, exploited and executed using technical expertise.
Will it kill off the thriving cinema industry? No, why should it? These are the very same
consumers who (for whatever reason) weren’t going to trek out the cinema but can now enjoy the movie in the comfort of their own home. It will of course drive down the window times of the lifecycle of the movie but ultimately will also recoup the commercials faster.
As seen on screen
As film makers look to off-set some of these costs, it seems inevitable that we will also see a much clearer and in-your-face advertising model. Product placements won’t just increase but will become increasingly sophisticated.
So, while you may continue to see stars such as Robert De Nero drinking Coke in a movie (for which Coke may pay as much as up to $30million), when that film is distributed via other medium channels such as Blu-ray then something interesting happens. The Coke that
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De Niro is drinking can now become an immersive advert that the user can interact with, contributing another dimension to the integrated advertising model.
Would this ever happen? Well, to see how much times and attitudes have changed, let’s take a look at Back to the Future part II. The movie incorporated specific brands that were pushing their ‘future’ thinking such as a Pizza Hut hydrated pizza and Black & Decker. When it was released in the 80s, it was criticised for such blatant advertising but now audiences
would hardly bat an eyelid.
The pace of change is likely to be slower in the movie industry and it’s unlikely that free movies will be as common as music in 2008 but the landscape is definitely moving this way. Once you add up a few major sponsorship or advertisement deals within a movie then throw in digital distribution, you’ll soon discover that producers are suddenly waking up to movies that cost £0.00 to make.
And the winner is...
With this model, the simple answer is that everyone is a winner. Advertisers get their brands endorsed by stars and seen by millions; movie studios reduce their risk by having additional funds supplied by advertisers in place before production; consumers get to watch the same high quality movies where and when they want to.
Becoming a leader of the ‘free’ world
Whether you are content owner, publisher or reseller, retailer of digital media, the ultimate challenge is to work out what a successful business model looks like when the selling price to your customers is £0.00.
Throughout, it’s important to bear in mind that:
1. The consumer perception of ‘free’ is just that - a perception!
2. Retailers/resellers have to subsidise the free catalogue with concepts that can
support a £0.00 price point for consumers.
3. Content owners must still get paid.
A final point to note is that the reseller that must pay the storage, distribution, delivery and associated costs with the media. Therefore, to be able to make any business model work in this brave new world, content owners must review their own cost and revenue models so that both sides can move forward and make digital media a mass commodity.
Moving in the right direction
Not everything will be free to the consumer straightaway so here’s a thought we’re happy to give away.
If a music label demands a cost price of £0.59 per download, it may sell 300 units of that track. However if that label looks closer at their sales model and brings the price down to say £0.29 (an easier price that can be associated against any advertising model) it might see that figure of 300 transformed into sales of 3,000 or more.
Whatever you think of this micro-payment model, the most important thing is to act – and act now. Ignoring the issues of digital media has only made the situation worse for content owners and distributors. Now is the time to work out your strategy and deliver.