resulting in data inconsistencies. This presents a formidable challenge to convert proliferating volumes of data extending from customers, products and services and distribution channels into bankable knowledge. One way to quickly and effectively extract value from these vast data pools is to pursue analytics as a service (AaaS), a new delivery model that allows M&E players to work closely with specialists that provide analytical insights on the fly, while shifting the cost of owning technology infrastructure, processes and talent to the chosen partner.
A Highly Competitive Landscape Technology convergence has blurred traditional media boundaries and reduced entry barriers, creating new forms of competition for M&E companies. For instance, the rise of over-the-top (OTT) television, where content is directly delivered via broadband Internet, poses direct competition to cable and satellite televisions, which already compete with each other. The introduction of telco TV, operated by Verizon and AT&T, has increased competitiveness in the pay-TV market, making it imperative for cable operators to provide new services and develop new revenue streams to not only retain but also grow their existing subscriber bases. According to Infonetics Research, attractive pricing offers from IPTV and other OTT video services like Amazon On-Demand and Netflix are eating into cable operations in North America, which has seen a continuous decline in new cable video subscribers.1 For studios, the gap between theatrical release and home video release is shrinking, and DVD sales are plummeting. DVD sales, which offer a 65% profit margin, were once a major revenue source for Hollywood and helped movie producers achieve investment returns even if their films languished at the box-office. But their sales have fallen by more than $6 billion during the 2006 to 2010 timeframe, to $20 billion, as consumers embraced less expensive alternatives such as renting content rather than purchasing it (see Figure 1). The much-hyped Blu-ray Disc plus
Driving Forces
From phonographs and audio cassettes, to compact discs and now movies in the cloud, technology continues to evolve, testing M&E companies ability to keep pace with consumer demands. M&E has been profoundly impacted by the digital revolution and, as a result, has been in flux for much of the last two decades, as waves of new players tap advances in digital devices and bandwidth, to the detriment of established players. While providing numerous opportunities, technology has also created a complex, volatile business environment, in which organizations are forced to rethink their strategies to deal with the challenges of the digital world, including unpredictable demand and consumption patterns of customers, competition from new and alternative sources, content monetization and managing IP rights and supply chains.
Figure 1
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digital product sales have failed to make up for the sharp decline in DVD-generated revenue. The growing popularity of different forms of renting such as DVDs via mail and subscriptionbased digital streaming threaten digital film purchases and pay-TV channels that survive on movies and television shows. The publishing sector, on the other hand, has seen the Internet disrupt long-established business models by dismantling entry barriers. The proliferation of e-readers and tablets has created a surge in e-book sales, which now account for one-fifth of revenues generated by the largest publishers in the U.S. Many bookshops are closing, and publishing companies must ensure that they are adapting to the digital world while protecting their traditional revenue streams. Digital books reduce costs for publishing houses and relieve them of the grueling printing and inventory management processes. However, they are not as effective in grabbing attention as the attractive hardcovers in the store, and they attract piracy, which has become rampant in countries such as Spain and Russia,2 with a number of e-books regularly appearing on file-sharing Web sites. The emergence of social media and blogs provide consumers with numerous alternatives to access, produce and share content. Not surprisingly, the Internet is increasingly becoming the preferred source for news (see Figure 2), putting tremendous pressure on the advertising revenues of traditional newspapers.
Content Monetization Traditionally, newspapers, magazines and radio offered much of their online content for free, while movies, games, television shows and music charged. They assumed that traffic to their Web sites would fetch advertising revenues, but they are trading analog dollars for digital pennies (and upgraded to dimes), as described by head of NBC Universal, Jeff Zucker.3 Advertising revenues continue to decline as readers increasingly turn to free online content. Online advertising has steadily increased over the years and is expected to double through 2015, while traditional media advertising, barring television, will decline, according to an eMarketer report (see Figure 3, next page). Newspapers have yet to find a stable alternative revenue source, as online revenues hardly compensate for their print loss (see Figure 4, next page). There are only a few newspapers that currently charge customers for content, but the number is growing (see sidebar, page 5). The rapid growth of digital content and the globalization of the M&E market have provided organizations with numerous channels to distribute and monetize content. For instance, a television show can also be watched on ABC.com or NBC.com using a mobile device or game console, and it can be licensed in various geographies. However, this has created new challenges. M&E companies must manage operations across multiple platforms (broadband Internet, wireless, digital TV, etc.) and continuously devise
70 60 50 40 30 20 10 0 2001 Television 2002 2003 2004 Internet 2005 Radio 2006 2007 2008 2009 2010
Newspaper
Base: 1,500 adults reached on cell phones or landlines. Respondents could volunteer up to two main sources. Figure 2
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new ways to distribute numerous products and services across a multiplicity of channels. M&E companies must contend with shorter lifecycles for products and services, which means they have less time to monetize content. And with the globalization of the M&E market, it is important that companies have complete knowledge about what content they can sell, in which territory and in which format (IP management). Further, M&E companies must fulfill dynamic customer demands for personalized digital services and upgrade their IT infrastructure to support ongoing digital media transformation.
The Empowered Customer Customers today have more choices than ever. The Internet and mobile phones have become an integral part of their lives, especially of the millennial generation, the first fully digital demographic. Technology convergence has led to the development of new products (smartphones, tablets, etc.) that are driving the demand for ubiquitous access and customized services. Digital natives, in particular, want content to be available on-demand and on a variety of digital devices. They also create and distribute their own content and influence content generation by M&E companies and purchases among their networks through social media.
Source: Television Ad Spending Bounces Back, Virtually Unaffected by Online Growth, eMarketer, March 29, 2011. *Print only **Excludes off-air radio and digital
Figure 3
$40 $30 $20 $10 $0 2004 Print Online 2005 Total 2006 2007 2008 2009 2010
Print advertising fell by half while online advertising doubled during 2006-10. Figure 4
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A global survey by Nielsen found that 85% of customers want free online content to remain so, and 79% said they would move to other free sources if news companies started charging.4 The trend is particularly prevalent for all types of content in North America and Europe, the most established users of the Internet. Customers appear to be unwilling to pay for online news, blogs, podcasts and other regular content, but they are ready to open their wallets for content that is relevant, created by professionals and adds value. Consumers dont mind spending money if they are provided an appreciably better user experience
and convenience, such as watching a television show on their digital device or reading books on Amazons Kindle. According to a December 2010 Pew survey of 755 Internet users, 65% of Internet users paid about $10 per month to download or access digital content, with music and software leading the pack, followed by apps for cell phones or tablet computers and digital games.5 The message is clear: The power has shifted to consumers, and M&E companies need to deliver what customers really want and at their convenience.
Charging Customers
Under pressure to improve revenues, a number of newspapers and magazines are putting their content behind paywalls. To break through the customers mindset that online content should remain free, The New York Times, unlike the Financial Times and The Wall Street Journal, has introduced a porous paywall, which allows subscribers to view 20 articles per month for free before they encounter the paywall. Also, there is no restriction if the content is accessed through social networking sites. The publisher believes that its moderate pricing (at $15 per month with an introductory offer of 99 cents) and free digital access for print subscribers will persuade frequent users to subscribe. Politicos experience is another case in point. The online publisher has successfully managed its subscription service Politico Pro, which delivers specialist reports on the politics of healthcare, energy and technology sectors for $2,500 a month.6 Subscribers get early-morning briefings, afternoon updates and highly customized instant news alerts directly on their mobile devices, along with other services.
predict future requirements and determine profitability, culminating in more timely and effective decision-making. Further, with efficient data warehousing, organizations can also deal with huge amounts of enterprise-wide data and solve a number of business issues, such as digital supply chain management, IP rights management, product profitability and demand planning, which could prove to be a game-changer.
Customer Analysis
Consumers are fragmented across devices, platforms and channels, and they generate enormous amounts of data. Segmentation based on purchasing preferences, demographics and behavioral patterns allows organizations
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to understand issues unique to each group and address the group as a whole. This is useful for mass customization of products and services, targeted marketing campaigns and increased value of the advertisers investment. Social Network Analysis Social network analytics helps identify proximities and relationships between people, groups, organizations and related systems. It reveals the strength of relationships, how information flows within groups and who the influencers are in the group. Influencers can be used to quickly spread news about a new service or product, attract new customers and prevent mass churn by delighting them with new and innovative offers. Social Media Analytics An interesting commercial shared on Facebook or a tweet by a star on his upcoming movie spreads like wildfire and attracts millions of eyeballs. With millions of users globally, social networking sites are a major channel for customer engagement. In the U.S., two out of three people use social networking sites; about 63.7% (147.8 million people) of all Internet users use social networking, and the number will increase to 67% by 2013, according to eMarketer.7 Tracking of social media using text analytics allows companies to understand customer sentiment and provides a deeper understanding of their products and services. For example, by analyzing the chatter created on social media about a new movie trailer, companies can identify which aspects of the trailer viewers liked or disliked, gauge the pre-release hype and, based on this information, forecast revenues and make adjustments to marketing campaigns.
For example, by conducting profitability analysis of customers, companies can build pools of high-value consumers who can be offered special discounts without compromising profitability. Cross-Selling and Up-Selling Predictive analytics such as affinity or market-basket analytics allows M&E companies to understand products that are often bought together. It also provides the right combination of products and services for customers, such as a game and a movie based on the game. By identifying customers who have not bought any of these products or services, bundled products (cross-sell) or premium products (up-sell) can be offered. This will not only lead to improved revenues, but it will also reduce campaign costs, as the right customers are targeted. Campaign Analysis With the growing costs and complexity of marketing, it is important that M&E companies understand the effectiveness of their marketing campaigns. To optimize investments, it is crucial to understand how marketing budgets are being spent and their performance across customer groups, channels and campaigns. Campaign analysis can be used to study the efficacy of individual promotional campaigns in generating sales vis--vis cost incurred, based on key success criteria for a campaign. It is also useful to understand the impact on other related products and design efficient future campaigns. Real-time campaign analysis allows marketers to measure each and every aspect of a marketing campaign and take immediate corrective actions, resulting in efficient utilization of budget and resources.
Marketing
M&E companies spend significant amounts of money on content promotion, from creating pre-release hype, through the entire lifecycle of a product. As product lifespans shrink, it is important that campaigns target the right customers with the right product at the right time. By combining econometrics with product lifecycle data (a game or a movie), analytics helps marketing departments track profitable avenues and optimize investments. Based on customer segmentation, marketing campaigns can be tailored to address the needs of each segment.
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A delay at any point in the supply chain can have a huge impact on the business. For instance, the release of a movie DVD can be affected by delays in menuing and subtitling tasks, which are often handled by third parties. Such problems can be easily overcome by deploying advanced supply chain analytics that provides decision-makers with up-to-date information about content production, creating real-time visibility into their supply chain. Advanced analytics can allow M&E companies to understand and forecast demand patterns with respect to changes in the business environment, as well as drill down and identify the real causes of a problem. Supply chain analytics leverages customer, market and other enterprise-wide data pertaining to accounts payable, production analysis, etc., which helps optimize sourcing and supplier assessment and management, as well as production, inventory, sales and distribution.
helps companies more effectively realize greater value from their content by providing them with accurate details about the regions from which content can be licensed, the format in which it is available, etc. Efficient Business Models Ongoing economic uncertainty requires organizations to develop new business models that help them cope with the growing complexity of operations and, importantly, drive innovation and revenues to remain competitive. Gaining insights into unproven business models helps organizations assess the likely scenarios. For instance, a newspaper planning to put its content behind paywalls can use advanced analytics to combine customer, content, financial and other data to test the viability of the decision through what-if analysis and propensity modeling. The newspaper can understand how a particular move will impact online traffic and advertising revenues, and also test new models such as the introduction of micro-payments for digital subscribers or providing unlimited access to print subscribers. Further, social media analytics can be used to identify unbiased opinions of a large audience. IP Management IP management is the key for content producers to better monetize content and reach new markets. M&E companies are dealing with growing volumes of content, multiple release windows8 and markets. It becomes more important as M&E companies turn their attention toward BRIC countries which are expected to register a cumulative growth rate of 11.7% during the 2011 to 2015 timeframe, compared with mature markets average CAGR of 5.7% for future growth opportunities.9 BRIC countries are showing positive signs of growth in terms of mobile and broadband subscribers, socialization, pay television and discretionary spending on entertainment-related activities. M&E companies, which currently gain less than 10% of their revenues from these countries, must have a robust IP management system in place to tap growth opportunities and avoid getting embroiled in legal controversies. Effective use of IP requires companies to have complete information on the IP that they can sell in a given territory and across channels, as well as the performance of an asset or a channel. This information helps in
Content Monetization
The first step toward monetizing content begins with leading customers to a superior experience. Apps (application programs) for smartphones and tablets make it convenient for users to browse and consume content anywhere without accessing a Web site. For example, freemium apps, or apps where basic features are free, while advanced functionalities are available for a fee, provide convenience to customers and revenues for M&E companies. Rovios Angry Birds game app is the best-selling mobile phone app, with more than 300 million downloads and $1 billion revenues. The New York Times iPhone app provides users with breaking news alerts and allows them to save news for later offline reading, as well as share content through Facebook and Twitter. The second step involves creating the user experience. User experience is defined by the ease with which customers locate content on a Web site and navigate the personalization features offered. Customized Web sites for mobile phone and online viewing that facilitate customer interaction help create a better user experience. The data generated from the user interaction can be analyzed to understand their preferences and, ultimately, optimize the user experience. Knowing what and how to monetize is the key to maximizing revenues from content. Analytics
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executing better licensing deals and also ensuring compliance. However, such information lies in disparate databases across the organization, hampering the ability to maximize the contents reach and generate revenues. Analytics, combined with efficient information management systems, consolidates internal rights data residing in siloed databases and provides organizations with a clear view of rights availability information about restrictions, as well as what can be sold in which geographic locations and in what format which helps prevent contract violations. This information is useful for identifying markets and channels where the rights have not been sold. Analytics can track metrics such as licensee performance and contract expiries that help manage existing contracts and facilitate new deals to be signed, including cross-selling and up-selling. Analytics also helps enable accurate royalty calculations by aggregating organizationwide details about content, contracts and pricing.
understanding of the issues, effective forecasting and the ability to make meaningful decisions more quickly.
Roadblocks
The focus of M&E companies has shifted from content-centricity to customer-centricity, but very little has been done on the information management side to handle the data explosion, ranging from customers, IP rights and sales figures across multiple channels, leading to increased pressure on legacy systems. Organizations typically have information residing in numerous independent legacy systems, often resulting in data inconsistency. Its no wonder then, that resolving data issues makes up 70% to 80% of the effort of implementing an analytics project, according to research firm IDC.10 Even advanced analytics cannot be effective if it is deployed on disparate databases. It is, therefore, important that data structures across the organization be standardized and inconsistencies resolved. In order to leverage the benefits of analytics, organizations need to focus on new approaches to information management that can effectively deal with data overflow and siloed databases. Efficient master data management, combined with powerful predictive and real-time analytics that consider enterprise-wide data and other critical aspects of the business, enables real-time
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tailored to their needs that can be increased or decreased as business requirements dictate, providing more Op-Ex flexibility. As analytics processes become standardized and can uniformly be applied via cloud-enabled models (harnessing the growing clout of utility computing architectures), we believe that M&E companies stand to benefit greatly by associating themselves with partners that have invested in such capabilities.
Looking Forward
To experience the potential of analytics, we believe that M&E companies should consider the following: Develop an enterprise-wide data architecture. Identify key areas for deploying analytics. Design a comprehensive strategy for adoption and implementation of analytics, including information technology. Develop a fact-based decision-making culture focused on achieving specific goals. Formulate customized strategies to capitalize on unique data. Continuously renovate and renew analytics implementation. Enter into relationships with partners capable of providing AaaS to advance competitive advantage.
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Footnotes
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Satellite Video, IPTV Gaining Fast on Cable Video, Infonetics Research, Nov. 1, 2011. Great Digital Expectations, The Economist, Sept. 10, 2011. Chris Albrecht, Zucker: Were at Digital Dimes Now, Gigaom, March 18, 2009. Nic Covey, Changing Models: A Global Perspective on Paying for Content Online, Nielsenwire, February 2010. Jim Jansen, Cash for Content Online, Pew Research Center Publications, Dec. 30, 2010. Politico: What are the Secrets of its Success? The Guardian, Sept. 5, 2011. U.S. Social Network Usage: 2011 Demographic and Behavioral Trends,eMarketer, March 2011. Release window for a movie is the time between its theatrical release and release in other formats, such as home video, on-demand, etc. Global Entertainment and Media Outlook 2011-2015: Digital Forecast and Trends, PricewaterhouseCoopers, 2011. Business Analytics and the Path to Better Decisions, IDC, September 2010. Leveraging Technology to Win in Media and Entertainment Businesses, McKinsey & Co. BPaaS refers to the provision of business services encompassing underlying IT infrastructure, platform and skilled manpower, to run specific business processes in a virtual, globalized and distributed operating model.
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Bibliography
HBO and the Future of Pay-TV: The Winning Streak, The Economist, Aug. 20, 2011. Felix Salmon, How The New York Times Paywall is Working, Wired, Aug. 14, 2011. Matthew Garrahan, Entertainment Industry: A Cloud Up in the Air, Financial Times, August 01, 2011. Internet Gains on Television as Publics Main News Source, Pew Research Center, Jan. 4, 2011. 2 out of 3 Americans Use Social Networking Sites, Corporate Eye, March 23, 2011. SAS for Media, SAS Web site, 2011. Jim Jansen, 65% of Internet Users Have Paid for Online Content, Pew Research Center, Dec. 30, 2010. Monetizing Digital Media: Creating Value Consumers Will Buy, Ernst & Young, 2010. Act on Your Audience DNA, Teradata, 2009.
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About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services. Cognizants single-minded passion is to dedicate our global technology and innovation know-how, our industry expertise and worldwide resources to working together with clients to make their businesses stronger. With over 50 global delivery centers and more than 130,000 employees as of September 30, 2011, we combine a unique global delivery model infused with a distinct culture of customer satisfaction. A member of the NASDAQ-100 Index and S&P 500 Index, Cognizant is a Forbes Global 2000 company and a member of the Fortune 1000 and is ranked among the top information technology companies in BusinessWeeks Hot Growth and Top 50 Performers listings. Visit us online at www.cognizant.com for more information.
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