Until recently, the global media industry had been relatively stable, with a robust value chain and well-defined business models.
Today, multiple factors are tearing at the fabric of those finely tuned business models: new players such as Netflix, Hulu, Amazon, and Apple offer consumers new ways of accessing professional video content; technology standards are in flux; and regulatory and macroeconomic factors undermine consumer and investor confidence.
Last week, more than 90,000 media and entertainment officials from 150 countries descended on Las Vegas for NAB Show, the annual National Association of Broadcasters conference. I attended to share some of predictions for the industry that we have developed in the Cisco Internet Business Solutions Group (IBSG). In particular, I spoke at a breakfast briefing for CxO-level executives about the impactful yet uncertain effects of four key drivers—consumer behavior, regulatory changes, technology, and macroeconomics—in an effort to better define their media-industry disruptions:
- Consumer Behavior—Consumer-behavior changes include willingness to pay, content preferences, level of interactivity, scripted/unscripted, genre, privacy, collecting, and ownership. All can have a profound impact on business models, margins, and revenue by creating industry power shifts and driving successful strategies. For example, as consumers gain access to a broad range of titles through on-demand services, they may have less need to own content. This could shift power to subscription-based distributors and further diminish the value of the sell-through market.
- Regulatory changes—These drivers include privacy regulations, net neutrality, antitrust enforcement, censorship, copyright enforcement, advertising regulations, universal broadband, local-on-local, localization, and local-production requirements. Extremely strict privacy rules will favor content owners and aggregators, as their ownership of ad inventory will allow them to capture most of the advertising revenue. Greatly relaxed privacy requirements will empower distributors by giving them the ability to monetize advertising inventory through complex yield management and better forecasting, while also allowing them to expand into additional roles.
- Technology—Emerging technologies include ultra-high-definition television, flexible and stretchable screens, holography, semantic analysis, power systems/battery technology, sensors and interfaces, ultra broadband, and scene acquisition. Additional technical advances could also have a deep impact. Powerful graphics processing combined with 3D real-time scene modeling, for example, would enable the use of multiple cameras to capture and model an entire football field. Producers and possibly consumers could then “create” their own virtual cameras at any angle or zoom level and focus on any detail they choose, from players to individual blades of grass. Overall, dramatic improvements in price and performance would place sophisticated production capabilities in the hands of amateur producers, enhancing their ability to create professional-level content.
- Macroeconomic conditions—These include recession, macro-shock, balance of trade, protectionism, commodity pricing, and supply. While less predictable than other areas, these factors can have a drastic impact. Lack of access to credit markets and to financial incentives would shift not only location of productions but also the type of films or shows being created. Decline in advertising budgets, for example, could shift production to reality shows, which promise lower production costs and are a boon to product placement. The growing importance of direct marketing would favor distributors with interactivity and better addressability and targeting capabilities.
It is impossible to predict how these four key drivers will change the industry. But in our white paper, “The Future of Media: ‘Dark Ages’ or ‘Wonderland’?”, we explore four possible scenarios that might result. We also offer recommendations for how players in the media industry should prepare themselves and respond to each outcome.
We believe that considering those scenarios and their implications will offer real insights into upcoming opportunities and risks, while daring players to create breakthrough strategies.