A report by UK Trade & Investment and Economist Intelligence Unit

1. Content Disruptors
Structural change in the media
and entertainment industry

3. Content Disruptors 01
About this report
Content Disruptors is a report written by the
Economist Intelligence Unit (EIU) commissioned
by UK Trade & Investment (UKTI). The report examines
the key trends reshaping content markets and
explains how companies are adapting to succeed
in a fast-changing world.
To shed light on these topics, the EIU conducted a global survey of 485 executives
in the media and entertainment industry. Respondents were drawn from Europe,
North America, Asia-Pacific and Brazil. All companies have a minimum global
revenue of $1 million. All respondents hold management positions, with 48%
occupying C-suite or board-level positions.
To complement the survey findings, the EIU also conducted wide-ranging
desk research and in-depth interviews with a range of organisations.
Our thanks are due to the following for their time and insight:
– David Card, Vice President Research, GigaOm Pro
– Nick George, Entertainment and Media Partner, PwC
– Marco Gomes, Founder, Boo-box
– Stephen King, UK Managing Director, Believe Digital
– Ian Livingstone, Founder, Eidos Interactive
– Stella Medlicott, Chief Marketing Officer, Red Bee Media
– Robert Picard, Director of Research, Reuters Institute, Oxford University
– Anthony Rose, Founder, Zeebox
– Mitch Singer, Chief Digital Strategy Officer, Sony Pictures Entertainment
– Zhang Tian Xiao, President, Shanghai Fantasia Animation Company
– Marco Vernocchi, Global Managing Director of Media
and Entertainment Practice, Accenture
The EIU bears full responsibility for the content of this report and the
findings do not necessarily reflect the views of UKTI.

4. 02 Content Disruptors
Executive summary
Back in 1996, when the internet was Inevitably, not everyone will thrive The revolution has only just begun
yet to become the global phenomenon in this changeable and competitive Executives in our survey identify a series
it is today, Microsoft co-founder and environment. Some parts of the of trends that have already transformed
chairman Bill Gates argued that content industry are finding it more difficult their industry. Over three-fifths (63%)
would be king in the rapidly evolving to adjust than others and there can believe advertisers are becoming more
digital world. be no single prescription for success informed and demanding, and 53%
in such a complex sector. Nevertheless, say digital models have made it more
It turns out he was wrong – at least in
this report – based on a survey of difficult to reach consumers in their
the sense that traditional media and
almost 500 executives from the preferred environment. More than
entertainment companies (television,
media and entertainment industry – half (52%) agree that the media and
film, radio, publishing and music
provides insights into the trends that entertainment industry “is not
businesses) have often struggled to
are reshaping the content business, sustainable in its current form”. The
translate their assets into a dominant
as well as some of the key strategies majority think there is plenty of change
position in digital markets. Indeed,
that will help companies chart a still to come, with three-quarters saying
many traditional media players have
successful future. that “we have so far only experienced
had to adjust to a world where new
a small part of the overall impact
technology powerhouses (the likes of
Key findings that the shift to digital will have on
Google, Apple and Facebook) compete
Digital is where the growth is, our economy”.
for their audiences’ time and attention.
Even ‘digital natives’ in the games but most companies are still
searching for the right model Opportunities outweigh threats
industry have had to adjust their
Digital content will be the fastest- The digital switch is increasing
business models, thanks to the arrival
growing part of the industry over the competition and forcing a rethink
of mobile devices and social gaming.
next decade and is expected to account of operating models. As with any
The good news is that despite the for 80% of the media we consume structural shift, this is creating winners
ceaseless wave of disruption and by 2020 (up from two-thirds in 2010). and losers. Nevertheless, when asked
innovation, the outlook for media and Businesses don’t need to shift to a whether they see different types of
entertainment companies as a whole is purely digital model, but they need change, such as the growth of online
bright. The appetite for media shows no to tap into the growing digital market. consumption or increased use of social
sign of abating – indeed people seem Only 12% of firms polled in our survey media, as opportunities or threats, the
eager to consume multiple media already have a digital distribution proportion of respondents seeing them
simultaneously. New technologies are model that is commercially successful more as opportunities never falls below
giving rise to innovative formats and – perhaps because their confidence in 60%. One point that might be boosting
genres, and sophisticated consumers the future hasn’t been backed up by industry optimism is recognition of
are emerging in high-growth markets concrete action. Although 63% view the the fact that demand for media and
with money to spend. rise of social media as an opportunity, entertainment content will continue
only 36% have undertaken social to increase, particularly in high-growth
media and viral content initiatives markets like Brazil and China.
in the past three years to increase
digital revenues.

5. Content Disruptors 03
This is still a hits business From personalisation
Devices and formats may be changing, to gamification
but traditional media players still have Three years ago, personalisation of
some advantages. They are good at content was seen as the most effective
tapping into what the audience wants. method of engaging with consumers,
“Media and entertainment is still according to executives in the survey.
primarily a hits-driven business,” says Today, however, there is a greater
David Card, Vice President Research emphasis on interactivity and so-called
at GigaOm Pro, a US technology gamification. Having allowed users to
consultancy. Of course, increasing personalise their experience, content
the ratio of hits to misses is difficult, providers are now trying to create a
but technology may help in this area more interactive or playful experience.
too. Nearly half of firms (49%) say
they involve consumers in their Traditional media can learn
innovation process. valuable lessons from the masters
of data
If it’s good enough, people will pay Google, Yahoo, Facebook and others
There has been much debate about have turned audience data into a
whether enough people will be willing science. By contrast, only 45% of
to pay for content now that there is so magazine publishers say they have
much available online for free. Nearly an efficient customer data mining
seven in ten (69%) respondents to our strategy. This is a waste. In the digital
survey think consumers will get used world, there is an opportunity to
to paying for well-targeted content continuously tweak and experiment
as digital models mature. To turn this with your product, measuring and
prediction into reality, the industry refining the audience experience
will need to make more headway using the latest tools and techniques
against digital piracy as well as deliver in data analysis.
genuinely compelling content that
is enticing enough to command
a premium.

6. 04 Content Disruptors
Introduction
The world’s media and entertainment
landscape is undergoing a radical
transformation. Growing use of the
internet and the introduction of new
distribution platforms that enable
content to be accessed via the
world wide web mean that sectors
like music, film, video games and
publishing are all transitioning to
a world where digital consumption
is fast becoming the new normal.
At the same time, the proliferation
of new kinds of devices, particularly
smartphones, tablets and e-readers,
is giving end-users more options
about when, where and how they
consume their content. If someone
had mentioned a decade ago that
they played, watched and read all their
media and entertainment content on
a single device it would have seemed
unlikely. Now, with the introduction of
the iPad and other tablet computers,
it is becoming second nature to many.
As transformational as these
developments seem, industry insiders
think there is still plenty more to come.
The impact of innovations like tablets
and smartphones has yet to fully
play out and continued advances in
technology should ensure that the
media landscape remains in a state
of flux for years to come.
The media and entertainment industry “ he impact of innovations
T
is enormously complex, with significant like tablets and smartphones
differences in the rate of change and has yet to fully play out.”
approaches to handling it between
sub-sectors and regions around the
world. This report acknowledges those
differences, but focuses primarily on
aspects of change that are common
across the industry.

7. Content Disruptors 05
Disruptive forces
Our survey highlights the scale of the Chart 1: Please indicate the extent to which you
challenges facing the world’s media agree or disagree with the following statements
and entertainment businesses. More
than half (52%) of all the executives Statement 1
we polled agree that the industry “ e have so far only experienced a small part of
W
“is not sustainable in its current form”. the overall effect that the shift to digital will have
Only 18% think it is. Meanwhile, three-
on our economy. There is much more to come.”
quarters think that “we have so far only
experienced a small part of the overall
effect that the shift to digital will have
Neither/
on our economy”. For those who fear
Don’t know
change, these are worrying times and
the future, it seems, can only promise
more of the same.
75% 22%
4%
Agree Disagree
Statement 2
“ he media and entertainment industry
T
is not sustainable in its current form.”
Neither/
Don’t know
52% 30%
18%
Agree Disagree
Source: Economist Intelligence Unit
Percentages were rounded up and may not add up to 100% for some charts.

8. 06 Content Disruptors
The three Ds of technological Both identify two big challenges. Another driver of the digital switch
change: Digital, devices and One is coping with the structural shift has been the increased use of mobile
distribution that is forcing a rethink of established devices, particularly smartphones.
The shift to digital represents one of operating models and increasing both As chart 2 shows, the number of
the most profound challenges the competition and fragmentation. The worldwide mobile subscriptions has
industry has ever faced. Physical other is dealing with an economic increased even more quickly than
distribution channels such as downturn that has reduced demand internet users since 2000, rising from
newspapers, magazines, books, CDs and accelerated the pace of change. 690 million to an estimated 5.2 billion
and DVDs have gradually been joined in 2012. Crucially, the share of
Increasing use of the internet has
by online or electronic consumption, smartphones in total mobile sales is
been one of the principal drivers of
leading to a disruption of existing growing rapidly too, increasing from
the structural shift. As chart 2 shows,
business models that is threatening 19% in 2010 to 31% in 2011.2 “Mobility
worldwide internet use has grown
profitability for many. is exceptionally high, but the other
dramatically since 2000, with the
driver is functionality,” says Mr George.
“There has probably never been a number of users rising from 386 million
“More functionality is being put into
faster changing landscape than the to an estimated 2.2 billion in 2012.
devices that are almost ubiquitous and
one we’re in now,” says Nick George, Speed of access has improved for
that’s giving people the opportunity
Entertainment and Media Partner at many people too, with the number
to consume media wherever they are.”
PwC, a consultancy firm. Businesses of broadband users rising from just
Zhang Tian Xiao, President of Shanghai
are in the grip of what Marco Vernocchi, 16 million in 2000 to an estimated
Fantasia Animation Company, believes
Global Managing Director of Media and 649 million today. Both trends – rising
this is increasingly true in emerging
Entertainment Practice at Accenture, internet use and broadband access –
markets. “In big Chinese cities, even
another consultancy, describes as are set to continue well into the future
taxis are equipped with tactile tablets
“pervasive change… where every as high-growth markets continue to
which customers can use to watch TV
dimension of the industry is develop their infrastructure.1
or play games,” he says.
undergoing a transformation.”
The shift to digital and the growing
use of mobile devices has created
what Mr Vernocchi calls a “broadband-
enabled ecosystem.” One of its defining
features has been the introduction
Chart 2: Internet users and mobile of new content distribution models.
subscriptions, 1991-2016 iTunes, Apple’s music and video
download platform, is probably the
most well known. Other examples
7 billion
include Spotify, the music streaming
Number of internet users or mobile subscribers
website, and Netflix, which allows
Number of internet users or mobile subscribers
6 billion
users to stream films and TV shows.
5 billion
4 billion
3 billion
2 billion
1 billion
Internet users
0 Mobile subscriptions
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Forecast
Source: Economist Intelligence Unit

9. Content Disruptors 07
The challenge for business All this makes for a richer, more Of course, disruption comes with
These trends – increasing digitalisation, engaging and more convenient media opportunities as well as challenges.
the proliferation of mobile devices and experience for end-users, but it is Apple’s launch of the iPad, although
the introduction of new distribution a mixed blessing for those involved by no means the first ever tablet
platforms – mean increased choice in the media and entertainment computer, opened the door to many
and convenience for end-users. “You’re business. The most difficult part of publications finding a means of selling
getting many more platforms on which the adjustment process has been, content they had previously given away
audiences can get new or old content and remains, the development of on the web. The blog, ipad.blorge.com,
so they’re getting a lot of choice,” says new business models that effectively reported in March this year that the
Professor Robert Picard, Director of monetise content. There are signs of launch of Apple’s Newsstand had
Research at the University of Oxford’s progress on this (see next section), but resulted in users spending $70,000 per
Reuter’s Institute. “This is really good many industry sub-sectors are still day on subscriptions within six months.
for audiences in terms of not having struggling to come up with a solution.
This hints at a wider point that
to be captives of legacy media firms
Another feature of the process has seen Mr George is keen to underline.
and platforms.”
incumbent businesses coming under “As societies get richer and
New devices and programmes are also increasing pressure from market technologies improve it makes it easier
enabling a shift in the way end-users entrants with new business models to consume more of the media you
consume media. According to InMobi, that challenge established approaches. want, so the net effect is that media
a mobile advertising network, mobile Though they have experienced consumption will increase,” he says.
devices have now surpassed TV in different levels of commercial success, With established markets still growing,
terms of time spent on media, with the obvious examples here are iTunes albeit slowly, and with emerging
consumers spending 27% of their time and YouTube, which both work market middle classes also expanding
on mobile devices compared with 22% alongside – as well as in competition quickly, demand for media and
on TV.3 Viewers are also increasingly with – traditional media. “The biggest entertainment content is unlikely to
getting into the habit of ‘dual strength of Apple, Google and YouTube decrease anytime soon. The nature
screening’, meaning that as they watch is that they’re always one step ahead of the demand may evolve, but it will
TV they are also using their mobile of the game, whereas most media undoubtedly be there. The challenge
devices to interact with family and companies have a passive approach to for firms will be finding ways to tap
friends or purchase products they have change,” says Mr Zhang. “Instead, they into it.
seen. Consumers are also accessing should be anticipating disruptions and
The opportunities that come with
content at different times and with funding research in new technologies
the shift to digital should not be
different types of devices. A survey by and platforms.”
underplayed, but nor should the
IAB Europe, a trade association, found
challenges be underestimated. The
that 73% of European internet users
process of digitalisation represents
watch TV online, either live or using
a radical shift that many parts of the
catch-up services like the BBC’s iPlayer.4
media and entertainment industry
are still struggling to get to grips with.
The next section of the report reviews
attitudes towards change and explains
some of the strategies being adopted
in a selection of industry sub-sectors
as they race to adapt.
“ obile devices have now
M
surpassed TV in terms of
time spent on media.”

10. 08 Content Disruptors
High growth markets
As in other industries, another correlation between GDP growth witnessing an explosion of start-ups
important driver of change in media and consumer spend on media and focusing on consumer audiences.”
and entertainment is the rapid growth entertainment… so it’s natural that we
Brazilian firms in particular seem
of emerging markets. In terms of total see the highest growth rates for media
eager to embrace interactive content.
media spend, the US remains the in these high-growth markets.”
According to our survey, four-fifths
world’s largest market by far with,
This is backed up by the findings of have developed products with an
according to PwC, a total spend in 2010
Nielsen’s global media consumption interactive interface to increase
of over $443 billion. However, other
index, which shows that Asia (excluding digital revenue in the past three years
countries are growing more quickly.
Japan) and BRIC countries surpass compared with only 52% of Chinese
China’s total spend on media and
Europe and Western markets on TV firms and 59% of European firms.
entertainment grew by more than
viewing and video consumption via
75% between 2006 and 2010, and it is But Brazil, India and China aren’t
the internet or mobiles.5 Marco Gomes,
expected to grow at nearly the same the only countries to look out for.
Founder of Boo-box, a Brazilian
rate up to 2015. Brazil too is growing “Any country with strong GDP growth
advertising network, emphasises the
exceptionally quickly (see chart). and a rising middle class is going to
opportunities created by the growth of
have an interesting media market,”
Brazil, India and China have fast- the middle class in emerging markets.
says Mr George, citing Mexico, South
growing economies and middle classes “The Latin American market has grown
Africa and the Philippines as examples.
who are big consumers of media,” thanks to the increasing buying power
says Mr George. “There’s quite a strong of the middle class,” he says. “We are
Chart 3: 2011-2015 growth forecasts for the
world’s largest media and entertainment markets
China
Brazil
Canada
Spain
South Korea
United States
Australia
France
Italy
UK
Germany
Japan
0% 2% 4% 6% 8% 10% 12% 14%
Source: PwC Forecast compound annual growth rate 2011-2015

11. Content Disruptors 09
Rethinking the media firm
Given the scale of the challenges faced As chart 4 shows, in each of the areas
by those operating in the media and we asked them about, from the
entertainment industry, one of the rise of emerging markets to the
most remarkable findings from our fragmentation of media channels,
survey is that the majority of the proportion of respondents viewing
respondents see the process of change these changes as opportunities rather
more as an opportunity than a threat. than threats never drops below 60%.
Chart 4: Do you see the following
more as an opportunity or a threat?
Growth of online consumption 82% 12% 5% 1%
Paid search 60% 11% 27% 2%
New advertising models 67% 11% 21% 2%
Increased use of mobile devices 63% 9% 27% 1%
Rise of social media 63% 10% 25% 1%
Internet TV 64% 12% 23% 1%
Rise of emerging markets 67% 8% 25% 0%
Fragmentation of media channels 63% 12% 23% 1%
0 10 20 30 40 50 60 70 80 90 100
■ More as an opportunity ■ Neither an opportunity nor a threat
Source: Economist Intelligence Unit ■ More as a threat ■ Don’t know/NA

12. 10 Content Disruptors
Reasons to be cheerful Perhaps most impressively, though
This optimism chimes with Accenture’s only 12% of respondents say they have
thinking. “If you go back just three a profitable digital distribution model
years, most of the debate was about at the moment, more than six out of
the digitalisation to come,” says ten (61%) expect to have one in the
Mr Vernocchi. “Now that future has next three years.
arrived and while some companies
There is no doubting the industry’s
might not have been as quick to adapt
confidence, but recent growth figures
as they should have been, most are
suggest that some sub-sectors have
really accelerating.”
more cause for optimism than others.
Encouragingly, our survey results seem According to PwC, the filmed
to back this up. More than seven in ten entertainment, video games and
(71%) companies say they “now have radio sub-sectors all grew during 2010,
a strategy for mitigating the threats but recorded music declined and
posed by the rise of digital content”, newspaper and magazine publishing
while nearly six in ten (58%) have were both flat.
a strategy to grow their business
by exploiting it.
Chart 5: Please indicate the extent to which you
agree or disagree with the following statements
Statement 1 Statement 2
“ e now have a strategy to mitigate any threats
W “ e now have a strategy to grow our business
W
posed by the rise of digital content.” by exploiting digital content.”
Neither/ Neither/
Don’t know Don’t know
71% 20% 58% 23%
8%
20%
Agree Disagree Agree Disagree
Source: Economist Intelligence Unit

13. Content Disruptors 11
“ ore than seven in ten companies
M
say they have a strategy for
mitigating the threats posed
by the rise of digital content.”
Chart 6: When, if ever, do you expect to have a digital distribution model
that is commercially successful?
We already have a digital distribution model that 12%
is commercially successful
In the next year 31%
61% of respondents expect to
have a successful distribution
In 1-3 years 30% model in the next 3 years.
In more than 3 years 19%
I do not think our company will be able to 5%
create a commercially successful digital
distribution model
We are not looking to create a digital 2%
distribution model
Don’t know/NA 1%
0 10 20 30 40 50 60 70 80 90 100
Source: Economist Intelligence Unit

14. 12 Content Disruptors
Misplaced or not, part of the industry’s are most effective, executives in the the way end-users are able to engage
confidence might come from its ability survey say personalisation was top of with content.” The result is that
to come up with creative ways of the list three years ago. But now the businesses are harnessing the new
engaging with its target audiences and emphasis has shifted to interactivity platforms to come up with innovative
its willingness to embrace these new and gamification. ways of engaging their target audience.
methods when they prove effective.
Mr Vernocchi offers an explanation
Our survey certainly seems to suggest
for the rapid shift. “What we observe
that media and entertainment firms
more and more is a ‘screen-centric’
are flexible about the approach
user experience,” he says. “There has
they use to engage with customers.
been an explosion of connected devices
When asked for their views on which
across the world that is transforming
methods of consumer engagement
Chart 7: What do you see as the most effective methods
of consumer engagement?
Personalisation (eg allowing a consumer ■ 3 years ago
to modify their page after logging onto a ■ Today
company’s website) ■ 3 years from now
Interactivity (eg by creating data visualisations
that can be manipulated)
Gamification (eg by creating leaderboards that
rank performance)
Convergence (eg offering free access to a movie
to incentivise the purchase of a game)
Consumer-led innovation (eg by crowdsourcing
improvement to products or services)
0% 10% 20% 30% 40% 50% 60% 70%
Source: Economist Intelligence Unit

15. Content Disruptors 13
Music: adapting to digital David Card, Vice President Research at There can be issues such as those
The music business has experienced GigaOm Pro, agrees that the music concerning Pink Floyd, an English
massive disruption from the shift to industry is being disrupted, but thinks rock band, which has contractually
digital, with music downloads, piracy that new technologies and distribution prohibited the sale of its music as
and, more recently, streaming from models are only part of the problem. individual tracks on vinyl and CD,
sites like Spotify, Pandora and Last FM “The birth of rock culture, the baby- and wanted the same to apply in the
all forcing change. boomer generation and the switch to download world. Its record company
selling albums rather than singles were EMI disagreed, but in late 2010 a judge
While the sector as a whole is growing,
probably responsible for artificially ruled in the band’s favour. King believes
these pressures have meant that its
inflating consumer spending on music this should have been the label’s view
sources of income have begun to shift
relative to where it had been,” he as well. “If Pink Floyd says we don’t
as revenue from recorded music has
explains. “The music industry used want our tracks available individually,
declined. According to eMarketer,
to be 2% of consumer entertainment I wholeheartedly support them and
a US research firm, worldwide music
spending – it went up to 3% for a while say ‘if that’s the rule for you with
industry revenue increased from
and now it’s probably back down to your digital rights, we have to find
$60.7 billion in 2006 to $67.6 billion
about 2%.” the answer to it’, rather than saying
in 2011. Over the same period, however,
‘that’s not how people consume it’.”
income from recorded music fell He also thinks there has been a
from $36 billion to $34.7 billion while fragmentation in the demand for In fact King rejects the word ‘disruptive’
income from live events increased music, which means that there are when it comes to music distribution.
from $16.6 billion to $23.5 billion.6 now fewer of the really big artists who “For people to talk about content
have acted as cash cows in the past. disruptors is ludicrous,” he says.
Increased revenue from live
“There are so many genres and sub- It indicates that something is finishing,
performances has been welcome,
genres now,” he says. The result has whereas people who saw the shift from
but what is happening to recorded
been that there are fewer big bands the single being the most important
music? In a nutshell, income from
with crossover hits. “The hip hop stars sale, to the album, to the CD, will be
online and mobile sales has been
here in the US are pretty big, but they’re accustomed to change. “There are
rising, but is not enough to offset
not as big as the stars of the 1970s changes in the methods of distribution,
the decline in physical sales.
and 1980s, or even the 1990s.” For an that’s all it is,” he explains. “It’s how
As this suggests, the pattern of how industry that relies on hits, he says, you enhance your offering that really
people consume music is far from this is a major problem. counts. The great thing about digital
settled. “A lot of old school people still is that it de-risks the industry. We
Regardless of the underlying reasons
like downloads and owning, and a don’t have to manufacture. Distribution
for the music industry’s struggles,
lot of young people have only known is quite an easy process and it’s
digital distribution is now a given
streaming or stealing,” explains Stephen developing on a daily basis.”
for new artists and their music. More
King, UK Managing Director of Believe
challenging is the situation surrounding
Digital, a digital distributor for
artists who were signed before digital
independent artists. “Our job is to
was prominent or even existed. In 1963
persuade them that stealing content
clearly there was no need for a digital
is unacceptable and the only way
clause in a contract but those contracts
you can make that case is to make
need revisiting with the artists or their
everything available legitimately.”
estates, says Mr King. “The cost for the
[music] majors is quite high, there’s a
lot of legal work in those areas and they
think it outweighs the return.”

16. 14 Content Disruptors
TV: does every wheel need to be The other thing that doesn’t need Mr Rose also thinks that improving
reinvented? reinvention, she suggests, is the ‘event’ technology could lead to a major shift
TV is evolving too, but it is important TV programme. “Big broadcasters in the way the TV industry organises
not to overstate the extent of the such as ITV and BBC have invested itself. “Broadcasters do three things
transformation. As long ago as 2005, heavily in live-event broadcasting today: they’re content providers,
executives at ITV, a UK broadcaster, whether through a voting-based distributors and aggregation portals,”
were claiming the family-viewing mechanism or live sporting events,” he explains. “In future, however,
tradition on Saturday was effectively she says. “We’re seeing this type of they might not want to do all three.
dead, ignoring their own X-Factor-style premium content really booming.” For example, you might find that one
successes and failing to anticipate doesn’t want to do content anymore.
There are some changes afoot, however.
the BBC reinventing the genre with Instead, it can simply reinvent itself as
Video-on-demand service Netflix,
a relaunched Doctor Who and an aggregation portal. Do broadcasters
for example, commissioned a further
Strictly Come Dancing, both popular realise these kinds of options are open
season of Arrested Development, a US
programmes in the UK. The same is to them? If they don’t, they might
TV series. This was never intended for
true in the US, says Mr Card. “A lot of find themselves disenfranchised in
traditional broadcast, but for direct
people have been talking about major the future.”
streaming to the box. The episodes
disruptions in television content…
concentrated on a specific character Mr Zhang thinks partnering with
but I think the broadcast networks
and could be watched in any order. foreign producers is the best way to tap
and cable networks have actually
This, Ms Medlicott suggests, marks a into international markets. For example,
done a pretty good job of locking
new way of commissioning away from Fantasia worked with French national
down their business.”
the constraints of linear programming. broadcaster France Télévisions to
“It’s amazing how people had develop Shaolin Wuzang, a popular
Another shift is coming in the
written TV off,” says Stella Medlicott, show about three teenagers fighting
integration of TV and mobile device
Chief Marketing Officer of Red Bee a ruthless demon in China during
experiences. “In future, all of television
Media, a firm which helps broadcasters the 16th century. The show has since
is going to be two-way interactive and
and platform operators connect their received numerous awards. “Many of
socially connected,” says Anthony
output with their audience. “We our projects are built on that model,”
Rose, Founder of Zeebox, which has
mustn’t underestimate the art of comments Mr Zhang.
created an app to help integrate the
scheduling. A lot of people say they
two domains. “Today, TV and the
want to have the freedom of choice of
internet exist as two separate entities,
what they watch, [but] when you get
with little interaction between them,
down to it in reality they don’t. A lot
but that’s all going to change as
of the time people want to sit back
technology allows us to make it more
and have content pushed at them,
interactive, personalised and targeted.”
and that hasn’t really changed.”
Storing your content
In the download market Sony Pictures “[Consumers] said they can’t share The company’s solution was to create
Entertainment, the television and film content with their family when they a platform that could be shared more
unit of Japanese conglomerate Sony, buy it online, they’re worried about easily with family and the service
has launched Ultraviolet, a cloud what might happen to it if their is building up a reservoir of users.
service where customers can store their hardware crashes and about keeping “We have over four million registered
purchased films. Mitch Singer, Chief track of what they own,” he says. users and we’ve been running for less
Digital Strategy Officer at Sony Pictures “They have to remember where they than a year,” says Mr Singer. “Of course
Entertainment and the chief architect bought it and where it’s stored – I’d want hundreds of millions of users
of UltraViolet, says the idea originated on Apple, on Amazon or on a shelf but I’m very happy with the growth.”
from customer research. at home.”

17. Content Disruptors 15
Computer games: the new It is worth explaining the freemium This will have an effect on a market
outgrowing the new model for non-players. If someone in which $50 for the latest release
Ironically, the most striking example goes on Facebook and plays a game is commonplace, one might think.
of a medium outgrowing the devices called Farmville, for example, the object “That graphic-rich, interactive
on which it is traditionally consumed is is to build up a farm full of animals and cinematic experience is still going to
also the newest. Computer games were these are acquired in two ways. Either be required by a lot of people, but the
digital to begin with, even in the days the player works for ‘rewards’ and business model and the formats by
when a tennis game consisting of two therefore gets a cow or a sheep or some which these games will be served
blobs batting another blob between other token, or they can pay cash to will undoubtedly change,” says
them was considered sophisticated. boost themselves. Entry to the game is Mr Livingstone. “The console game
free but the company behind it makes might one day become software-
Ian Livingstone, Founder of Eidos
money from people buying the extras embedded in a smart TV, for example.
Interactive, is a leading games industry
so they can enjoy the game a lot more. But one thing is certain, the games
figure and an advisor to the UK
industry has become mass market
government on computer games Another factor that has pushed the
entertainment, driven by advances
and digital skills. He believes the price of games down is the ubiquity
in technology and content diversity.
impact of games moving to the online, of computer games once they became
In terms of where we are as an industry
downloadable or streamable world has available on smartphones. “All the
compared with film, we’re only in the
been profound. “Content creators, no explosive growth has been on games
1930s and yet the global market for
matter where they are in the world, are played on Facebook, smartphones
software sales alone is $50 billion a
able to serve digital content to global and tablets,” says Mr Livingstone.
year today and that’s going to rise
audiences via high-speed broadband,” “Smartphone growth has been
to $90 billion by 2015 as more people
he says. “Small, agile studios are able phenomenal, leading to successes
play games.”
to innovate and self-publish, bypassing like Angry Birds, which has seen a
the traditional supply chain of getting billion downloads over the past couple Also, the casual player is more
boxed games to retail stores. Games of years. Everyone’s now carrying a accustomed to paying $1 than five
are moving from analogue to digital, games device in their pocket in the or six times that, which changes the
from being a product to a service, shape of a smartphone and that’s where dynamic. “Paradoxically, ‘free’ content
from a premium price model to a the true growth is happening today.” actually forces up the quality of
freemium model.” production,” says Mr Livingstone.
“If you want someone to pay for an
item inside the game they’re playing,
your game had better be good because
people will only spend money when
they’re enjoying themselves.”
Changes in this market have led
traditional sales channels to suffer.
In the UK the Game store chain spent
a period in receivership just as in the
music industry HMV has posted poor
profits. Mr Livingstone believes these
channels have supported the games
industry but now need to change with
it in order not to be outmoded.

18. 16 Content Disruptors
Publishing That kind of blow is difficult to duck, Much rides on the outcome of the
Publishing is another sector commonly but many think that a big reason the publishing industry’s attempted shift
thought to have struggled with the publishing industry has struggled is from free to paid-for content on the
switch to digital. Newspapers have that it was too quick to offer content internet. Executives in our survey
lost out as consumers have started for free in the early days of the digital believe audience expectations will
accessing news and opinion for switch. It is still possible to visit a change: indeed, fully 69% of them
free online, and advertisers have newsagent and pay for a newspaper say that readers will be prepared to
increasingly looked elsewhere to while someone else is in their home pay for content.
capture their attention. Book publishers looking at the same articles for free
But Mr Card sounds a note of caution.
are struggling too as the growing on their computer (see box below for
“I don’t think paywalls are hopeless,
popularity of e-readers eats away more on this).
but they’re very tricky because there’s
at margins.7
News Corp was one of the first so much good free content available,”
“Newspapers and magazines have companies to strike out against he says. He thinks we need to be
been hugely disrupted,” says Mr Card. this trend, insisting on charging for realistic about how much paywalls
“In the US in particular, we had a big everything beyond the current day’s can do to solve the industry’s problems.
market with lots of local newspapers newspapers. It was heavily criticised “Historically, it’s difficult to get more
and not so many national newspapers, by consumers at the time who had than single-digit figures of your
but Craigslist (the online classified become accustomed to free services audience to subscribe for content.
advertisement site set up in the mid- from Facebook, Twitter, free office If you’re getting 6%, 7% or 8% you’re
1990s) basically destroyed the local automation from Google and free doing pretty well, but that’s not the
news business by giving away music from a number of sources. kind of ratio newspapers are used
classified ads for free.” Since then, however, other newspapers to at all.”
– including the Financial Times and
New York Times – have started selling
rather than giving away their content.
A punishing time for publishing
Our survey confirms that publishing Meanwhile, only 55% of newspaper
firms are struggling more than their publishers expect to have a digital
internet, TV and entertainment peers model that is commercially successful
to adapt to changes brought about in the next three years compared with
by the shift to digital. Perhaps most 69% of film companies.
importantly, only half (49%) of
There are also understandable
magazine publishers believe marketing
differences within the publishing
through digital channels has increased
industry, particularly when looking at
their sales and lead generation
the impact of social media. Magazine
significantly compared with two-thirds
publishers are much more sanguine
of TV and film companies.
about its rise than newspaper
publishers. More than seven in ten
(71%) of the former view the rise
of social media as an opportunity
compared with only 54% of the latter.

19. Content Disruptors 17
Boo-box: how to make online content profitable
Brazil’s media and entertainment “And yet companies are missing a trick
market is forecast to grow by nearly by not showcasing their core business
12% between 2011 and 2015, a much on these networks. So I founded
higher rate than in the US and European Boo-box.” Last year, it quintupled
countries. According to Mr Gomes, Latin the number of ads it placed to reach
America is undergoing a major digital four-fifths of Brazilian web users.
revolution. “Facilitated access to the
Described by web publication
internet and the growth of homes
TechCrunch as “Brazil’s Web 2.0
with personal computers, laptops,
ad network”, Boo-box has been
smartphones and tablet sales have
experimenting with rich-media ad
fostered a spirit of entrepreneurship
formats, behavioural targeting and
and innovation in Latin America,” he
demographic profiling. In return this
says. “I believe we can expect a massive
gives publishers (Boo-box’s customers)
expansion of start-ups focused on
the possibility to explore differentiated
technology, internet and e-commerce.”
formats and higher profitability.
Mr Gomes has taken advantage of this
Mr Gomes thinks the digital revolution
trend to create Boo-box, a platform
will lead to more success stories
for content providers with novel ad
like his. “A growing number of
formats, such as Twitter feeds or blog
entrepreneurs and investors are
text. “People in Latin America love to
coming to Brazil to implement their
interact with content, which is why we
projects,” he says. “We are undoubtedly
are experiencing such a surge in social
witnessing a historic moment.”
media,” Mr Gomes explains.

20. 18 Content Disruptors
Conclusion: Who will One thing is for certain, there will
come out on top?
be winners and losers, just as there
are in any industry experiencing
structural change.
The shift to digital is a critical and
With the impact of digitalisation still playing out, which ongoing challenge, and there is no sign
of relaxation in the pace of change.
types of organisation can we expect to prosper as the
In 2010, digital content was estimated
media and entertainment industry continues to evolve? to account for about two-thirds of all
media, but by 2020 it is forecast to
account for about 80%.8
Media and entertainment firms failing
to effectively tap into the digital shift
will either be niche players or will
disappear. As Mr Rose points out,
“Technology giveth and technology
taketh away. If you don’t embrace it,
you’re eventually going to be left
behind.” This doesn’t mean that
everything will go digital. Instead,
many will be governed by ‘the rule
of and’, meaning that they will need
to complement physical distribution
channels with a digital offering.
Quality content will still have a huge
role to play. “Media and entertainment
is still pretty much a hits-driven
business,” says Mr Card. This isn’t going
to change. “Movie studios, record labels
and TV stations will be doing the same
thing they’ve been doing forever:
they have to manage a portfolio,
jump on the ones that take off and
then franchise them to death.”

21. Content Disruptors 19
However, that doesn’t mean they can’t One of the key strategies for firms In comparison, the biggest risers are
learn from other parts of the industry. trying to transform themselves into this mobile, social media and telesales, with
“The likes of Google, Yahoo and others kind of organisation, Mr Vernocchi says, social media expected to become the
are very numbers-orientated,” explains is to remain “open to the ecosystem”, best value for money media channel
Mr Card. “They programme, they see meaning that they should collaborate over the next three years. As in any
what works and they do it again. and absorb innovations where possible, industry, when the balance of return
Traditional media companies that but buy them in where necessary. on investment shifts so does the focus
can take their taste and deal-making of activity. Media and entertainment
Winners and losers might also be
capability and combine it with as much spend has already been refocused to
determined by the evolving perceptions
numbers discipline as possible will fit the shifting consumption habits
of value for money in advertising. One
probably be able to react and move of users and we should expect to see
of the clearest messages from our poll
better than others.” this continue.
is that those media channels seen as
Drawing some of these themes together, being most effective from a marketing
Mr Vernocchi says firms that succeed point of view are in a state of flux.
will be characterised by their capacity Traditional advertising mediums like
for “continuous innovation”. This is radio, TV, print and poster advertising
critical, he thinks, because growing are all seen as being in decline in terms
complexity and the increasing pace of the value for money they offer
of change mean that the profitability marketers. Perhaps most strikingly,
of existing business models will be whereas radio was seen as the best
continually called into question. value for money just three years ago,
in three years’ time our respondents
think it will only rank sixth.
Chart 8: In your opinion, which of the following marketing
channels will provide best value for money for companies
attempting to engage with content consumers in your sector
of the media and entertainment?
■ 3 years ago
■ Today
■ 3 years from now
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
TV
ail
s)
ile
dio
ia
g
er e
ail
r
ia)
g
he
fly m
in
tin
ite
ed
ob
Em
m
ed
Ra
tis
s)
Ot
eg ho
ke
bs
tm
M
ct
lm
er
ar
g ( of
we
re
dv
in
cia
m
Di
sin ut
e(
Pr
ra
ele
rti f o
so
lin
ste
s/t
e(
ve s o
On
Po
lin
ale
ad m
On
or
les
rf
Te
he
Ot
Source: Economist Intelligence Unit

22. 20 Content Disruptors
The media and entertainment industry This kind of bullish attitude towards
remains in the grip of a radical change, shared by the majority of our
transformation. In managing this, respondents and interviewees, is just
the key challenge for market players is as well because there is much more
to come up with new business models to come. The good news for those
that can ensure they remain profitable. that can adapt is that media and
Though many companies were slow entertainment markets continue to
to respond, there are signs that the expand, particularly in high-growth
industry is beginning to get a handle economies like Brazil and China.
on the challenges involved and many Demand for quality content delivered
are optimistic about their ability in the right way is far from satisfied.
to adapt. For those that can find a way to tap
into it, the future looks bright.
Mr Singer of Sony Pictures
Entertainment is firm. “You can view
disruption in one of two ways,” he says.
“You can view it as a threat which
forces you to attack it or you can view
it as an opportunity. New technologies,
for example, cloud services, are
opportunities to us and to our
consumers to get content in entirely
new ways. There’s a lot of things you
can do with disruption and I don’t think
viewing it as a threat is very productive.”
End notes
1. Internal Communications Market Report 2011, Ofcom
2. Market Share: Mobile Devices, Worldwide, 1Q12, Gartner
3. Mobile Media Consumption Research, InMobi, February 2012
4. Mediascope Europe 2012, IAB Europe
5. Turning Digital: The Asian Media Landscape, Nielsen, 2012
6. GrabStats.com
7. IHS iSuppli, April 2011
8. A Brave New World of Connected Media, Cognizant, November 2011

23. © 2012 The Economist Intelligence Unit Ltd.
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