"Making Online Profitable: The Case for Strategic Collaboration between Global Carriers and the Media Industry

1. Making Online Profitable: The Case for
Strategic Collaboration between Global
Carriers and the Media Industry
Presented May 5, 2010 at Digital Hollywood
Hollywood & Telecom Executive Brainstorm
Santa Monica, California
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2. The Team
 Thomas Rambold
◦ CEO, DESS Consulting - C-Level consulting with global carriers
◦ Former CTO , Siemens Information Networks
◦ Former General Manager, Siemens Broadband and Data/IP business unit
 Mark Kapczynski
◦ CEO, Kontrol Media – media industry incubator
◦ VP, Advertising Solutions, Atigeo – pattern recognition software
◦ Former CEO, MESoft, Inc. – tapeless workflow software for film and TV
◦ Former Microsoft, Director of Worldwide Media & Entertainment Solutions
 Seth Walworth
◦ VP Industry Marketing, Kontrol Media
◦ Former Director of Marketing, MESoft, Inc.
◦ 30 years, telecommunications marketing and product management experience
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3. Our Sources
 20+ interviews with media industry executives
 50+ conversations with thought leaders at media industry conferences
◦ ad:tech
◦ Media Summit New York
◦ IAB 2010 Leadership Meeting
 Secondary research from various online articles and publications
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4. Our Objectives
 Review online threats to carrier and media cash cow revenue streams
 Highlight the opportunity gap in online commerce
 Identity key issues impeding online commerce
 Highlight intrinsic carrier capabilities that can solve these issues
 Propose a value-add Carrier E-Commerce and Media Services platform
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5. Why Work Together – Main Themes
 Lucrative revenue sources face long term threats
◦ Carriers – Will mobile voice and data transport be commoditized?
◦ Studios – DVD sales are falling and the TV ad market is stagnant
◦ Newspapers & Music – The sky has already fallen
 E-commerce is a key market
◦ Carriers – How do you participate in $155B* of e-commerce transactions?
◦ Media – How do you make e-commerce work for content?
 Both industries need each other to figure it out
◦ Carriers have unique assets they could deploy
◦ Media firms – and their advertisers – can provide critical input
Source: Forrester Research, "Forecast: U.S. Online Retail Sales, 2009 - 2014"
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6. Carriers - Clouds on the Horizon
 Mobile is the cash cow but ………
◦ 87% U.S. market penetration*
◦ Price wars starting
◦ Massive 4G network investments
 Huge growth in mobile data traffic – but who gains?
◦ Mobile will be dominant Internet access method by 2014
◦ More search ads for Google
◦ More Facebook, YouTube, and Twitter traffic
◦ Lots of free Wi-Fi – why buy expensive carrier data plan?
◦ Nightmare precedents - LD, Local, enterprise data – transport becomes a commodity
 Carriers are reacting
◦ Wholesale Applications Community initiative
◦ Branded hardware
◦ Complaints about Google getting a free ride
…… Add value to Internet activity, not just access and transport
Source: Plunkett Research, "Wireless, Cellular & RFID Industry Trends" Global Carriers Making Online Profitable 6
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7. Media – Clouds Overhead
 Studios still healthy
◦ $62B TV ad revenues, $34B cable programming fees , $17B DVD sales/rentals*
 But consumers are drifting online
◦ 800,000 households dropped cable in last two years*
◦ 17 percent of weekly viewing audience watch one or two TV episodes online
◦ In a networked home – who cares where the show originates from?
 How do you make online pay?
◦ Internet has 34% of eyeballs – but only 12% of marketing spend*
◦ Consumers accustomed to free content
◦ Piracy remains a problem
◦ Nightmare precedent – newspaper and record label implosion
 Media industry is reacting
◦ DECE – content portability
◦ CIMM – cross-platform ad measurement
◦ TV Everywhere – Cable walled garden
◦ Destination Portals – Hulu, newspaper paywalls
Still searching for answers …..
Source: Adams Media research: From Wall Street Journal, January 4, 2010. “Cinema surpassed DVD sales in 2009”
Source: Convergence Consulting Group, "The Battle for the American Couch Potato“ (TV ad, cable fee, # Online Profitable
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7 Source: Forrester Research, “U.S. Interactive Marketing Forecast, 2009 – 2014”

8. Little Strategic Collaboration So Far
 For studios
◦ DVDs and TV still rule
◦ Cable MSOs are the strategic partners
◦ Carriers are considered
 Pipe providers
 An emerging TV programming outlet
 A source of advertising and sponsorship $$
 For carriers
◦ Been riding the mobile wave
◦ Other vertical markets – financial, healthcare, retail – are considered bigger
◦ Focus on cloud-based enterprise services across industries
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9. Strategic Collaboration is Needed
 For Studios
◦ Carriers – not cable MSOs – are the dominant providers of online and mobile
infrastructure
◦ The center of gravity for content distribution is moving online
◦ You can’t solve strategic online issues without involving the carriers
 For Carriers
◦ Wireless data usage is expected to grow 4000% by 2014*
◦ You must add value to this – or you will be a commodity transport provider
◦ Media firms – and their advertisers – will tell you what value is needed and how to charge
for it
Source: Local Techwire, March 24, 2010: "As Sprint prepares for video calls, wireless execs seek more bandwidth"
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10. Online Commerce – Latent Opportunity
 E-Retail: $155B in 2009 - 6% of retail sales* (U.S.)
 E-Marketing: $26B in 2009 - 12% of ad spend* (U.S.
◦ Consumers spent 34% of their media time online in 2009
◦ Mobile advertising was $400M
 Paid online TV/movie sales and rentals - $361M* - 2% of total (U.S)*
 Lots of room for growth – particularly with a better platform
 How much of this revenue can carriers address?
◦ Transaction fees, Advertising services, Content distribution services, ???
Source: Forrester Research, "Forecast: U.S. Online Retail Sales, 2009 - 2014“
Source: Forrester Research: “U.S. Interactive Marketing Forecast, 2009 – 2014”
Source: Adams Media Research: From Wall Street Journal, January 4, 2010, “Cinema surpassed DVD sales in 2009”
Source: Convergence Consulting Group, “The Battle for the American Couch Potato”
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11. Key Online Challenges - What You Told Us
 Advertising ROI
 Get consumers to pay for content
 Curb piracy - without irritating legitimate users
 Enhance the user experience
 Anywhere, anytime, any screen distribution
 Content discovery
 “One-Click” Transactions
Solve these, turn “digital dimes” into “digital dollars”
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12. Carriers can Change the Game
 Massive Subscriber Reach – mobile, online, TV
 Customer Information – Single, integrated profile
 Start-to-Finish Session Management
◦ Know WHO you are, WHERE you go, WHAT you do, Start to Finish
◦ Track and log activities to augment profile
◦ Profile can travel with subscriber throughout session
◦ In-session content or ads are optimized to profile
 Scalable Bandwidth and Infrastructure
 Transaction, Multi-Screen, and Security Expertise
 Clout to set standards
Native strengths, barely tapped for e-content and e-commerce
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13. Real-Time Profiles – A Big Step Forward
Search Engines Websites
Content
Advertising
Real-Time User Profile
- OPT-IN (Value Exchange)
ONLINE - Preferences
SESSION - Online History
- No Direct Identifiers
- Inference and Learning Engine
- Web Interface Engine
Financial
Social Media
Transaction
Services
Opt-in, secure, intelligent agent that saves time & improves relevance
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14. Telco Next-gen Platform Brands
3rd Party
Publishers Ad Agencies eTailers
VARs
Reporting
Targeting Carrier Shared
Services User Profiles
Engine
Advertising Content
Engine Engine
•internet
•mobile Consumer •apps
•pc
•SMS
•TV
Device Platform •email
•“other”
•video
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15. Better ROI for Your Advertisers
 Reach – Micro-target LARGE audiences
◦ Massive carrier databases
◦ Comprehensive profiles
◦ Profiles tagged that meet advertiser criteria
◦ Profiles interact with websites and search engines as users surf web
◦ Ads served only to the targeted audience
 Relevance – Ads more likely to be viewed
 Engagement – Intelligent profiles enhance user interactions with ads
 Measurement – Profiles capture all activity for campaign review
 Value – Efficient and effective use of ad $$
◦ Target easily and precisely AT SCALE
◦ Reach efficiently across channels and screens
◦ Engage and track through the purchase funnel
◦ Follow up for awareness, favorability, intent, and brand-building.
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16. More Paying Customers for your Content
 Identify LARGE audiences of your best prospects
 Reach them efficiently across channels and screens
 Make it very easy for them to buy
 Deliver a premium and differentiated experience
◦ Value-added bundles
◦ Exclusive and personalized interaction
◦ Higher-quality video and/or audio
 Protect this premium content from piracy
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17. Curb Pirates – Not Legitimate Users
 Direct-download cyberlockers are the go-to piracy source
 Carriers have the most potential control over these cyberlockers
 But carriers have no reason to enter the minefield
◦ A lot of cyberlocker traffic is legitimate
◦ Some falls into gray areas
◦ Carriers risk losing subscribers if they curb legitimate traffic
◦ At worst, they risk lawsuits
 Publishers argue that online piracy costs them a lot of money
 Then find a way for carriers to profit from solving the piracy problem
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18. An Enhanced Consumer Experience
 Key elements remain convenience, relevance, engagement, and quality.
◦ Don’t bombard me with messages I don’t care about.
◦ Let me engage or dig deeper in different ways
◦ Make it easy to buy.
◦ Enhance with bundles, features, interactivity, and audio/video quality
 Means knowing as much as possible about that person, right now.
 Requires real-time profile that interacts with search engines and web sites
 Requires the ability to deliver a better experience
◦ “One-click” transactions
◦ Quality-of-service guarantees,
◦ Content delivered 7x24 to the desired device
◦ Video-roaming “rescreening”
◦ Support in-session service requests
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19. Improved Content Discovery
 The immense amount of information on the Internet ….
◦ Makes it hard for consumers to discover content they would like to buy,
◦ But have forgotten about,
◦ Or don’t even know exists
 Hard for publishers to get full value from their long-tail inventory
 Serendipitous search will help
◦ Real-time user profiles will improve results from content search tools
◦ Site-specific such as Amazon.com
◦ Or general search such as Google or Bing
 Even better – target and drive likely buyers to your destination portal
◦ Real-time profiles will interact with your content search tool
◦ Make superior suggestions from superior information
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20. Simplified Distribution Across Screens
 Multiple Dimensions requiring carrier expertise and scale
◦ Ability to deliver across fixed line and wireless environments
◦ Authenticate user for entire viewing session and multiple screens.
◦ Digital Rights Management to authorize usage
◦ Video/audio formats matched to device and available bandwidth
◦ Ads inserted as necessary
◦ Support “re-screening” to other user devices in-session
◦ Support video roaming hand-offs as necessary
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21. “One-Click” Transactions
 Multiple dimensions requiring carrier expertise and scale
◦ Real-time profiles that interact with transaction engines to save users time
◦ Purchase, pay-per-x, subscription, ad-inserted, and micro-payment options
◦ Scalable bandwidth and processing to handle surges in customer demand
◦ Immunity from denial-of-service attacks
◦ Secure, PCI-compliant transactions
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22. Contact Information
Mark Kapczynski
Kontrol Media
mark@kontrolmedia.com
310-594-3547
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