The Digital Entertainment evolution is still in its infancy. The next 10 years will continue to see rapid changes and developments, and traditional operators, service providers, publishers, broadcasters and distributors will need to adapt to remain successful during this period. With the ongoing transformation of the industry, solutions and business models which are successful today are not guaranteed to continue to represent a “cash cow” into the future. However, it is possible to maintain a positive long term outlook through an evolutionary based approach that focuses on a strategy of content capitalization.

Successful companies will:

• understand the potential of virtually unlimited content – both professional and user-generated – and use it to their advantage;
• utilize innovative technologies that are completely aligned with either content, markets, or both;
• understand changes in market demographics and user requirements;
• bring all these aspects together to a strategic business, centered on content capitalization instead of merely either technology, or content, or demographics.

This means that in order to unlock today’s potential opportunities, companies must address solutions which successfully deal with complexities of rights management, niche segmentation (the “long tail”), online vs offline, generation vs consumption, quality and mobility. The focal points of activities will be next generation television and mobile data and communication, and their underlying enterprise architecture. Not only telecom operators will have to change, but all players within the digital entertainment ecosystem.

Turner Broadcasting is an interesting example of such an evolution. Starting out from a traditional media base, they successfully entered the online market with leading websites such as CNN.com. Their evolving digital entertainment portfolio includes forays into user generated video advertising, interactive and pay per view sports services and innovative plays such as gametap.com, an online subscription and advertising based gaming portal. The consistent theme with these latest service offerings is to find opportunities that position Turner to make money from niche services. Turner’s approach demonstrates a clear understanding that the future is more than just mass market, and a desire to evolve their strategy to remain in step with changing content capitalization methods.

Our example of the late 1990s, TiVo, has also felt the winds of change. Emblematic for early leaders, they found themselves in the typical Innovator’s Dilemma, with existing contracts and legacy hardware, missing intellectual property, and a strong competition from new market entrants able to leapfrog early technology experiments without the high price of early adopters. The company is now moving towards new content solutions and integration of advertising relationships, as evidenced for example by a recent deal with Amazon.com. Today, TiVo’s survival depends on moving the company away from a pure subscription-based technology play to a new advertising and partnership based business model, bridging a leading technical expertise with markets and contents to create real value.

With the level of disruption in the Digital Entertainment market today it is inevitable that there will also be losers. Most at risk are existing players who are unwilling and/or unable to continue to evolve their business models to handle capitalization of content. New emergent sectors and services will be created and as new entrants attempt to position themselves the result will be an inevitable level of churn. Market leaders need to remain vigilant; it is not uncommon that “pioneers are shot down while someone takes their land”.

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