The new scenarios that emerged immediately “After the Bubble”, although more successful in alignment of technology, content and markets, were often unable to pull these dimensions together towards a common goal of content capitalization. Ongoing disruptions in technology, market and content produced repeated cases of service substitution, but without a corresponding revenue shift. However, as time went on, some companies managed to harness the opportunities brought about through change and continued to adapt, creating long-term value. These companies have found a way to build successful business models that continue to blend technical advances with available content and market requirements. Netflix is one example:
While mainstream consumer adoption of online movie watching will take a number of years due to content and technology hurdles, the time is right for Netflix to take the first step.
says Reed Hastings, the company’s CEO. Hastings is well aware of the necessary alignment:
Over the coming years we’ll expand our selection of films, and we’ll work to get to every Internet-connected screen, from cell phones to PCs to plasma screens.
The introduction of mobile ringtones by Nokia provides another interesting example. At the start of the decade, mobile phone penetration in the youth market was only around 20%. Nokia like other manufacturers and service providers was keen to address this market. Nokia’s observations of user behaviors quickly made clear the level of fashion-consciousness and the importance of text messaging within the segment. This lead to the development of the “smart messaging” protocol. Soon after, Nokia engineer Versa-Matti Paananen developed an application on top of the protocol, which allowed users to program their phones to make complex musical sequences. Paananen’s so-called Harmonium software was then placed on the Internet for anyone to download, thus bringing the final aspect: the move attracted content aggregators who used their existing content stores and distribution knowledge to sell the first generation of polyphonic ringtones. The alignment of user requirements, technology and content, together with a controlled business model that harnessed this potential to capitalize content created a new and valuable service.
Gartner reports that just 5 years after the first ringtone sales, the worldwide market has grown to over 9 billion US-Dollars. While overall growth in basic ringtone downloads is starting to slow, the continued evolution by market players including Nokia towards mobile music services is creating a substantial impact on the Digital Entertainment industry. A recent study published in the Wall Street Journal predicts that the ringtone market will make up 12% of total world-wide music sales by 2008. Historical patterns of passive engagement in relaxation type activities such as television viewing are slowly being replaced with a more “lean-forward” interactive involvement, particularly within younger market segments. Even today younger users are not content to just “sit back” and passively watch programming created and scheduled by traditional broadcasters and distributors, but instead create, manipulate and watch the content they are interested in at a time and a location which provides them with the most convenience.
A simple version of this can be seen in the success of interactive reality TV series Pop Idol/American Idol. Marketing Communications company SMLXL reports that with over 3.2 billion viewers worldwide the 22 Pop Idol national editions consistently lead ratings and break viewing records, providing broadcasters with the opportunity to generate substantial advertising revenues (the broadcaster of American Idol in 2005 charged around $700,000 for a 30-second commercial slot). The Idol franchises’ primary goal of finding talent for the recording industry has also been a success, with revenues from recordings of Idol performers already exceeding US$100 million. However, it is the innovative use of interactive voting, particularly through mobile text messaging, which sets the program apart. The fourth series of American Idol generated 41 million SMS-based text votes, the largest texting event ever up until that date. More significant however, was that 30% of votes were received from users who had never used text messaging before, demonstrating the shows incredibly powerful impact on user behavior. Worldwide voting has topped 680 million votes, which when compared against the 560 million total estimated worldwide households with televisions, shows an incredible level of penetration of user interaction. Revenues from interactive voting are currently at 600 million US Dollars for the past 5 years, and with a typical revenue split of 40% to the producers, 30% to the broadcaster and 30% to the telecoms operator this type of “participatory” or interactive TV provides a lucrative platform for all parties involved.
[Next post in series: Winners and Losers ]
this is how entertainment should be. making the viewers get involve with the show… :D