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Prospering in An Era of Disruptive Change In Media & Entertainment February 6, 2007. $800 mm Publicly Traded Strategy Consulting Firm One of the fastest growing companies in the US (Fortune) 2,000+ Consultants - PowerPoint PPT Presentation
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Prospering in
An Era of Disruptive Change
In Media & Entertainment
February 6, 2007
2
FTI Consulting Overview: Who We Are
$800 mm Publicly Traded Strategy Consulting Firm
One of the fastest growing companies in the US (Fortune)
2,000+ Consultants
Specializing in corporate finance, economics, marketing, litigation support and corporate communications
Business Communications Consulting
Forensic &Litigation Consulting &
Technology
Economics ConsultingCorporate Finance, Transaction
Advisory Services
3
Focused on Top-Line Revenue Growth Strategies and Marketing
Strategy Organization Process
Top Line Growth
• Market opportunity assessment
• Segmentation• Brand portfolio• Launch models• ROI optimization• Pricing
• Business Unit• Marketing and Brand• Market research/ Insight
teams• Sales
• Customer knowledge• Innovation/ NPD• Market planning• Brand management• Performance metrics
and benchmarking
Analytic Competencies
• Decision Architecture
• Bayesian Decision Tree
• Econometric Modeling
• Scenario Planning
• Mix Modeling
• Cognitive Decision Sampling
• Real Options Pricing
• Game Theory
• Mathematical Programming
4
Our Clients: We’ve Seen Marketing Best Practices Across Industries…
5
Our Reputation…Thought Leadership in Marketing
6
Our Intellectual Capital – Books, Articles, Workshops
Books
Articles
Workshops & Speeches
– Radical Marketing (Harper, 2001) – The Infinite Asset (Harvard Business School Press, 2001); – 60 Trends in 60 Minutes (J. Wiley & Sons, 2002)– Numerous chapters in books, including: Financial Times Handbook of
Management, HBR on Brands, HBR on CRM, and MBA in a Box
– HBR: “See Your Brand Through Your Customers Eyes” (2001)– Sloan Management Review: “Achieving the Ideal Brand Portfolio”
(2005)– Strategy+business: “How to Brand Sand” (1998), “Bring on the
Super CMO” (2003), 21st Century Launch Models (2007)– CMO Magazine “Come Together” (2005)– Plus: Business 2.0, Journal of Business Strategy, FT, Fortune, Wall
Street Journal, Estrategiay Negocios, LA Times, Ad Age, Brand Week, Straits Times, etc.
– Major organizations: American Marketing Association, Direct Marketing Association, American Bankers Association, etc.
– Leading companies: PwC, Pfizer, P&G, Kraft, Philip Morris, Lego, Gap, Dupont, Cemex, Ford, Kellogg, Bose, Hershey, SAP, Alcoa, etc.
7
Three Titanic Forces Converge: 1st in a 4-Part Series on Media
• The goal of this series is to seek underlying causes
• To focus not on what is happening, but why it’s happening
• The series is in four parts:– 3 Titanic Forces Converge– Network Economics– Managing in an Era of Mass-Niche
Duality– Strategies for Adaptation
8
Ad skipping threatens ad revenues
Fragmented
Reach
US Ad Spending Out of Whack
0% 5% 10% 15% 20% 25% 30% 35% 40%
TV
Newspapers
Radio
Magazines
Internet
US Ad Spending Time SpentEco
nom
ist,
July
200
5
MismatchedSpending
The new marketing reality (affecting all industries)
9
It’s Official: Gates Says Web Will Revolutionize TV In 10 Years
Dah…..
10
3 Titanic Forces Converge
•The Rise of Openness•Broadband•Many-to-Many Networks•Causing extreme divergence in audience fragmentation and content choice
11
1st Force: The Raise of Openness• With the internet came open standards: http, ftp,
html, mp3/4, etc.• Openness means barriers to entry fall because
the tools needed for startups are readily available for free or for small licensing fees
• The really bad news for the majors: No Market Equilibrium
• Creates a seemingly chaotic environment of constant innovations entering the market
12
Walled Gardens Collapse
CBSNBC
ABC
TNTDiscover
ESPNOxygen
QVCE! Golf Ch.Disney
FoxWB
HistoryAMC
Heavy.com
Very High Fixed Costs, Spectrum Monopolies, etc.,
Little consumer choice
Cable Infrastructure Develops with excess capacity,
Still high rents for network startups
(Oxygen $400 mm to launch)
Consumer Choice Expands
No Significant barriers to entry except legitimate
content
13
Retail Radio MTV
Label
Consumer
Artist
MySpaceiTunes etc. Band SiteBlogsFacebook
From Simple to Complex…Record Companies Risk Losing Their Relevance
Record Label’s Traditional Role
Web creates a Label By-Pass
14
Temporary Equilibriums May Re-emerge
• In low barier-to-entry environments, equilibriums can still emerge, but they are short-lived
• After 1st Dot-Com, Yahoo, AOL, and MSN emerged as the major portals sharing a dependable portion of the page views and ad revenue
• With the advent of MySpace, College Facebook, their position begins to erode
• On the web, new models and technological innovation will continue to cause instability
15
2nd Force: Broadband
• The emergence of broadband will be as important as the invention of the car vs the horse and buggy
• 60%+ of US households have it
• Some European and Asian countries have higher penetration and faster service
16
Some Conservative Predictions – Broadband Enabled
• Video will become far more “immersive” on the web as speed, quality and picture size improves.
• Every TV show and movie will be available on demand somewhere on the web.
• The browser and the TV will merge in the living room, creating a “cable bypass.”
• Conventional TV networks and cable broadcasting will reduce to 1/3 of their current viewership and skew toward seniors, who are slower to adopt new technologies.
• DVD-based video games will disappear and be replaced by web-based distribution.
• Games may begin to seriously rival television audiences as they gain broader appeal.
• Advertising will remain the dominant financial model, but will be individualized, more flexible, more measurable and less intrusive.
• Peer-to-peer distribution will become the dominant legal transfer protocol on the web for video.
1954: Rand Envisions the Personal Computer…
17
3rd Force: Many-to-Many Networks
• The world has been living with a broadcast model for the last 60 years.
• Cable and broadcast TV, radio, newspapers, portals and websites are all one-to-many networks
• While the internet is built on a many-to-many network technology, most services don’t use it this way: email, skype, are 1:1 or 1:n
Metcalf’s Law: In a many-to-many network there are N2
connections
18
Many-to-Many Networks Are Powerful
• YouTube is now streaming over 100 million streams per day• Hard to dislodge• Accustream predicted their were 31 billion streams of user-generated
content in 2006• P2P traffic now exceeds HTTP traffic on the web• Three Reasons For N:N Power:
– Unbounded Size– Efficient Search– Super Distribution
19
Super Distribution
n: 0 1 2
Simple Viral Distribution: 2n
n: 0 1 2
Simple Viral Distribution: 2n n 2n 3n
0 1 1 5 32 243 10 1,024 59,049 15 32,768 14,348,907 20 1,048,576 3,486,784,401 25 33,554,432 847,288,609,443 30 1,073,741,824 205,891,132,094,649 35 34,359,738,368 50,031,545,098,999,700 40 1,099,511,627,776 12,157,665,459,056,900,000 45 35,184,372,088,832 2,954,312,706,550,830,000,000 50 1,125,899,906,842,620 717,897,987,691,853,000,000,000
2n
2 3 4 6 8 100
20,000
40,000
60,000
80,000
100,000
120,000
N
Growth of 1 vs 100 Viral Chains
1 Chain
100 Chains
100*2N 15 mm
“Swarming” Dampens This
20
Some Interesting Observations about N:N
• Once large, very stable: YouTube, Ebay, Skype• The market may not need two???• What’s emerging:
– N:N News– N:N TV– N:N Games– Content may be inherently N:N, but has been shoe-horned into 1:N all
these years– Encourages place- and time-shifting– Content far more elastic in terms of format, length and interactivity
than we have been conditioned to believe (same with advertising)
21
Next in Our Series on Media…
• Part II - Network Effects: The emerging dominance of “network externalities” and a new concept: The Network Good
• Part III – Managing The Mass-Niche Duality• Part IV – Strategies for Adaptation
• To Get On The Mailing List, Email Bruce Benson at bruce.benson@fticonsulting.com
• Blog: FTIMedia.wordpress.com
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