Sample 2-p136-Digital case study-Global Digital Media Trendbook 2013

Newsmedia publishers and broadcasters are leveraging the hottest trends in multimedia publishing, including video, social media,

targeted advertising and e-commerce on multiple digital platforms including

smartphones, tablets and PCs.

WNMNWORLD NEWSMEDIA NETWORK

WNMNWORLD NEWSMEDIA NETWORK WORLD NEWSMEDIA NETWORK

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Global Digital Media Trendbook Partners

The European Publishers Council is a high level group of Chairmen and CEOs of leading media groups in Europe. Representing companies with newspapers, magazines, online publishing, journals, databases, books and broadcasting the EPC has been communicating with Europe’s legislators since 1991 on issues that a!ect freedom of expression, media diversity and the health and viability of professional media in the EU. www.epceurope.eu/

FIPP - the worldwide magazine media association represents companies and individuals involved in the creation, publishing, or distribution of quality content, in whatever form, by whatever channel, and in the most appropriate frequency, to defined audiences of interest.

FIPP exists so that its members develop better strategies and build better media businesses by identifying and communicating emerging trends, sharing knowledge, and improving skills worldwide. www.fipp.com

Vislink plc is a global technology business specialising in the collection and delivery of high quality video and associated data from the field to the point of usage. Vislink provides solutions to the broadcast and media market for the collection of live news, sport and entertainment events and to the surveillance market including law enforcement and public safety customers. Vislink solutions include the design and manufacture of microwave radio, satellite transmission and wireless camera systems. Vislink has operations in the United Kingdom and the United States and has sales o"ces in the United Kingdom, United States, Australia, China, Dubai and Singapore. The Company is listed on the London Stock Exchange (LSE:VLK). www.vislink.com

The World Newsmedia Network is a not-for-profit, multiple media research company devoted to assisting media companies achieve their business objectives across the media spectrum through research, events and consultancy. WNMN consults to and produces events and research for media companies around the world. www.wnmn.org

Copyright © 2013 World Newsmedia Network

GDMT 2013, in its eighth year, explores revenue and usage trends across digital platforms, including social media, video, mobile, tablets, Internet and beyond. The yearbook also analyses data from 60+ global research companies in order to project plausible futures of digital channels for media companies worldwide.

The World Newsmedia Network publishes GDMT with the support of three major research partners: European Publishers Council, FIPP and Vislink.



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Table of ContentsExecutive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Introduction Chapter 1: Global Media Landscape. . . . . . . . . . . . . 19Global entertainment and media market Global advertising by categoryGlobal advertising by region Chapter 2: Digital Media Advertising Landscape. . 35Global media revenues subject to digital competition Migration from traditional media to digitalDigital hot spots Online media

· Online media market· Online media advertising· Internet· Broadband· Dial-up· Facebook· Video

Mobile media· Mobile media revenue· Mobile media advertising

Tablet and e-reader media· Tablet media revenue· Tablet/e-reader trends

Digital TV marketVideo game marketSocial media marketGeo-location trends in hyperlocal online and mobile Chapter 3: Media Usage Trends. . . . . . . . . . . . . . . . . 63General media usage trends Advertising perception Online usage and user profiles Blog usageVideo games Social networking Mobile usage and user profiles Mobile TV Mobile social networking Chapter 4: Mobile, tablets and Apps. . . . . . . . . . . . 93TabletsTablet contentAppsPaid app trendsMobile Chapter 5: Impact on Magazine Industry . . . . . . . 111Magazine industry overview Growth of digital media and projections in revenue, readership change Magazine websitesRevenue trends including advertising and paywalls vs. free sites recap Mobile device usage/revenue

· E-readers· Smartphones

iPhone app comparisons and insights Mobile case studies from magazines E-reader overview, including trends in penetration, sales growth, apps, features, pay plans Emerging digital media in magazines Case Studies...companies and countries FIPP digital trend data Chapter 6: Impact on Newspaper Industry . . . . . 123Newspaper industry overview Growth of digital media and projections in revenue, readership change Newspaper websites Revenue trends including advertising and paywalls vs. free sites recap Mobile device usage/revenue

· E-readers· Smartphones

iPhone app comparisons and insights Mobile case studies from newspapers E-reader overview, including trends in penetration, sales growth, apps, features, pay plans Emerging digital media Case Studies...companies and countries Other digital trend data for newspapers Chapter 7: Impact on Broadcast Industry . . . . . . . 135TV, radio and cable industry overview Growth of digital media and projections in revenue, readership change Broadcast website examples Revenue trends including advertising and paywalls vs. free sites recap Mobile device usage/revenue· E-readers· Smartphones iPhone app comparisons and insightsMobile case studies from broadcast companiesE-reader overview, including trends in penetration, sales growth, apps, features, pay plansEmerging digital media in broadcast Case Studies...companies and countriesOther digital trend data for broadcast companies Chapter 8: World Newsmedia Innovation Study 2013 . . . . . . . . . . . . . . . . . . . . . . . 147The survey respondentsResponding companies’ reachEfficiencies and cost savingsImprovements through investmentsPlatformsRevenuesCost reductionsChange management Chapter 9: Big Data for Media Strategies. . . . . . . . 161

Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

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the publisher World Newsmedia Network Chicago, Illinois United States of America Tel: +1 847.778.9806 www.wnmn.org

ISBN: 978-0-9895207-0-6

WNMN CEO - Martha L. Stone, [email protected]

Editorial Director - Rachel Milton, [email protected]

WNMN Designer - Jeff McMillen

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Global Digital Media Trendbook 2013

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That said, video usage patterns are shifting from the television screen to the PC, tablet and mobile screens. Publishers and broadcasters are recognising the trends and are building high-engagement video content packages for their enthusiastic audiences. Among the most promising strategies for publishers and broadcasters is producing more video for a seemingly insatiable digital audience, and then monetising it through higher-CPM advertising.

“Video on Demand, that’s the revolution, it’s happening now, I don’t care if it’s TV or a mobile device,” said Jeff Bewkes, Chairman of the Board and CEO of Time Warner at a recent Financial Times conference. “HBO, Netflix, YouTube are all VOD platforms. That’s TV disintermediating the Internet not the other way around.”

In particular, younger audiences are driving the transition of video to the smaller screen. According to the Reuters Institute’s “Digital News Report 2013,” television viewership in the 18- to 24-year-old and the 25- to 34-year-old categories is half of the viewership of those 55+. Conversely, the younger age groups make up the lion’s share of usership online, and represent almost 2.5 times that of those 55+. The study was conducted in the United States, Brazil, Japan and six European countries.

Gfk corroborates the findings in the United Kingdom, saying 16- to 24-year-olds are the primary users of online news video, despite having an overall lower engagement with news, in general, compared to their older counterparts.

Main news source by age, online vs. television

Source: Reuters Institute’s “Digital News Report 2013”© World Newsmedia Network 2013

Online TV

18-24 25-34 35-44 45-54 55+

56% 55%

42%

32%

21%

28% 28%

38%

47%

55%

16 to 24 group most prolific news video consumers In % of UK respondents aged 16-24

Source: Gfk© World Newsmedia Network 2013

All video users Regularity of access

65+: 15%

55-64: 11%

45-54: 18%

35-44: 19%

25-34: 16%

16-24: 21%

Less often: 33%

Once a week: 14%

2-3 times a week: 18%

Most days: 23%

Everyday: 12%

Case study:The medium is the message: A new economic model

for video content is coming

In 2013, viewers and video makers worldwide are not only asking themselves what shows people want to see, but, increasingly, how they want to see them and what they are willing to pay for them—on which device, through which portal.

Nielsen’s Fourth-Quarter 2012 Cross-Platform Report projects that the U.S. will have more than five million “Zero-TV” households in 2013, up from just over 2 million in 2007. These households don’t constitute Nielsen’s traditional definition of a TV household—but they still view video content—on tablets, mobile phones and PCs. In contrast, there are 110 million standard TV households in the United States, according to Nielsen.

Reed Hastings, CEO of online streaming video provider Netflix, wrote a manifesto in April that boasted, “over the coming decades and across the world, Internet TV will replace linear TV. Apps will replace channels, remote controls will disappear, and screens will proliferate.”

More video is being consumed via access on multiple platforms – online streaming through Netflix, YouTube, Amazon, Hulu, through Apple’s iTunes app store, sharing on social networks, through apps like Snapchat and Vine. The diversity of video tributaries on screens big and small heralds a new golden age of television, with a renaissance of smart, sophisticated content. It also offers channels a potentially more

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rigorous revenue stream alternative to advertising, via paid subscriptions.

Netflix and other video on demand (VoD) streaming platforms have generated seismic waves in the video world—through both creative, à la carte video sharing packages, as well as enlightened content that exploits Big Data’s ability to synthesise viewer preferences.

“As Internet TV (audience) grows from millions to billions, Netflix, HBO, and ESPN are leading the way,” Hastings wrote.

Netflix has 30 million U.S. subscribers, slightly more than HBO and about 9 million more than the nation’s biggest cable company, Comcast. Netflix’ revenue exceeded US$1 million for the first three months of 2013—adding 2 million subscribers— setting a record that led to stocks soaring above $200 per share, more than 23 percent.

Streaming Netflix videos accounted for 4 billion hours over the first quarter of 2013, BTIG Research has reported. Netflix’s average subscriber streams 87 minutes of video a day, putting Netflix ahead of many major cable networks as one of the most watched services.

In the United States, Netflix dominates in online video on demand via fixed access via PC, according to Sandvine, garnering 32.3 percent of VoD market during the first half of 2013, while YouTube drew 17.1 percent. However, in terms of market share on mobile – that is, smartphones and tablets – Sandvine reports that YouTube dominates with a 27.3 percent

share, compared to a small but growing 4 percent share for Netflix.

Netflix’s success is, in large part, due to its intense development of new programmeming. In February 2013, it released all 13 episodes of an original US$100 million series, “House of Cards”, which it created based on Netflix subscriber analytics. According to a recent survey, 86 percent of Netflix subscribers indicated that original series such as “House of Cards” make them less likely to cancel the service.

While Netflix is slow in expanding to international markets, “House of Cards” was called “a huge hit” in the United Kingdom, though no viewership data was released by Netflix.

In May, it resurrected Fox’s “Arrested Development” series, and in June it forged a multi-year original content contract with DreamWorks that will lead to 300 hours of exclusive, new TV episodes. Netflix chief content officer Ted Sarandos has told GQ that “the goal is to become HBO faster than HBO can become us.”

Netflix is just one online streaming source (and force) for original content, however.

In April 2013, Amazon launched 14 original comedy and children’s shows, including “Alpha House”, starring John Goodman, and an adaptation of the cult film “Zombieland”—and encouraged viewers to vote which ones should be turned into fully executed series. Amazon will not release subscriber figures on Amazon Prime subscriptions, which includes access to its video service, but its numbers are thought to be in the millions.

Hulu has original programming including “Battleground,” and new offerings from stars like Eva Longoria and Seth Meyers.

Apple’s iTunes charges for television shows per episode and season. Apple said sales of media on iTunes hit a record in the first quarter of 2013. According to a study by the NPD Group, Apple nets 45 percent of online movie rentals, and 65 and 67 percent of all movie and TV show purchases, respectively.

Also part of the VOD experiment mix, YouTube. In May, YouTube, Google’s video site, announced it would ask viewers to pay a subscription for some of the videos on its site—in some channels’ cases, for as little as 99 cents, but a charge, nevertheless. YouTube’s strategy allows video makers to create

Top online video sources, fixed accessUnited States, first half of 2013

Netflix

YouTube

HTTP

BitTorrent

MPEG

Hulu

iTunes

SSL

Flash Video

Facebook

Amazon

HBO GO

0 5% 10% 15% 20% 25% 30% 35%Source: Sandvine 2013© World Newsmedia Network 2013

32.25%

17.11%

11.11%

5.57%

2.58%

2.41%

1.9%

1.89%

1.72%

1.48%

1.31%

0.34%

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models similar to newspapers’ and magazines’ tailored paywall subscriptions, allowing subscribers access to customised libraries of videos on demand.

Advertising, however, will remain a substantial revenue stream in YouTube’s model—the company was estimated to take in $1.3 billion in ad revenues last year, according to a recent report by Pivotal Research.

The rise of on-demand Internet content distribution services such as Netflix, Hulu, and Amazon has fundamentally altered the pecking order in the video delivery universe—not just because of the content they offer, but because viewers are able to cobble together content packages that cost less than a traditional cable subscription. According to the FCC, the average price of basic cable in 2012 was approximately $54.77 per month. With a Netflix subscription that can be as little as $7.99/month, Hulu at $7.99/month, and Amazon’s Prime Instant Video at $79/year, viewers can save almost $400/year if they stick with a streaming-only system rather than relying on cable.

“Cord-cutting is going to happen. The fact that it hasn’t yet is simply because cable companies have been effective at maintaining bundles,” said Carl Howe, director of consumer research at the Yankee Group in Boston. “What these disrupters – Netflix, Hulu and Amazon - are doing is opening up more distribution possibilities for programmemers, and that changes everything.”

Broadcast and cable networks are adapting to keep pace with people’s online viewing habits.

HBO and Showtime have their own VoD apps. ABC presented a live-streaming television app that allows users to watch television from their mobile devices. CBS announced an investment in online TV provider Syncbak, which can stream live shows on the Internet. Discovery Channel started up its own experimental YouTube channel, called TestTube, after it lost six percent of its 18-34-age-group viewers in 2012, according to The Wall Street Journal. Fox and Univision have mused about the possibility of making content accessible only through pay models. There’s TV Everywhere, an initiative by Comcast and Time Warner to encourage customers of multichannel video programmeming distributors (MVPDs) to watch content online and on mobile devices. Some broadcasters have launched a legal battle against

Aereo, which streams local broadcasts over the Internet for a small subscription fee.

Nielsen research reports that consumers are still watching 4.5 hours of broadcast and cable networks daily, but online streaming via Netflix and other sources may soon steal more of that viewing time, analysts say.

“As time spent with Netflix continues to grow, we suspect live and DVR’d TV viewing will fall,” said Richard Greenfield of BTIG Research.

The rise of VoD has huge advertising implications. Online video is by far the most engaging video viewing form, according to a study by Starcom MediaVest Group in the United Kingdom. People positively engage with 94 percent of the video they consume, compared to 78.2 percent for linear TV, 62.1 percent for TV VoD and 48.7 percent on recorded TV. Engagement is a measure imperative to advertising effectiveness. Positive engagement is defined when people have their attention mostly or entirely focused on the content, according to SMG. As VoD usership surges, engagement will have a profound impact on advertising pricing.

TV, in the general sense, is not coming to an end. Its economic model is simply changing dramatically. And with more sources competing for eyeballs through original content and VoD packages, content is still king—That is perhaps the only certainty in the video delivery survival race.

Positive video engagement, by viewing typeUnited Kingdom video on demand channels

Source: Starcom MediaVest Group, 2013© World Newsmedia Network 2013

Online videoLinear TVTV VODRecorded TVPaused TV

0 20% 40% 60% 80% 100%

94.1%

78.2%

62.1%

48.7%

13.1%

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Sample 2-p136-Digital case study-Global Digital Media Trendbook 2013