The Effect of Technology on Those Who Package and Distribute the News

The Effect Of Technology On Those Who Package And Distribute The News

Villanova University Executive MBA Program

March 15, 2008

Media Content Distributors Face An Ever-Changing Landscape

•  The “news” was historically distributed via a limited number of outlets

•  Technological advancements have drastically changed this landscape

•  Traditional content distributors (networks, newspapers, etc.) must embrace new technology to stay relevant

R5 examines the effect of these changes from the perspective of those who “create” the news

Agenda

•  Situation analysis –  Historical media trends –  New media trends –  Advertising revenue trends

•  Definition of Key Issues

•  Strategies & Tactics –  Emerging business models –  Case study

Timeline

1950’s - 1995

“Traditional” media

1995 - 2000 2001 - 2007

•  TV, radio, print •  Advertising is

predictable

Internet is Supplemental

Internet becomes Integrated

•  Internet boom begins

•  Lots of VC funding

•  Build it and they will come

•  Test, learn, tear down, rebuild

•  dot-com crash •  eCommerce

begins •  Smarter use of

technology to drive business

•  Broadband connectivity

•  Digital generation

How has this affected media companies?

Historically, Media Distribution Was Limited To Only A Few Outlets

•  Primarily broadcast media –  Radio –  Television – the evening news –  Newspapers – one daily paper –  Magazines – Saturday Evening Post –  Cinema Reels

How Has Technology Changed The Game?

•  Proliferation of broadband and the Internet (Web 1.0) –  24 x 7 cable (CNN was first big player) and

hence 24 x 7 news cycle –  Hundreds of channels (TV & radio) – niche

players everywhere for every demographic –  Internet, cable and satellite television, satellite

radio, wireless technologies –  More choices in content sources and format,

but still uni-directional from provider to consumer

Internet Allows For Content Aggregation…

•  With Web 2.0, users can package and present personalized content •  RSS/XML feeds of news/events •  XML feeds of audio/video podcasts •  Portals such as iGoogle, My Yahoo, iTunes/iPod

allow easy collection and presentation •  Space and Time-shifting of content

This makes for highly targeted and impactful advertising possibilities

…And More Collaboration

•  User generated content vs institutional created content

•  Users interact with content – give them a “voice” •  Citizen journalism (camera phones) •  Blogs (Twitter) •  Social bookmarking •  You Tube •  My Space / Facebook

•  Mobile devices enable real-time use of these technologies

Ubiquitous Connectivity

•  Huge broadband penetration, WiFi everywhere and emerging 3G networks •  52.6% of US households and nearly all

corporations have high speed access •  Almost all consumers are mobile

•  Smart phones •  Blackberries

Source: Leichtman Research Group October 2007

Constant Connectivity + Internet = More “Trusted News Sources”

•  National and International sources for news in addition to local sources

•  Plethora of niche focus sources for content traditionally available locally

•  Globalizes news, jobs, real estate, classifieds, personals, weather

•  Advertising revenue will continue to decentralize with the wide availability of information

The Line Between News And Entertainment Has Blurred

•  Jon Stewart, Stephen Colbert, Howard Stern

•  Blending/Blogs by authoritative data sources –  Henry Blodget –  Walt Mossberg –  John Paczkowski –  David Pogue –  James Fallows

“Don’t Trust Anyone Over 30…”

Changes In Consumption Have Had A Significant Affect On How Dollars Flow

•  “Networked generation” spends around 3 hrs online per/day –  70% use some form of social networking site

•  MySpace, Facebook, Bebo

•  Significant reduction in traditional media use since 2005 –  Television down ~17% –  National newspaper down ~14%

Source: Business Insights Ltd. Management Report 2007

Advertising Changes Are On The Horizon

•  62% of marketers believe TV advertising has become less effective

•  87% plan to increase online ad spending

•  Many say they will cut their TV ad buys substantially when Digital Video Recorder penetration tops 50%

Source: Association of National Advertisers and Forrester Research

TV advertising is NOT personal, but fire and forget

US Advertising $ % by Media

Source: ZO Advertising Expenditure Forecast October 2007

Estimated

2007 US Advertising Revenue

•  17 companies compared across all 5 major ad sectors: online, print, TV, radio, outdoor

•  Total US ad revenue across all 17 companies grew 9% (‘06 to ’07) –  $53 billion to $58 billion

•  Online ad revenue grew 28% –  $14 billion to $18 billion

•  Offline grew only 3% –  $39.5 billion to 40.6 billion –  Helped significantly by the inclusion of affiliate fees

(and global revenue) at CBS, Viacom, and News Corp •  Online ad revenue grew by $4 billion •  Offline ad revenue--in all other media--

grew by $1 billion

Source: Silicon Alley Insider


2007 US Advertising Revenue

The Google in 2007

The year-over-year growth of revenue on Google.com (US)--approximately $2 billion--was more than twice as much the growth of ad revenue in all of the offline media companies in this sample combined.

A single media property, Google.com (US), grew by $2 billion. All the offline media properties owned by the 13 offline media companies mentioned, meanwhile--all of them--grew by about $1 billion.


What are the key issues?

Media Companies •  New technology forces rapid changes in

how consumers want information packaged and delivered

•  Highly fragmented and competitive content-delivery business will continue to challenge loyalty and viewership

Both of these will change the way media companies make money

Content Distribution Challenges

•  The content distributor faces many key questions: –  How do you remain a relevant and trusted

source of information? –  How do you keep users coming back? –  Do you have the technology systems in place

to allow distribution of content to multiple formats and platforms? Are they efficient across multiple platforms?

–  Do you give your users the ability to personalize and customize their experience with you?

–  How do you evolve with technology changes? –  How do you make money?

Objectives…there are only 2

1.  Stay relevant

2.  Stay in business…and grow

Strategies

•  Externally, continuously assess consumer awareness and use of new technologies to determine trends and preferences

•  Internally, rapidly identify and assess new and emerging technologies to determine viability for media distribution and packaging

What Can Help Make it Happen?

•  Leverage technology solutions to: –  Understand your user / audience –  Target them in terms of content and

distribution –  Allow your users to interact –  Integrate efforts so that distribution to multiple

platforms and technologies is economical –  Set-up systems and metrics to monitor and

integrate technology trends –  Pilot new and innovative ways to generate

revenue based on personalization and customization

Content Distribution – Examples of How It Has Evolved

•  Newspapers –  Wall Street Journal, Washington Post, NY

Times •  Started as print distribution •  Evolved to integrated online services, some

subscription based •  Offer aggregation, collaboration, and

connectivity on multiple platforms •  Television, Cable, Satellite Broadcasters

–  ABC, NBC, Fox, CBS, PBS, CNN •  Traditional over the air distribution •  Evolved to integrated online platforms where

content presented in multiple platforms for multiple mediums

•  Video On Demand, IPTV, Internet video streaming

Content Distribution Examples

•  Radio Broadcasters –  Clear Channel, Citadel, NPR affiliates, “Mom

and Pop” •  Started as over the air radio stations •  Evolving to integrated online platforms where

content is presented in multiple platforms for multiple mediums

•  Internet radio, iTunes integration •  Last.fm, iLike

•  Evolution key to long term viability –  Mergers, acquisitions, downsizing –  Ad revenue

We’re still in an evolutionary phase – this requires balance!

Behavioral Targeting What Do They Know About You?

Source: comScore and New York Times

Company Touch Points

Conde Nast 34

New York Times 45

Walt Disney (ABC, ESPN) 64

Yahoo 811

Behavioral Targeting Working







Contrasting The Transition Of The Business Models

Now •  Subscription-based services •  Advertising-supported services

Emerging •  Personalization & customization •  Understanding the new platforms

Disconnect between new media platforms and advertising dollars spent

Evolution Is Not Complete

For example, NY Times print vs. on-line

Case Study

•  WITF, Inc –  Public broadcaster with television, radio,

magazine, and web content distribution mediums

–  Underwriting move from unidirectional broadcast mediums (TV/Radio) to web

–  Called for restructuring of functional silos to support content distribution workflows in new technology realm

–  Still rapidly changing and evolving – the challenge is staying relevant on all platforms with global competition

–  New initiatives –  NPR/PBS recognize media usage trends and

are also trying to stay relevant as individual entities and through local affiliates

So What Should Media Companies Do?

•  Ad focus – mass niche •  Go where the audience is (virtual worlds,

gaming, social & mobile networks) •  Two-way interaction •  Target areas where you can be the best

Efficiently leverage technologies to drive this both internally & externally

Back-up

Conclusions

•  In new media world, personalization & customization is key for content distributor and advertiser

•  Traditional media can remain relevant by placing greater focus on Customer Relationship Management

•  Meet users on the platforms they expect on their schedule

•  Constantly maintaining trust, once broken, almost irrevocably lost

•  Leverage technology to enable new business models and optimize existing ones

US Advertising $ by Media


5 yr growth 02 v 07: +20%

Estimated

US Advertising $ by Media except Internet


5 yr growth 02 v 07: +14%

Estimated