Tuesday, February 14, 2006

Observations from the Media Summit 2006

Media Scrum:
Observations from the 2006 Media Summit

These are highlights and my observations from McGraw-Hill’s 2006 Media Summit New York on February 8 and 9. I have tried to pick out interesting tidbits – items that one doesn’t see reported in the media a hundred times a day. I will not extrapolate any claims about the future and have saved those for my blog, http://mediascrum.blogspot.com.
I also make no claims to being objective or thorough. For example, I have no interest in gaming (blame it on my demographic: almost fiftyish, Asian-American suburban male).

A theme of the Summit was that programming is going on-demand. We will henceforth refer to this as OD, because we are headed for a content overdose. One participant joked that the only area free of media is our sleep, and even that is probably threatened.

In addition to the media model changing from linear programming to OD, there is increasing volatility in business model lifecycles, content providers’ growth and decline, and devices and trends reaching critical mass – and potentially imploding – compared to the past. We have seen rapid adoption of blogs, Skype, and other phenomena at a rate previously unheard of, and others have crashed and burned just as quickly.

Consequently, everyone is making decisions and investments with incomplete information, lack of benchmarks, and very little assessment of causation vs. correlation. Comcast, at least, is leveraging its network to create additional revenue streams, e.g., OD and phone, and making multiple bets on the future of how people want to watch TV, e.g., continuing with linear programming. Verizon, on the other hand, is making a much bigger, and riskier, investment in its network infrastructure in hopes of consumer acceptance.

Some items about consumer behavior:

v People want more control over their media consumption;
v Consumers like the home theater experience; and
v They are willing to pay for access; but
v They are less willing to paying for content, except for material that is especially valuable, e.g., business-related or adult.

There is a resultant rush to capture the consumer market by:

v Providing the most interesting content;
v Being the content aggregator of choice; or
v Controlling the means of delivery – primarily cable or phone lines.

The pure content business models are driven by the multiplicity of consumer choices:

v Branding of content becomes more important; and
v Continual consumer engagement is critical to keep them viewing your content.

Advertising imperatives, however, may be different:

v Consumer engagement with content does not, ipso facto, mean engagement with advertising;
v It’s not clear that engagement with advertising leads to desired consumer behavior; and
v In any case, the ad sales market has not kept pace with the explosion of media, partly because of the business model of siloed advertising sellers or the career imperatives of short-term CMOs.

How did all these trends coalesce at the Summit? The presenters seemed to accept that DVR homes watch more TV, perhaps 20% more. Therefore, it seems that there is greater consumer engagement. If the consumers skip ads, however, their value to advertisers would seem to be reduced, and at least two Summit participants cited the statistic that DVR users skip 80% of ads. The true impact of this would depend on benchmark data that no one had: for how many ads do people leave the room or switch channels even without DVRs? Are the 20% of ads that are watched particularly relevant to those viewers – resulting in extremely effective advertising, or is the 20% made up of people who are too lazy to even skip the ads? It’s hard for the media providers, distributors or advertisers to know definitively what to do next.

Regulatory schemes have not kept pace with either technology or consumer behavior, yet the regulators are confronting entrenched and well-funded players on significant issues:

v What is fair use of content?
· When I buy music, what are the limits, if any, of my rights to listen, replicate, share (or distribute) that content?
· Who should enforce those limits: the content provider? The distributor who sold the music? The hardware manufacturers on whose devices I listen to the music – iPod, PC, car stereo?
v Who should regulate the content I can access over the web and then report on my activity: the Chinese government searching for dissidents? The French government searching for neo-Nazis? The U.S. government searching for terrorists?