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Radiohead rejected traditional publishing practices and released their album online, asking fans to pay what they felt was fair. 8 COGNIZANT September 2012 Step 2: Disrupt yourself Innovation is inevitable: but will it come from you? Many of the big names in media today arrived as startups from the IT industry — and they’re disrupting your position: the channels, revenue and pricing models, partnerships and products you offer. You have to constantly innovate — not by making incremental improvements, but by solving new customer problems — even if it means disrupting existing business models. Disrupting pricing: innovating with “free” Pricing is one area that’s ripe for disruption: the unusual economics of digital distribution and the availability of free content has dislocated pricing expectations. You’ll have seen bands like Radiohead reap the rewards of “name your price” experiments, but niche artists can benefit too. Comedian Louis CK offered a recording of his live show himself for download for just $5, with no DRM. It went viral, selling 200,000 copies in 12 days. Now he’s avoiding Ticketmaster to run his own tour — making $4.5 million in 48 hours. Mobile app companies like Zynga have used the “freemium” model: they offer the main smartphone app for free, and generate revenue through in-app purchases (it now has 22 million daily users). Amazon sells short stories and articles as “singles” for a fraction of the cost of a book — it has even posited that in future books will be free, supported by ads. TV shows and songs now sell individually instead of as albums or series. New rental models are emerging, too. Disrupting distribution: global, multi-channel launches Timing is another opportunity. In a globalised world, where digital assets can be distributed instantly for nearly zero cost, there’s no excuse in the consumer’s mind why a film or TV show should launch in London three months later than in New York. There’s no reason why they can’t watch the DVD they just bought on their phone or tablet as well as on their TV, or have to pay twice for the privilege. For many consumers, this is where piracy comes in. Some publishers now launch films globally and on all media simultaneously, and sell “triple-play” packs that include DVD, Blu-ray and digital versions of films for convenient use on different players. But why let any delay get in the way of revenue? Magazines can launch the digital version of an issue while the paper version is printing. Authors can serialise their books to superfans as each chapter is written. Experiment and throw away the rules In some cases the only way to innovate involves creative destruction of the current business model. Author Cory Doctorow makes all his books and stories freely available online and encourages fans to translate them into new languages to expand his readership. He found his print sales increased. Despite the free copyright-expired books available on most ebook platforms, and free access to a huge library through Google Books, multiple studies have found that e-reader owners buy more books than traditional readers. These examples show that although loss leaders and free samples are not new concepts, they can still be counterintuitive — which makes experimentation critically important.
Step 3: Co-opt threats You can’t stop progress History shows that trying to regulate away or otherwise deter the emergence of disruptive technologies is often ineffective. It didn’t stop radio, the audio cassette or the videotape; it didn’t stop the sale of blank CD-Rs or MP3 players. And despite the enormous and ongoing efforts to strangle file-sharing through court action, ISP bans, deterrent prison sentences, massive fines, warning stickers, unskippable DVD warnings and DRM, it’s not stopping copyright infringement of games, movies, music and books, either. In fact, embracing a disruption can create new opportunities for the organisations that initially seem most threatened by it. Many media companies have done very well from radio, cassette, VHS and even digital sales. And there’s no reason they can’t turn other disruptive technologies into revenue opportunities too. Turn threats into opportunities For example, while millennial consumers rarely now sit watching TV without an Internet device also in front of them, this isn’t necessarily a threat to TV producers in the battle for the living room — using tie-in apps, programme hashtags and other tools, programmers can increase their audience engagement by promoting social viewing (companies like Zeebox, which bills itself “your TV sidekick”, are already tackling this trend). Broadcasters facing threats from users uploading copyrighted material to YouTube, for example, can react not by issuing takedown notices, but by automatically monetising their copyrighted content using features like YouTube ContentID (which AMC used to monetise user-uploaded Mad Men clips) and myvideorights.com (which the BBC uses). Broadcasters can also host their own advertising-included streams on their own sites and apps. Users get a convenient experience through their choice of venue, and the broadcaster still gets advertising revenue. News organisations concerned about their content being viewed for free online have two options: they can lock their content behind a paywall like the UK’s Times, or go all-out for social media referrals like the Daily Mail, which has become the world’s most-shared news site. And in competition with live, global networks like Twitter, they can choose to stay a strictly professional news organisation or embrace reader participation and citizen journalism. Some newspapers, like the Guardian, have made reader commentary a core part of the value that their websites add. Don’t fight the future Incumbents have as many opportunities as startups to redefine the competitive landscape. You can’t fight new technologies or disruptive behaviour — so instead devise a strategy that embraces it and leverages it in your favour. Further Reading: In ‘Online News: to Charge or not to Charge?’ we tackle the thorny issue of how to handle “free” Social viewing tools like Zeebox, which bills itself as “your TV sidekick”, can increase audience engagement. September 2012 COGNIZANT 9
Page 1 and 2: In association with Fit for the Fut
Page 3 and 4: Contents 4. Step 1: Scan for change
Page 5 and 6: Globalisation Thanks to advances in
Page 7: The real disruption is that platfor
Page 11 and 12: Leverage VRIN to grow your business
Page 13 and 14: Step 6: Build virtual value network
Page 15 and 16: Alternatively, you can create or sp
Page 17 and 18: Building demand To take users away
Page 19 and 20: About Cognizant Cognizant knows you

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