Future of Media Report 2008 - Ross Dawson

: : FUTURE OF MEDIA : REPORT : :JULY 2008

: : FUTURE OF MEDIA : REPORT : : JULY 2008WELCOME: : FUTURE OF MEDIA 2008 : PARTNERS : :Strategic PartnersPartnersWe are entering the media economy. Thetraditional boundaries of the media andentertainment industry have becomemeaningless. Today almost everybusiness and social activity is a formof media. An increasing proportion ofour social interactions happen acrossmedia channels. Every organization isnow a media entity, engaged in creatingand disseminating messages among itsstaff, customers, and partners to achievebusiness objectives. As the physical economybecomes marginalized and economic valuebecomes centered on the virtual, mediaencompasses almost everything.At the same time, many media organizations are experiencingsevere challenges, as content proliferates, audiences changebehaviors, advertising revenue erodes, and new competitorsemerge. Others are prospering as they tap swiftly growingsectors, leverage amateur content creation, tap the power ofsocial networks, and scale production costs. Meanwhile adjacentindustries such as telecom, financial services, mobile phones,consumer electronics, professional services, and even automobileare becoming media participants.Each year Future Exploration Network runs the Future of MediaSummit, linking Silicon Valley and Sydney with video and crosscontinentaldiscussions, and launches an accompanying report.The striking impact of the 2006 and 2007 Future of Media Reportsmeans this year’s report has a lot to live up to. We are confidentthe new frameworks and ideas we are contributing will againprovide substantial value.Over the last years we have helped many media organizationsdevelop and implement effective strategies. We thrive on helpingcompanies to create the future of media. However it is alsoexciting to take these issues and conversations into a broadersphere. Welcome to the conversation.Ross DawsonChairmanFuture Exploration NetworkPage 2

MEDIA: A GROWTH MARKETSIZE OF GLOBAL MEDIA ANDENTERTAINMENT MARKET IN 2008:$US 1.7 trillionSource: PricewaterhouseCoopersSIZE OF GLOBAL MEDIA ANDENTERTAINMENT MARKET IN 2024:$US 5.7 trillion (2008 dollars)Source: Future Exploration NetworkMedia, entertainment, and related industries are positioned at the center of massive globalgrowth. The current positioning of some media companies in a rapidly changing marketmeans they are not experiencing this upside. Others are doing fabulously well in tappingpeople’s almost insatiable desire for content and connection. In this report we explore thegrowth and opportunities available to all participants in the vast landscape which is media.Fastest growing advertising markets 2007 - 2010Source: Zenith OptimediaGlobal advertising revenuesSource: Zenith OptimediaUS$ billion0 2 4 6 8 10 12 14 16 18 20600USAChinaRussiaBrazilUKIndiaJapanSouth KoreaSouth AfricaPhilippines0 10 20 30 40 50 60 70 80 90 100%US$ bn50040030020010002005 2006 2007 2008 2009 2010InternetCinemaOutdoorTelevisionRadioMagazinesNewspapersPage 3

Hours per weekmillion1009080706050403020100350300250200150100500Media ConsumptionSource: Carat1900 1920 1940 1960 1980 2000 20202FragmentationAt the same time as we are consuming moremedia, every existing media channel is beingfragmented, and new ones are being addedapace. In the example of television in this chart, we watch evermore television, but the proliferation of new channels meanscontinually less viewer time per channel. Now that the Internetand mobile are creating an explosion of new channels andcontent, audiences are being divided into smaller and smallersegments.Implications:Current mass media markets are ephemeral.Revenues per channel will decrease. In all excepta handful of cases, production costs will needto scaled down.User generated contentSource: Technorati, Flickr, Alexa, Comscore, www.internetworldstats.com2005 2006 2007 2008Flickr photos (x 0.1)Facebook visitorsNumber of blogsYouTube visitorsInternetDigital TVAnalogue TVGamesWirelessOutdoor MediaDigital RadioAnalogue RadioCinemaPrint60504030201007 Driving Forces Shaping Media1Increasing Media ConsumptionIncreasing media consumption Humans areintrinsically media animals. As we get greater accessto media and content, we are discovering that ourappetite for information and entertainment is virtually insatiable.It is commonplace for people of all ages to consume multiplemedia at the same time, with television, internet, newspaper,messaging, and other media frequently overlapping.Implications:Average total media consumption will exceed wakinghours. Most media will be consumed with partial attention.Advertising impact will decrease.3ParticipationEarly talk about consumer-generated media has become astark reality over the last two years, with an explosion of mediaparticipation across blogs, photos, videos, social networks,and more. The costs of quality content creation are plummeting. Alreadya large proportion of content available is non-professional, and people’smedia activities are increasingly focused on participatory channels such associal networks.Implications:An infinite supply of content. Increased fragmentation of attention.Pro-Am (professional-amateur) content modelswill emerge.Exabytes(10 18 Bytes)Total IP bandwidthConsumerConsumer videoUS TV FragmentationSource: Media Dynamics and Bear Sterns1950 1960 1970 1980 1990 2000 200550454035302520151050YearGlobal IP trafficSource: Cisco2006 2007 2008 2009 2010 2011 201214121086420weeklyset usage (hrs)time perchannel (hrs)4PersonalizationMedia is becoming personalized. Ultimately this isabout user control, in enabling every possible choice inwhat, when, and where people consume media, and itsformatting, filtering, and presentation. At the same time, real-timeinformation on viewers enables highly targeted advertising based onbehaviors, location, and other profile data. The fate of personalizedadvertising will depend on how societal attitudes to privacy evolve.Implications:Users’ expectations for control over their media will increase.Abuse of personalized advertising will create a backlash. Somewill opt-out, and others will opt-in if sufficient value is created.Platform-AAdvertising.comYahoo! NetworkGoogle Ad NetworkSpecific MediaValueClick NetworksYahoo!Tribal FusionGoogleCasale Media NetworkDRIVEpmadconion media groupTraffic MarketplaceAOL Media NetworkinterCLICKMSN-Windows LiveTremor Media24/7 Real MediaADSDAQBurst MediaUS Internet audience reachSource: comScore, Media MetrixUS$millionAdvertising NetworksWeb Property0 10 20 30 40 50 60 70 80 90 100% of US online population6Generational changeThe chart shows that each generation is fairly consistentin its media consumption patterns, however that eachgroup behaves very differently. The average audience ageof traditional media such as television and radio continues to increase.Over the medium to long-term, generational change will result indramatically different profiles for media consumption and participation.Implications:Media channels will be increasingly age-segmented. Advertiserswill accelerate their shift to new media outlets. Sharemarketvaluations will reflect age profiles of audiences.40003500300025002000150010005000Behavioral AdvertisingSource: eMarketer2005 2006 2007 2008 2009 2010 20115New revenue modelsWithin the current trend away from subscriptionand towards ad-supported business models, theway that advertising is sold is dramatically changing.As illustrated, the vast majority of the online players with thegreatest reach are advertising networks, not stand-alone sitessuch as Google or Yahoo! Unbundling sales and content isallowing far greater scalability of content production costs.The promise of micropayments for content may re-emergewithin a decade.Implications:Advertising aggregation will be central to the medialandscape. Media companies will segment andunbundle ad sales and content creation.80%70%60%50%40%30%20%10%0%Newspaper readership by ageSource: Journalism.org, Scarborough Research1999 2000 2001 2002 2003 2004 2005 200618 - 24 35 - 44 55 - 647Increasing bandwidth25 - 34 45 - 54 65+In developed countries the Internet has now shifted from dial-up to broadband in the home.A rapid pace of increase in bandwidth will continue indefinitely. It will not be too long before themajority of developed country homes receive over 100Mbps. At the same time mobile bandwidth issoaring, with a variety of technologies contributing to pervasive high-speed access to content.Implications:Video on demand anywhere, anytime. Personal clouds will allow music and video collections to be accessed anywhere without localstorage. The rationale for allocated media spectrum and infrastructure will fade.Strategy •Thought Leadership•Sponsored Content•For additional Future of Media Resourceswww.futureexploration.net

Future of the Media LifecycleHOME MOBILETIMESHIFTINGRECOMMENDATIONSSTORAGEPLACESHIFTINGPERSONAL CLOUDLIFESTREAMINGWORDSVIDEOPHOTOSRECORDERMUSIC SYSTEMDIGITAL VIDEOMEDIACENTERTVPCGAME CONSOLEVIDEO WALLPAPERFRAMESDIGITAL PICTUREINTERFACESFLAT SCREENSUNIVERSALREMOTERECOGNITIONGESTUREPRECIPITATIONOF PARTICIPATIONBROWSERCAMERAVIDEOHANDHELDMUSIC PLAYERPDAPHONEVIDEO GLASSESVOICERECOGNITIONeBOOK READERSNEWSPAPERSMAGAZINESPORTABLELAPTOPINTERFACESWIRELESSUPnPHOMENETWORKSPOWERLINEETHERNETCOAXSHOPPINGSIMULTANEOUSATTENTIONLONG- FORMIMMERSIVEGAMESHOME MEDIALIGHTINGINTELLIGENTDIFFUSIONOF MEMESDIFFUSIONOF MEMESALERTSMAPSTRAFFICLOCATIONBASED MEDIAOFFERSWEATHERKEYBOARDSWIRELESSPROJECTORMOBILELINK TOMOBILEVIDEOEVERYWHEREOUTDOORMEDIAINTERACTIVEBILLBOARDSPERSONALIZEDMESSAGESDIRECTIONSTIME-BASEDTV / VIDEOCONVERSATIONGAMESSEA OF CONTENTCOMMENTARYMUSICNEWSCreative Commons Attribution-Share Alike 3.0 LicenseCreated for:StrategyFor diagram explanation, Summit registration• Strategy• Thought LeadershipThought Leadership : : Future of Media : Summit 2008 : :For diagram explanation and other and additional Future of Future Media of Media Resources: resources:• Sponsored Sponsored Content ContentSilicon Valley July 14 | linked by video | Sydney July 15www.futureexploration.net/fom08

Finite players play within boundaries,infinite players play with boundaries.James CarseFlow Economy FrameworkThe Flow Economy Framework encompasses allactivity based on the flow of information and ideas.The diagram shows its six elements: Standards,Relationships, Connectivity, Interfaces,Content, and Services. All six elements arerequired to deliver value to customers.STANDARDSEach of these elements can be run as a standalonebusiness. However the greatest valueis unlocked in how they are combined. Only ahandful of companies have the capacity to play inall six elements of the flow economy, and even then theymust rely heavily on alliances. The heart of strategy in theflow economy is in leveraging existing strengths to moveinto a higher-value strategic position. As the landscapedevelops, this repositioning is a continuous process.More informationFull details on the Flow Economyframework and strategy process can befound in Chapter 7 of Living Networks.Free chapter download from:www.livingnetworksbook.comownershipFRAGMENTEDpeoplepowerwaiting forthe futureOPEN PROPRIETARYPLATFORMSplatformplaystitansclashCONCENTRATEDFuture of Media: Strategy ToolsScenario Planning for MediaClassic scenario planning is one of the most powerful tools for rigorouslong-term strategy development in the media industry. In the face ofmultiple uncertainties, including technological development, consumerbehavior, standards battles, regulation, and many others, a well-designedscenario planning process assists the development of robust businessstrategies.Generic scenarios are of limited use. Scenarios need to be developedaround specific business issues and key decisions. A typical scenarioplanning process would include:•••••••••CONNECTIVITYCONTENTIn uncertain times, don’t try to predict thefuture. Systematically explore possible futures.Define objectives and key strategic decisionsIdentify driving forces and critical uncertaintiesSelect key dimensionsRoss DawsonCreate scenario frameworkDevelop distinct, plausible, complementary scenariosTest existing strategies across scenariosGenerate new strategic optionsINTERFACESSERVICESDefine a core strategy and contingent responsesBuild strategic responsiveness across the organizationRELATIONSHIPS3 Examples: Strategic repositioningin the Flow Economy1AppleApple has proved very effective atrepositioning itself across the floweconomy. Most prominently, it has usedits strong positioning in Interfaces (e.g. iPod, Mac)to shift to Content (iTunes). It has also built directRelationships with its iTunes customers whereasbefore distributors held all customer relationships.Apple’s adoption AAC as the default music encodingStandard on iTunes provided some lock-in as it was aless common though still open standard. For iPhoneit has selected and generated revenue from selectedpartners for Connectivity (AT&T in the US), and isnow taking part of the Service revenue for iPhoneapps provided by a broader developer community.2British Sky Broadcasting (BSkyB)BSkyB began with part ownership of the satellitesproviding the Connectivity for TV delivery,creating and buying Content, and using theseto create customer Relationships. In the early 1990s itsold its satellite ownership and since then has used theAstra satellites to provide the necessary Connectivity. Itsexclusive live TV Content rights for the FA Premier Leaguesince 1992 has been leveraged into strong subscriber growthand many new Relationships. In 2001 BSkyB introducedSky+, a combination set-top box and digital video recorder,providing an Interface to generate greater revenue andbuild more entrenched Relationships. BSkyB is now shiftinginto new Services including broadband and phone. It is alsodistributing its Content over new channels including mobileusing Sky Anytime.You have to learn the rules of thegame. And then you have to playbetter than anyone else.Albert EinsteinGame Theory: Strategies for Openness1.Flow Economy Strategy Process - SummaryDefine your spaceThe inexorable shift to openness dominates the media strategic landscape today. Allsuccessful platforms provide rich programming interfaces, open standards are swiftlybeing adopted, data portability is gaining momentum, most content is available on RSSfeeds, and controls on intellectual property are being loosened.The extraordinary pace of these trends means that media strategy is becoming morechallenging. New business models are required, competitive responses must be swift, andstrategic choices need to be made and implemented in real-time.In this environment game theory is extremely relevant and a valuable strategic tool.Game theory studies how multi-player situations may evolve as participants respond toeach others’ actions. This can be done using mathematical modelling, or more simply as aframework for thinking through strategic options, their impact on the industry landscape,and optimal short and long-term strategies.• What is the “total customer experience” you participate in creating?• Which elements of the flow economy do you currently providewithin this?• Who provides the other flow economy elements required?• What is your current relationship with these providers?2. Redefine your space• What is driving change in the flow of information and value in the space?• How can you redefine the total customer experience?• What are competitive drivers within each of the flow elements required?• How can you leverage your existing positioning into new sources ofrevenue or value?3.Reposition• Build internal capabilities.• Acquire existing businesses.• License content or technology.• Build alliances with complementary firms.• Outsource business activities.3NTT DoCoMoThe flow economy framework is especially relevantto telecoms providers that need to reposition fromcommoditized Connectivity into higher valuespaces. DoCoMo has distinguished itself by developingStandards including W-CDMA and i-mode, providing it withlocal market differentiation and access to international markets.Its alliances with phone manufacturers allow it to control theInterfaces used by its customers, creating more embeddedRelationships. i-mode’s staggering success after its 1999launch was largely attributable to its model of allowingthird-party Content and Services providers access to thesystem, with just a low margin for DoCoMo. DoCoMo is nowproviding financial Services through its DCMX mobilecredit cards, and, as other mobile companies, seekingto leverage its existing customer Interfaces toprovide search functionality.Strategy •Thought Leadership•Sponsored Content•For additional Future of Media Resourceswww.futureexploration.netSTRATEGYMAPCOMPETITORACOMPETITORBCOMPETITORCSTRATEGY1STRATEGY2STRATEGY3

: : FUTURE OF MEDIA : REPORT : : JULY 2008SNIPPETSMEDIA SNIPPETSMore than 57% ofonline video viewersshare links to the videosthey find with othersPewUS newspapercirculation is the sameas in 1978, when therewere 100 million fewerpeople in AmericaNewspaper Associationof AmericaThere are 1.4million newbroadband usersin China everymonth.China MobileSix in ten (59%) arenot comfortablewhen websites usebehavioural informationto tailor advertisementsor content.HarrisIn 2007 YouTubeconsumed as muchbandwidth as theentire Internetin 2000.Daily TelegraphRoughly one-fifthof all U.S. households aredisconnected from theInternet and have neverused e-mail.Parks AssociatesFrance has thelargest number of IPTVsubscribers in the world, withthree of the world’s four largestIPTV service providers (Free,Orange France Telecom and NeufCegetel). The remaining serviceprovider out of the top four isPCCW in Hong Kong.dailyIPTVThe median age ofa US live televisionviewer is 50, comparedto 38 for the entirepopulation.Magna GlobalThirty seven percentof consumers saythey would rather payfor online contentthan be exposed toadvertisementsDeloitteAlmost 70% ofjournalists read blogsregularly, while 20% saythey spend over one hourper day reading blogsMarketwatchPage 10

ABOUT FUTURE EXPLORATION NETWORKFuture Exploration Network assists major organizations globallyto gain insights into the future and develop strategies that createcompetitive advantage. Its unique services are delivered from itsdeep in-house expertise, complemented by its network of globalbest-of-breed experts.Clients of Future Exploration Network’s key executives includeABN Amro, Capgemini, CNET, Ernst & Young, IBM, KPMG, LendLease, Macquarie Bank, Microsoft, Morgan Stanley, NewsCorporation, and SAP.LEADERSHIPRoss DawsonChairmanRoss Dawson is a globally recognizedbusiness strategist and authority onthe future of technology and business,the best-selling author of LivingNetworks and Developing Knowledge-Based Client Relationships, and a frequentinternational keynote speaker. His work is regularly featured inleading print and broadcast media worldwide such as CNN,Bloomberg TV, Washington Post, Reuters, SkyNews, ABC TV, andChannel News Asia. Ross also writes the highly influential Trendsin the Living Networks blogVIRTUAL CONSULTING MODEL TAPS WORLD’S BESTFuture Exploration Network has extensive in-house resources forconsulting, research, and content creation. We complement thesecore resources by drawing as required on our diverse networkof global best-of-breed experts. This allows us to deliver unique,world-class services for projects of any scale.SERVICESStrategy consultingFuture Exploration Network applies a range of tools andapproaches to assist its clients to develop clear, actionablestrategies in highly uncertain environments. We have deepexpertise in applying scenario planning to build robust strategies.ResearchDeep research into technological, social, and businesstrends supports clients’ strategic thinking, decisions, andimplementation. Technology landscapes help organizationsto plan long-term positioning, product development, andtechnology strategies.Thought leadership contentWe create content for leading organizations that will reachand engage attention-poor senior executives and support keymessages on technology and business trends. These can bedelivered in a wide variety of content formats, including print,presentations, documents, audio, video, and flash, and deliveredso they reach target audiences.Presentations and workshopsKeynote speeches and executive workshops can be deliveredby key Future Exploration Network executives Ross Dawson,Richard Watson, or other world-class presenters from our networkto stimulate, provoke, entertain, and provide input into specificstrategic decisions.EventsWe create focused, relevant, highly interactive conferencesand events that bring together the best minds in the field.FEN organizes both public events, and custom-designedevents for key sponsors.Go to www.futureexploration.net forother free publications including:Future of Media Report 2008 is published under aCreative Commons Attribution-ShareAlike 3.0 LicenseReport Design: redk.com.au••••Future of Media Report 2006Future of Media Report 2007Web 2.0 FrameworkExecutive Insights into Enterprise 2.0Page 11

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