Driving growth through innovation in the media and entertainment industry - Media & Entertainment Group New imperatives for a new digital age
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Media & Entertainment Group Driving growth through innovation in the media and entertainment industry New imperatives for a new digital age By Marco Vernocchi and David Wolf
The global recession has been especially
hard on most sectors within the media
and entertainment industry. Today,
however, conversations among industry
executives are cautiously beginning to
turn more hopeful, focusing on the
possibility of a new era of growth.
Whenever a full recovery occurs, it is clear that the media and
entertainment industry will continue to wrestle with a difficult
transformation. Technology platforms are evolving rapidly,
new business models are emerging, consumer viewing habits
are changing, new competition is arising from multiple sectors.
In general, companies are under intense pressure to devise
more effective revenue models, especially in the face of
recent double-digit cuts in advertising spending.
DrDriving growth through innovation 1
The single theme that cuts across all
these challenges and opportunities
is innovation.
Out of the difficulties of the current have made progress in digitizing their are shrinking, traditional business
marketplace, a select few players will supply chains, for example, but still models are failing and consumer
emerge in a more competitive position, struggle to devise workable business attention spans are getting ever shorter.
fueled by innovation directed at three and monetization models. And engaging Shareholder value analyses of the media
primary areas: consumers in meaningful ways continues and entertainment industry reveals an
to be the most elusive goal of all. increasing weighting of the current
• The digital consumer experience: value—associated with profitability from
Achieving excellence in engaging Running through these three primary existing operations—over the future
and interacting with consumers. areas of innovation is another critical value of many of these companies,
capability: managing the innovation meaning they are generating little or no
• Digital monetization: Applying pipeline efficiently to achieve growth. premium from their future strategies.
innovative thinking to traditional Innovation needs to be encouraged at
business models in a way that creates all levels of a company and embedded Responding to these challenges means
new revenue streams. in every organizational process. That far more than just trying to extend the
requires creating a business discipline growth curve of existing products,
• The digital supply chain: Migrating for managing innovation, beginning services and models. This is about
from analog to digital capabilities with a precise definition of innovation's fundamental change that requires
across all dimensions of the supply role in the corporate strategy, and then jumping to a new growth curve entirely.
chain, from content acquisition and putting organizational structures and A large portion of the way that a
archiving, to content production, to dedicated investments in place. Without modern media and entertainment
content packaging and distribution, to those, innovation will produce only company operates needs to change.
fully automated process orchestration. sporadic creativity, not game-changing
innovations capable of driving high Yet, winners will emerge—companies
The demands of today’s economic performance. with the leadership and culture to
environment mean that success in only support bold and holistic change,
one or two of these areas is no longer Make no mistake: The challenges and also with the discipline to
sufficient; coordinated excellence in all ahead are significant. Volatility is at an manage innovation toward competitive
three is now required. Many companies all-time high. New product lifecycles advantage.
2 Driving growth through innovation Driving growth through innovation 3
Consumer engagement and insight
as keys to growth and innovation
One of the most important frontiers for innovation in the media and
entertainment industry is in how companies engage and interact with
digital consumers, and in how they harness customer insight as an
engine for growth.
The economic downturn has under- long-term relationships. Our Global consumers will ultimately drive higher
scored the importance of more targeted Content Study found that a large major- share of wallet and growth in revenues.
consumer engagement. It is, after all, ity of companies surveyed (62 percent) They are currently laying the ground-
specifically the mass media that has rank the creation of direct-to-consumer work to deliver these benefits.
been hurt the most during the recession. relationships as one of their top three
The title of Accenture’s most recent priorities. More than a third of them (38 Using analytics to improve
Global Content Study, “This time, it’s percent) already have such relationships consumer insight
personal,” puts the matter well. Media while 46 percent have both direct and
Media and entertainment companies
and entertainment companies must indirect models. In fact, only 16 percent
are aware of the critical importance of
improve their ability to leverage a close, still have a pure indirect consumer
analytics to serving consumers more
personal understanding of consumers model, and most of them are already
effectively. At the same time, they are
to deliver targeted and relevant content trying to break free from it.
not confident in the maturity of their
and services. The mass media era is
own analytics capabilities. Our survey
over; we have entered the era of Content companies aim to use direct
found that more than 70 percent of
“me media.” consumer relationships in a variety of
executives agree that robust consumer
value-creating ways: to gain feedback
data capabilities are an enabler of com-
Improving consumer engagement in on the content consumption experi-
petitive advantage for their companies.
a me-media age involves developing the ence, develop new commercial offers
However, more than half (54 percent)
right models for consumer interaction, and marketing campaigns, inform and
do not believe they are industry leaders
harnessing analytics for better insight shape content production, develop
in using on- and off-line data, and
into consumer behaviors, and creating new methods of content packaging
a fourth of respondents believe they
richer, more relevant and more engaging and distribution and optimize pricing
are lagging considerably when it
opportunities for consumer interaction. to increase revenues.
comes to harnessing analytics for
Direct-to-consumer models better consumer insight.
However, the ultimate goal of a direct-
Content companies are aware, at to-consumer model is more profitable One innovation in this area that
least, of the importance of engaging consumer relationships. Companies Accenture is driving is what we call
directly with consumers to establish know that direct interaction with an “intelligent digital platform.”
4 Driving growth through innovation Driving growth through innovation 5
Many organizations run branded websites customized, increasing the likelihood come back. If they don’t come back,
on relatively inflexible Web 1.0 digital of delivering relevant and compelling companies can’t learn enough about
marketing infrastructures and delivery experiences. them to effectively monetize the
systems. More often than not these relationship. An enterprise is then forced
legacy systems make it difficult to Relevant and engaging to remain in the world of digital small
deliver personalized experiences. consumer interaction change—trying to make money on
sessions, site visits and page views.
An intelligent digital platform, on the
other hand, gives a company the ability The intelligent digital platform points to
the larger issue involved with generating Innovation in the consumer domain must
to run analytics on the data generated
richer consumer relationships: moving be driven by a new mindset, one based
as customers interact with the site.
beyond a push marketing mindset to on relevance, dialogue and influence and
Consumer products giant Procter &
develop longer-term, interactive dialogue supported by the technology platform
Gamble is already leveraging this kind
with consumers. The ability of many just mentioned that can deliver custom-
of flexible, reusable platform—moving
traditional media and entertainment ized experiences. If relevance to consum-
beyond a a one-size-fits-all website to
companies to engage consumers and ers is high, they are more likely to stick
a platform that delivers customized
engender loyalty lags far behind many around to become long-term customers.
experiences to consumers, as well as
activity reports and business impact other industries. In the online world, and
the world of mobile portals, that gap A second value generated from an
assessments to company executives.
widens every day as Web and mobile engaging and reliably relevant experience
In effect, the intelligent digital platform traffic heads inexorably toward the sites is that digital advertising and marketing
is giving P&G a website where, unlike that know how to do digital well. can begin to fulfill the potential that
today’s sites, every customer will see and has long been predicted for them in the
experience something slightly different. The failure to engage consumers digital age. With deeper insight into
What consumers see on one page will becomes a self-perpetuating problem consumer behaviors, marketers can
depend on what they did on the previous when it comes to improving the revenue- make bolder promises to deliver specific
one and on their profile—which is based generating potential of digital. If a kinds of customers with specific interests
on knowledge of their behaviors and company can’t craft a relevant and at specific phases of the purchase
preferences gleaned over time. The compelling experience, people won’t consideration process.
website experience will be highly
6 Driving growth through innovation Driving growth through innovation 7
Applying innovation to improve
monetization
NBC Universal CEO Jeff Zucker once famously characterized the
digitization of media and entertainment as having traded “analog dollars
for digital pennies.”
Although Zucker has recently upgraded his a premium ad-free version; and forms and ways of delivering content. And
assessment (he thinks revenue generation 22 percent cite paid-for models. 86 percent of companies believe the most
has now achieved at least the level of important capability for future success
“digital dimes”), companies still have a The hybridization of business models will be delivering content across devices,
long way to go to generate the kind of combining multiple revenue sources likely platforms and locations, tailoring content
revenues one should expect from digital reflects the general downturn in advertis- services to specific platforms.
channels. ing spend, which has increased the
pressure for companies to move toward Ultimately, a multi-platform strategy is
New, hybrid business models hybrid approaches drawing on several driven by what consumers have been
simultaneous revenue streams. telling the industry for several years:
Uncertainty and volatility have created
people are loyal to content brands, not
a situation in which many different digital
Overall, the responses from the executives to particular channels. And they seek
business models co-exist in the media
in our study suggest that the choice of out the best consumption experience by
and entertainment industry, with no single
model will be determined on a case-by- choosing content specific to the platform
model yet emerging as dominant.
case basis, depending on the specific they are using to consume it.
characteristics of the offering and target
This situation was confirmed by the
consumers. Going forward, it will be criti- Thus, the message from both consumers
Accenture Global Content Study. No single
cal for companies to have the flexibility and industry leaders is clear: future reve-
business model was chosen as dominant,
and commitment to innovation that nue growth in the multi-platform world
strongly implying that companies will
enables them to operate a combination depends on delivering the right quality
need to pursue hybrid models, mixing
of models, and to move between them as and genre of content to the right consum-
different revenue sources. Just over a
consumers’ requirements change. ers over the right platform. This capability
third of the executives in our survey
takes us back to the previous discussion
predicted that advertising-funded models
A multi-platform strategy about innovations capable of delivering
will predominate in three years’ time;
better consumer insights. To be certain,
21 percent favor a hybrid mix of ads and Just as companies must embrace a market- technology innovation is critical to
various other revenues; 18 percent point place of hybrid business models, so must multi-platform delivery; equally important,
toward a “freemium” model, blending they embrace hybrid platforms for content however, is the insight that tells a company
a basic “free,” or ad-funded offering with delivery. Our survey found that two-thirds which consumers want what content
of executives believe their main source of delivered to them over which platforms
future revenue growth will be new plat- at what times.
8 Driving growth through innovation Driving Growth and Innovation 9
Improving content ROI • A truly complete view of the available also offers the capability to gather greater
rights, allowing for comprehensive insight into consumer behaviors. In turn,
A final factor in improving digital moneti- multi-platform exploitation. that enables savvy marketers to offer
zation capabilities concerns improving bolder value propositions, offering to
one’s capabilities in exploiting the full value • Detailed control and management of the
deliver consumers with clearer intentions
of content, as well as in content rights performance of content.
to buy at greater levels of specificity.
management. The costs associated with
content now represent a substantial part Digital advertising and the age That ability to target then leads to more
of the total operating costs of media and of “performance marketing” favorable pricing models and metrics,
entertainment companies, and account Accenture believes that the industry will
for the majority of their investments Digital technologies have fundamentally
migrate to a metric we have termed, “Cost
and assets. altered the media and entertainment
per Desired Outcome” or CPDO. Such a
industry and, with it, the advertising
Other research and analysis from Accenture metric will be a distinctive feature of the
industry as well. Yet, the challenges of
finds that, in the broadcasting industry for age of "performance marketing"—where
monetizing digital advertising are profound,
example, companies generate less than $2 media companies will ask marketers to pay
both for marketers and for those companies
for each $1 spent on content—not a favor- based on performance or the achievement
offering the advertising channels them-
able money-making ratio in the long run. of a particular outcome. This is a distinctive
selves. All companies face the difficult
competitive advantage to a media compa-
task of bringing a new business model
To increase profitability, broadcasters need ny—being able to tell a marketer, "Let's
online while still maximizing profitability
to improve their content return-on-invest- work together to precisely define the out-
from the old model.
ment. To do this, they need to strengthen comes you are looking for; then you will
or acquire new capabilities in content pay only if we help you achieve that desired
planning, acquisition and exploitation, If we look at where innovation is happening
outcome.” This approach also improves the
including: in the world of advertising today, it's with
effectiveness of marketers because they
media and entertainment companies that
must think more clearly about business
• Innovation through experimentation: are embracing the distinctive nature and
objectives that drive desired results.
scouting the content market to identify capabilities of digital and using those
early-stage content for acquisition—less capabilities to shape how they interact
expensive content that nevertheless has with and engage consumers. Digital enables
high upside potential. more interactive, ongoing relationships, and
10 Driving growth through innovation Driving growth through innovation 11
Innovation in operations and the
digital supply chain
Even as media and entertainment companies look to improve their future
value through improved consumer engagement and new business models,
so must they optimize their current operations. The bulk of enterprise
value—stock price and return to shareholders—comes from those operations
and the ability to generate sufficient profit and cash from the business.
This focus underscores the need to the distribution strategy, channels and supply chain are continuing to rise,
streamline and maximize efficiencies, windows created a loosely coupled with 69 percent of executives saying
applying innovation to operations and cost and revenue equation. In a highly their businesses’ investments in digital
looking in every corner of the business fragmented environment, with a prolif- transformation increased by at least
for ways to reduce costs and, in eration of devices and channels, and 10 percent in 2009.
general, to improve cost and cash with increasing price pressures, it is
management. This can mean using out- more important than ever to directly And 90 percent of executives whose
sourcing more effectively; it can mean align production costs to revenue. companies have “fully digital” opera-
improving the digitization of the supply tions still have an ongoing program
chain to become more efficient; it can Companies must develop the ability to to improve their digital capabilities—
also mean completely reengineering look at a property in terms of its lifetime evidence that digital supply chain
marketing and distribution processes. value, and then weigh all production- capabilities will continue to be an
oriented costs against all potential essential means to create, manage
Aligning costs and revenues revenues. With that information, and distribute content.
companies can then determine the most
From a cost management perspective,
effective way to make, market and Digitizing a company's supply chain
it is obvious that media and entertain-
release the product to maximize return. can produce dramatic results. Media
ment companies need to drive costs out
and entertainment companies can
of their operations as much as possible.
Supply chain digitization potentially save up to 40 percent of
But what specifically can companies do
their operational costs by migrating
better than they do now? Another important dimension of
to a fully digital environment.
operational excellence is the continued
One area ripe for improvement is in digitization of the supply chain.
However, as companies continue to
transforming a company’s operating According to our Global Content Study
build out their digital supply chains
model to better align production- findings, the digital supply chain is now
to compete more effectively for
oriented costs with distribution- a must-have capability for competing
consumers’ attention and revenues,
oriented revenues. In the past, the in the industry. Despite tough economic
they still face several barriers that
separation between production and conditions, investments in the digital
may impede their progress towards
12 Driving growth through innovation Driving growth through innovation 13
becoming a fully integrated digital example, are finding opportunities for their core competencies lie and then
enterprise. Technological challenges are better cost management in production- source non-core or specialized skills
certainly one part of the story, but and broadcasting-related application for content-specific operations with
organizational, workforce and financial outsourcing, including application external labor pools at an attractive
barriers also figure prominently in maintenance and development. price point.
executives’ minds.
However, increased price points and In general, marketplace complexities
Digital transformation affects all aspects pressure to decrease costs are spurring and the need to interact with such
of the business, and requires focused companies to move further up the a wide range of players in the overall
efforts to manage organizational outsourcing maturity scale, looking to media and entertainment ecosystem
change, retrain critical workforces, a provider to do more than deliver mean that all companies must be
change the predominant culture, alter capabilities at lower costs. An outsourc- prepared to innovate when it comes to
budget-making presumptions and ing provider is now sought out as a collaborative operating models. Joint
encourage the leadership mindsets source of innovation and the means ventures, partnerships, cooperation with
required to successfully navigate a to drive specific business outcomes. local distribution partners and with
long-term journey of change. More mature outsourcing relationships other companies and industries up and
offer greater transparency and predict- down the content supply chain—these
Outsourcing and other forms ability. They are structured to align and other developments will be critical
of cooperation across the incentives and behaviors to outcomes to achieving high performance in the
of the business. years ahead. This is an insight Accenture
value chain
relies on every day, as we bundle our
The use of outsourcing to improve Furthermore, given the continued rise services and offerings across these
efficiencies in the media and entertain- in importance of digital technologies, related sectors of media, entertainment,
ment industry is not new. Most compa- many media and entertainment publishing, communications, software,
nies have already made initial forays companies find themselves lacking high tech and electronics.
into outsourcing, especially around skills in sufficient numbers to succeed.
back office functions. Broadcasters, for Organizations need to assess where
14 Driving growth through innovation Driving growth through innovation 15
Challenge and promise: The years ahead
To meet that need, media and enter- transform their cost structure and It sounds less glamorous than deliver-
tainment companies must be commit- capture the benefits of fully digital ing a blockbuster film, game or TV
ted to understanding and satisfying operations. With these capabilities, show. And yet the future ability to
consumer needs, and developing great companies can meet their needs for deliver those blockbusters depends in
In a recovering but still uncertain global business environment, people look content and consumer experiences. current as well as future value. fact on the grittier kind of innovation
They must apply innovation to the way that transforms a business from the
to entertainment and information more than ever. they think about business and revenue More than any other type of business, inside out.
models, learning to live in a market- the media and entertainment industry
place with multiple platforms and has innovation in its DNA. These com-
multiple paths toward improved mon- panies have a track record of thinking
etization. And companies must also in new ways, of reinventing the way
people learn and play and grow. The
task ahead is to apply that same spirit
of innovation to business models,
operating structures and customer
capabilities.
16 Driving growth through innovation Driving Growth and Innovation 17Contact About the Authors
Accenture is a leading provider of Marco Vernocchi is the Global
services and solutions that help Managing Director of Accenture’s
communications companies increase Media & Entertainment industry
their ability to generate innovations practice. In this role he overseas the
and launch new products and services development of Accenture’s strategies
faster, with less cost and risk. We
and capabilities to serve broadcast,
work with 18 of the world’s top 20
film, music, games, print, publishing
communications companies and 41
of the top 50 operators (by revenue). and portals clients.
David Wolf is the Managing Director
For more information on how for Accenture’s Media & Entertainment
Accenture can help your company
practice in North America. David works
drive breakthrough growth through
at the forefront of technology changes
innovation, please contact:
in the media and entertainment
www.accenture.com/ industry, including digital content
mediaandentertainment and e-commerce. He has more than
17 years experience leading and
delivering engagements that pioneer
new technologies and apply existing
technologies in new and innovative
ways.
Copyright © 2010 Accenture About the Media & About Accenture
All rights reserved. Entertainment Group
Accenture is a global management
Accenture, its logo, and Accenture helps broadcast, consulting, technology services and
High Performance Delivered entertainment, portal and publishing outsourcing company, with more
are trademarks of Accenture. companies adapt to the realities of than 181,000 people serving clients in
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new opportunities. More than 1,000 unparalleled experience, comprehen-
dedicated professionals provide media sive capabilities across all industries
and entertainment companies with and business functions, and extensive
a distinctive combination of business research on the world’s most success-
and technology consulting, systems ful companies, Accenture collaborates
integration and outsourcing capabili- with clients to help them become
ties. Accenture has worked with high-performance businesses and
19 of the 20 largest media and governments. The company generated
entertainment companies in the world. net revenues of US$21.58 billion for
Visit us at www.accenture.com/ the fiscal year ended Aug. 31, 2009.
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