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Perspectives

Winning the Content Wars: A Look into the Digital Future (Part 1)

2016-09-07


Information, media and entertainment players were among the first to have their business models turned upside-down by digital’s onslaught. Here’s how we see the market consolidating over the next several years.

By now, most information, media and entertainment (IME) players have invested in digital content and delivery. However, many are not equipped to confront the legion of new, agile and formidable opponents, such as Facebook, LinkedIn, Amazon, Apple and Google – all of which are seeking to own every corner of the content market. 

Consequently, traditional IME companies must ask themselves difficult questions to define their role in the digital future, as well as apply Code Halo™ thinking to cement their place in both the present and near-term landscape. In Part 1 of this two-part series, we examine the challenges at stake and how we see the market evolving during the next five years. 

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Having already connected most of the developed world, social media titans such as Facebook, LinkedIn and Twitter, as well as technology platform purveyors such as Google, Apple and Amazon, have now set their sights on the content space. Because they garner the majority of online traffic, traditional publishers have little choice but to play ball or risk forfeiting control of their content and audiences. 

All told, social media giants now want to serve as the window from which the world views content. As of November 2015, Facebook users consumed eight billion videos per day, doubling in just seven months. Furthermore, these companies continue to make massive investments in content creation, distribution and consumption.

For example, Facebook recently debuted a free social news-gathering tool, Signal, to help journalists surface and follow stories and sources. Facebook’s recent acquisition of Oculus Rift also showcases its belief in virtual reality as content of the future. What’s more, both Facebook and LinkedIn have created publishing platforms within their platforms to better control both content and delivery. And both Facebook and Twitter now offer live streams to compete with YouTube, broadcast, cable and live television providers. 

That’s not all. Thanks to their popular app stores, Apple and Google now have unprecedented control over content publishers. Amazon, too, has become an entertainment company through its popular instant video service, which competes with Netflix and Hulu in the over-the-top (OTT) video space. Apple and Spotify are locked in a two-way race for the future of music. Apple is considering buying Time Warner to gain exclusive content rights for Apple TV. Such a deal could go a long way toward helping consumers “cut the cord” with cable for good. 

Not to be left behind, communications service providers (CSP) are looking at new ways to stay ahead of the curve, such as exploring the option of vertical integration with content creators and service providers. Comcast’s 2009 acquisition of NBCUniversal and AT&T’s 2015 acquisition of DirecTV are two examples of how CSPs are working to create more comprehensive customer offerings.

Nevertheless, the winners will make deft use of decoding customers’ digital footprints, or Code Halos, to deepen their understanding of the market, improve consumer experiences and, ultimately, supply a larger share of the pie. In five years, here’s what the battleground might look like. 

A Landscape for the Future

Based on our experience working with IME companies and extensive research, we predict that within five years, numerous industry sub-segments will collapse into three “mega-segments:” information insight providers, entertainment experience providers and education outcome providers. 

Figure 1

While traditional industry segments will likely retain subtle distinctions in terms of content and delivery, by 2020 the basic tenets of their business models will align with the mega-segments to which they belong. Here’s a description of each: 

  • Information insight providers. For decades, news and information services companies have helped consumers stay informed, shape opinions and make decisions. Today, however, those products and services have become commoditized. To maintain their place at the table, news service providers must increasingly become insight-driven. As Facebook and other platforms increasingly become the home for consumers’ news, news and information brands can remain relevant by rising above commodity status with smarter, more personalized insights. 

  • Entertainment experience providers. In a traditional entertainment ecosystem, studios and television networks do not have a direct interface to customers. The entertainment they create is delivered through third parties, such as theater chains, retailers, streaming providers and broadcast stations. Today, however, maintaining customer stickiness is a function of the channel that delivers the last mile of the customer experience. Understandably, many players are anxious to enter the platform space by launching their own streaming environments (think HBO GO and Showtime Anytime) and through mergers with broadband services providers (a case in point is Time Warner’s attempts to merge with Comcast and now Charter). While this trend is expected to continue, most entertainment companies will still rely on third-party platforms such as Netflix, Hulu, YouTube and Facebook to deliver their content.

  • Education outcome providers. Over the last several years, educational institutions such as universities, certification providers and online programs have intersected. As a next step, educational content providers are expected to shift their focus – moving from providing specific outputs (educational content, testing, certifications and degrees) to helping students achieve their desired outcome, such as gaining expertise in a particular field or getting hired for a suitable job. In order to do this, education providers will require Code Halo thinking. (For additional insights, see our white paper “Managing Innovation and Student Expectations.”)

Given that the likes of Apple, Google, Amazon and Facebook will increasingly control how people access and consume content, we believe tomorrow’s leading content providers will also be the best technology intermediaries. 

In part two of this series, we will examine key questions and considerations for content providers hoping to cement their place at the future table. 

To learn more, read our full report, “Winning The Content Wars: A Playbook For Today’s Content Providers” or visit our Information Services and Media and Entertainment sections of our website.

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Winning the Content Wars: A Look into the Digital Future (Part 1)