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Accenture Media and Entertainment

The Accenture Global Content Study 2008The Challenge of Change: Perspectives on the future for content providers

The Accenture Global Content Study2008 studied more than 100 leaders and decision-makers in the media and entertainment industry, spanningtelevision, videogames, film, music, radio,publishing, interactive entertainment and advertising.

Executive SummaryThe study, now in its third year,canvassed opinions from execu-tives across North America andEurope, gauging their views ofwhere the greatest opportunitiesand challenges will come fromover the next five years. The key findings are outlined in thissummary.

There is consensus over the waythe digital market is evolving,where the opportunities lie andwhat will drive revenues over thenext five years:

• 63% of companies are pursuing a multi-platform distribution strategy.

• More than one-third of compa-nies expect to see significant revenues from social media and user-generated content within three years.

• 84 percent of companies expect mobile rich media to become mass market, representing the largest growth opportunity for media and entertainment firms.

• 52 percent of those interviewed see digital advertising eclipsing traditional advertising within five years.

Execution challenges are slowingthe market:

• Over 50 percent of the media executives we spoke to believe they know which capabilities they need to transform their businesses.

• 59 percent are less than halfway along their transformational journey and are unprepared to meet the challenges of the digital marketplace.

• Increasing complexity in the business environment is causing executives to re-evaluate their capabilities.

The digital market is expected tocontinue to trend upwards over thenext two to three years. But unlessthe large media organizations cantransform rapidly, they will missout on new opportunities for rev-enue growth. With this in mind, thecritical strategic priorities mustnow be focused on:

• Executing digital transformation quickly and effectively

• Aggressively pursuing multi-platform distribution

• Enabling continuous product innovation

• Aligning existing cost structures with future revenue streams

• Understanding the consumer and delivering on their needs.

The Challenge of Change 1

The media and entertainment industryknows about change. Over the past 100years, the industry has had to transformand reinvent itself as the result of theintroduction of disruptive technologies —from radio to film, silent to sound, filmto television and now, offline to online.During each transition entrenched playershave been faced with a single imperative:adapt, or risk losing your audience.

Inevitably, some entrenched players areunable to make the transition, and thusperish. Others recognize the opportunityand seize it.

The Challenge of Change 3 2 The Challenge of Change

In 1927 Warner Bros. released the first talking film, The Jazz Singer, andushered in the era of talking pictures.In 1929 Warner Bros. released the firstall-color talking film and created a“color revolution.” Fast forward to the1970’s when Warner Bros. first gotinvolved in cable television, acquiredAtari — one of the first video gameconsole companies — and helped tocreate the home video market. Later, in the 1990’s, Warner Bros. helped toredefine home video with the advent of DVD, ushering in one of the mostprosperous times in the industry’s

history. These innovations representbrave, tradition-defying gambles thatresulted in the company growing largerthan before and, ultimately, in industry transformation.

Now the media and entertainmentindustry is facing its largest and mostdaunting transformation. As technologyenables the ubiquitous availability ofmedia, the audience is shifting its con-sumption habits. Content creators anddistributors have to adapt. Change isnever easy, but circumstances conspireto make it inevitable. And, as theWarner Bros. example shows, it canbring very substantial rewards.

This year’s report — The Challenge ofChange — reveals the findings of theAccenture Global Content Study 2008,which canvassed more than 100 global,senior executives across the media and entertainment industry. Theseinfluential leaders provided us withinsight into the trends now shapingthis industry, enabling us to betterunderstand the potential winners andlosers, threats and opportunities. Wehope you find it an interesting andthought-provoking read.

"There will be no new surprises this year, instead we will see a significant winnowing out of new media models as the industry figures out what works." Sir Martin Sorrell, Chairman and CEO of WPP

For the third year, Accenture has interviewed senior decision-makers in the media and entertainment industry, asking themto identify the greatest opportunities and challenges theyexpect to encounter over the next five years.

Now established as a signpost to change, the AccentureGlobal Content Study 2008 synthesizes the views of morethan 100 leaders in the content space, including C-levelexecutives across the television, film, music, radio, videogames, publishing, interactive entertainment and advertising industries.

Building on our knowledge base accu-mulated in the three years since welaunched this major research project,we asked respondents to identify themost important opportunities for rev-enue growth in their industry over thenext five years, as well as the signifi-cant challenges that they will need toovercome. We asked for an update onthe social media and short-form videophenomenon. We investigated the rateof growth in digital revenues and

digital advertising, as well as theuptake of mobile media. And, crucially,we set about establishing just how farcompanies have progressed in theirdrive towards digital transformation.We then considered the findings inthe context of Accenture’s High-Performance Business Program andmade recommendations to help media and entertainment companiesachieve high performance in the newdigital era.

The following summary presents someof the key findings from this year’sstudy, as well as highlights some ofthe principal implications for mediaand entertainment companies strivingto capture digital revenues and sur-vive/thrive in this new environment.For further information about this report please register atwww.accenture.com/contentstudy.

The Challenge of Change 54 The Challenge of Change

Methodology

6 The Challenge of Change

In 1969, Thunderclap Newman wassinging: “We have got to get it togeth-er…because the revolution’s here.” Thesame sentiments apply today. Mediaand entertainment executives knowthe business is profoundly changingand acknowledge the need to adaptquickly, effectively and decisively tothe changing digital marketplace.

Leading media and entertain-ment executives “get it”

2008 may be recognized as the yearthat digital media moved from anunstable niche market in the eyes of our respondents to a more stablemarket critical to the success of theirbusiness, with companies such asDisney and NBC each projecting over$1 billion respectively, in digital rev-enues. Indeed, the results of our studyshow that there is a coherent andagreed upon view of how the market

is developing, where the opportunitieslie and what needs to be done to takeadvantage of them from now on.

Now it should all be about execution

Over 50 percent of the media execu-tives we interviewed now know whichcapabilities they need to take advan-tage of this new market. At the sametime, we believe that many have afalse sense of their current capabili-ties. For example, nearly 80 percent of executives told us that their organi-zations have a consistent view ofintellectual property rights (i.e.; havethe same understanding of the rightsassociated with a specific intellectualproperty across their entire business).This is at odds with our experienceworking in the media and entertain-ment space. We would suggest that amore realistic proportion of companies

It’s all in the execution

Extent to which agree or disagree with statements about digital transformation capabilities

60%30%0%

Consistent view of intellectual property rights

A future technology architecture and roadmap

Integrated management of digital assets and metadata

Deep customer insight for targeted offerings and content

Royalty management systems capable of efficientlytracking new revenue

90%

Agree Disagree

12%79%

19%62%

24%56%

26%58%

34%43%

Progress in migration from analog, offline company to integrated file-based digital enterprise(e.g. from production to distribution)

Analog, offline company Digital transformation Integrated file-based digital enterprise

(Not started) (More than 70% complete)

21%39%14% 20%6%

“Change inevitably takes longer than you think to happen — but when it happens, it's more profound than you could have imagined.” UK Television executive


with this capability is closer to 10 to30 percent. We believe this discrepan-cy can be explained by increasingcomplexity in the business environ-ment (i.e. increasingly complex rightsas distribution channels multiply).

While executives may overestimatetheir current capabilities, they have amore realistic view of their progressalong the digital transformation con-tinuum. This is highlighted by the factthat the majority of media companiesbelieve they are less than 40 percentof the way along this journey. Thisreinforces what we have seen in themarket. As companies progress ontheir transformational journeys, theybegin to realize that it is broader andmuch more complex than originallyexpected. As a result, they slow exe-cution and re-evaluate their plans.

The rate of change suggests that whilemedia companies have a conceptualvision and understanding of the all-encompassing scale of change in frontof them, the operational implementa-tion of “transformational capabilities”(e.g., integrated management of meta-data and digital assets, efficient digitalroyalty management systems, etc.) isbeing applied piecemeal, if at all. Forexample, a majority of content com-panies recognize the need to distrib-ute content through multiple plat-forms. However, almost one-third ofthose interviewed indicated that theyare still taking a “siloed approach”. 79percent of those interviewed plan tomove to an integrated approach, butchallenges abound.

As a result, most organizations areunprepared to meet the existing chal-lenges in the market. Furthermore,this market is evolving so fast thatthere are inevitably new innovationspoised to force more disruptivechanges through the industry in thenext 12 to18 months.

This year’s study shows that media andentertainment companies have, for themost part, embraced digital media, andhave acknowledged the need to adapttheir business strategies and technicaloperations to evolve and grow theirbusinesses. The study also reveals aconsensus as to where future valueand revenue will come from — multi-platform distribution, social media,mobile and digital advertising areamongst the front-runners.

Multi-platform distribution

Content companies know that theyhave to make digital content availableto consumers whenever and whereverthey want it, and there is broad con-sensus that finding new ways to reachconsumers, or responding to how andwhere media is being accessed is seenas the largest growth driver for con-tent companies over the next fiveyears. For 63 percent of our respon-dents this means pursuing a content

distribution strategy across multiplescreens (e.g.,TV, online and mobile, etc.)

It is not surprising then, that as companies pursue their multi-screenstrategies they are developing contentfor consumption across these differentchannels. While 83 percent of ourrespondents agree that content isincreasingly developed for consump-tion across multiple platforms, contentcompanies are taking a multi-facetedapproach to multi-platform distribu-tion. CBS, ABC and NBC, for example,repurpose content originally intendedfor television on the Internet. Othercompanies, such as Warner Bros. andDisney, have announced plans to

“The big issue will betrying to convert thetechnology to reliable revenue…trying tomonetise the socialnetworks, experiment-ing with new businessmodels, trying toincrease revenues in existing models.This is what we are all trying to do.” Music executive, USA

To what extent do you agree that…

82%

61%

24%

42%

26%

36%

40%

7%

78%

Content is increasingly developed

for consumption across multi-platform

distribution

Content companies are shifting toward

an “open model” of distribution

Commercial distribution of content

without DRM will cause dramatic

growth in digital revenues

The cost of distributing HD content

via the internet is cost prohibitive

Peer-to-peer is the only viable long-

term tech to distribute online content

Disagree Agree

12%


The future is getting clearer

Extent to which agree or disagree with statements around social media/user generated content

“Social media and user generated content is a high growth opportunity for content companies. Social networking is, too.”

Disagree Agree

15%68%

22%66%

2008

2007

Channels Pursued

TV

Online

Mobile

78%

95%

77%

create and distribute platform specificcontent, such as The Jeannie TateShow. Another example, ABC’s Lost,provides an integrated experience,creating unique content for each platform that furthers the overarchingplot and storyline. This integratedapproach creates new opportunitiesfor customers to interact with theircontent as well as new revenueopportunities involved with productionand distribution of the show.

Social media is here to stay

“People power” and new ways of consuming content continue to drivechange throughout the industry.Indeed, social networks, the posterchildren of Web 2.0 concepts, haveproven their ability to aggregate largeaudiences and influence consumerbehavior and popular culture. Ourrespondents recognize this, and 68 percent agree that social media anduser-generated content is a high-growth opportunity for them.

In fact, 53 percent believe social mediadistribution channels represent thehighest growth opportunity for them.This may be due to the fact that socialmedia represent much more than asimple distribution channel and directrevenue stream. Influencers congregateand decisions are made through socialmedia. Therefore social media also rep-resent a large indirect revenue stream.Through our experiences in the market,we have found that this opportunity isso complex, and requires such a broadset of capabilities to harness its power,that companies are finding it difficultto realize its revenue potential.

That said, 57 percent of respondentsexpect to see significant revenues from social media and user-generated content within one to three years.However, 40 percent expect to see significant revenues from this sector in greater than three years, and 18precent believe it will take more thanfive years (more than double theresults indicated in our 2007 study).

“We need to ensure that our content is available on whichever platform consumers wish to view it on.”

Television executive, USA


When will mobile rich media become a mass market?

1% >1 yr 1-3 yrs 3-5 yrs <5 yrs Never

13%53%

2% Already

28% 3%

51%

51%

42%

37%

32%

37%

33%

34%

33%

27%

35%

9%

7%

(no data)

What do you view as the greatest barriers to mass market uptake of mobile rich media?

2007 2008

Consumer readiness

Consistent user experience

Content owner readiness

Mobile operator/network readiness

Handset readiness

Interoperability/DRM readiness

Cost of service

Mobile

This year’s study reflects an agreementon growth drivers in the media andentertainment industry. 57 percent ofour respondents agree that mobilerepresents the largest growth oppor-tunity over the next five years andindustry observers agree that themobile market will have profoundimpact on when, where and how con-tent is produced, packaged, distributedand consumed. The question is: Whenwill this nascent market become amass market? To this, our respondentswere split. 55 percent believe thatmobile will be a mass market withinthree years, 45 percent believe it willbe after three years.

One possible explanation for the splitis that media and entertainment exec-utives see a number of significant bar-riers to the uptake of mobile richmedia. Consumer readiness continuesto be singled out by the greatest pro-portion of executives (51 percent), butcompanies’ ability (or lack thereof) toprovide a consistent user experience isalso expected to impede mass marketuptake (42 percent). Lack of readinessamongst both content owners andmobile operators/networks also plays apart (37 percent).

Digital Advertising

Our research indicates that ad-supported business models will drive a large portion of future revenues formedia and entertainment companies.In fact, 62 percent of respondentsbelieve that content will be supportedby a variety of advertising methods,including branded content, search,sponsorships, performance and a mixof all within the next five years.

As a result, expectations for surgingrevenues from online advertising arehigh. According to a recent FinancialTimes article (11 Feb 2008), onlineadvertising is expected to generaterevenue of US$41.6 billion this year.ZenithOptimedia forecasts that, by2010, online will represent one tenthof all advertising spend worldwide.

"There will be no new surprises this year, instead we will see a significant winnowing out of new media models as the industry figures out what works." Sir Martin Sorrell, Chairman and CEO of WPP

“People will be a much greater part of content creation or content consumption. I think the audience will be so much closer to the content authors.” Television Executive, UK

People powerOur research shows there is an enormous and growingopportunity for media and enter-tainment companies to engagewith the audience in a relativelyinexpensive but extremely effec-tive manner, provided they candevelop the right capabilities and execute well.

Respondents to our survey areconfident that the Web 2.0 phenomenon is here to stay. 66 percent agree that that thereis no likelihood of the ‘bubble’bursting during the next 24months, while 71 percent do notsee any risk in allowing theirbrands to be associated withsocial media. 68 percent of

executives see social media/networking as a high growthopportunity.

The music industry, in particular,is looking to social networkingsites as a source of new talent(television and film have yet tocapitalize on this opportunity).The home-grown success of starssuch as Lily Allen, ArcticMonkeys, Rihanna and KateNash — all of whom built theirfollowings on social networkingsites — underlines the potentialof this medium.

56 percent of respondents to oursurvey are already involved insocial media in some capacity.

For the year ahead, 46 percentexpect to focus on organicinvolvement, with 19 precentplanning joint ventures in thisspace and 10 percent contem-plating acquisitions. The slightdownturn in user numbers onFaceBook and some other socialnetworking sites is clearly notidentified as a long-term con-cern by media businesses target-ing this space. Indeed, comparedto last year (when 25% of exec-utives saw this as a revolutionaryphenomenon) the vast majorityof executives are convinced thatsocial media is evolutionary (74percent) and not a fad ( justseven percent of executives)


On both the buy- and sell-side, almostevery media company is trying to adaptto the reality of digital advertising as amajor source of revenue. As reportedon Mediaweek.com, Antony Young,president of Optimedia US, recently putit like this: “A lot more decisions arestarting with the media strategy, asopposed to starting with the messag-ing. Digital has put a big fat wedge inthe way we have to approach commu-nication in campaigns.”

As far as targeted spend on digitaladvertising is concerned, the majority(59 percent) will be directed at main-stream media portals. However, thismarks a significant decrease on lastyear, when 77 percent of budgets wereallocated to this sector of the market.In a growing digital market, this doesnot necessarily represent a dilution infinancial terms, but there is no doubtthat social networking portals areassuming far greater significance. For2008, 15 percent of budgets will beallocated to this area.

As such, small and large companiesalike are pouring resources into aggre-gating ever-larger audiences acrossplatforms and developing deeper abilities to target them. Google’s acqui-sition of DoubleClick, Yahoo!’s purchaseof RightMedia, Microsoft’s acquisitionof aQuantive and most recentlyMicrosoft’s bid for Yahoo! illustratesthis point. However, acquiring technolo-gies, aggregating audiences and achiev-ing consensus is simply not enough.

59%

15%

5%

5%

4%

3%

8%

Where do you expect to spend the majority of your digital advertising budget in the next year?

Mainstream media portals

Social networking portals

User generated content

VoD advertising

Mobile advertising

In-game advertising

Other

Multi-ChannelDistributionProviding a fully integrated,customer-centric, multi-channelexperience requires media andentertainment companies tobreak out of their siloed offer-ings and to abstract the contentfrom the device so that it canbe leveraged cross-channel. Thisrequires having strong contentand rights management capabil-ities, as well as the ability toproperly schedule and controlcontent distribution.

Social MediaEnabling media and entertain-ment companies can leveragesocial media to interact withtheir customers in a new andmore meaningful way. In orderto capitalize on and monetizethe wide array of social media,

companies across the valuechain first need to discern theirabilities to understand theircustomers’ behavior, preferenceand consumption patterns. Then,companies must determine thecapabilities and implement thetechnologies required to createcontent/offerings tailored tospecific customer segments.

MobileOvercoming the significant bar-riers to mass market adoption ofrich media requires organiza-tions to clearly define mobilecontent offerings and work withpartners more closely than everbefore. As such, content compa-nies should reconsider the defi-nition, purpose and businessmodels associated with mobilecontent. As offerings becomebetter defined, content compa-

nies must then work closelywith mobile content distributorsto create simple and integrateduser experiences that “fit” thecontent.

Digital AdvertisingAchieving the promise of digitaladvertising requires firms tounderstand who their customersare as well as to recognize thepower of multi-screen distribu-tion and the effectiveness ofrich media. This means mediaand entertainment companiesneed to build out multi-channeladvertising capabilities, includ-ing multi-channel inventory and management solutions aswell as multi-channel yield|optimization tools – all capableof delivering rich as well as static media.


The scope of digital transformation is broad, complex andaffects each value chain participant differently. This year’sstudy has found that regardless of where a company sits inthe value chain, the following challenges are common:

Common challenges across the value chain


Implications

The Accenture Global Content Study 2008 shows that mediaand entertainment companies are struggling to operationallytransform their businesses to meet the demands of an everchanging digital marketplace.

Transformation is a daunting prospect, but the momentumbehind the digital revolution continues to build and billionsof dollars are now at stake. A well-planned, well-executedintegrated transformation strategy is now a necessity.

The need to innovate and optimizecontent, to investigate new opportuni-ties and to exploit new technologiesand platforms – is a strategic priorityif companies are to survive and grow -and media and entertainment busi-nesses have to be equipped to exploitnew channels in an integrated way.

In this environment, as our studyshows, companies face a number ofchallenges. As ever, the keys to highperformance are speed, flexibility andinnovation – but the ways in whichthese need to be applied are changingall the time. Effective digital transfor-mation is vital and requires focusedexecution programs. Media businessesknow they have to do this to succeed:the time has come to act on theseintentions.

“From the consumer’s point of view,technology has caused this revolutionthat we’re talking about…it’s caused adramatic disruption in the way peopleused to consume information andentertainment, so technology has disrupted the model. This has obligedus to move on and try to keep up withthe change in their habits.” Publishing Executive, Italy

Against this backdrop, the ability toexecute effectively will be key to capitalizing on market opportunities.

Execution – getting it rightExecute your digital trans-formation as quickly and effectively as possible.How prepared is your organiza-tion to execute the cultural andtechnological changes requiredto support the demands of themarket?

Aggressively pursue multi-platform distribution.Is your organisation equipped toexecute an integrated multi-platform distribution strategy?

Focus on continuous productinnovation. Are you able to keep up withthe rate of change? In whichareas might you fall behind?

Align your cost structures tofuture revenue streams. Has your cost structure beenfully optimized to enable theflexibility required to pursuenew business opportunities?

Develop an understandingwith the consumer and deliverwhat they want. How well do you know youraudience? Content aside, do youhave the ability to create,enable, and deliver a product orservice they want?

“You must break theinnovators dilemmaand walk away fromold paradigms…youmust have a keenfocus on determiningwhat consumers reallyneed and what makestheir lives better.” Media Executive, USA

Multi-platform distribution, social media, mobile and digi-tal advertising are only a few examples of the rapid tech-nological and behavioral changes that are now a fact oflife for media and entertainment companies. To keep pace,organizations must overcome significant cultural, technicaland other business challenges. To effectively compete, corporate DNAs must change and, in making the change,companies in this space face important strategic and execution priorities, including:


The media and entertainment industry knows about change.Over the last hundred years, the industry has had to transformand reinvent itself. Today, transformation beckons again.

As in the past, Warner Bros. is leading the way and has begunits digital transformation journey. Once completed, digital content of all types will be created, stored, shared and accessedquickly, efficiently and securely across its operations and byeach member of the content value chain. In short, Warner Bros.is building flexible, responsive and agile businesses that will alsoallow for fine-tuning and course changes as the digital market-place emerges.

Across the entire media and entertain-ment industry, traditional ways ofdoing business are being challenged bynew digital technologies and consumerdemands for 24/7 access to high quali-ty content. This does not mean thattraditional content (and traditionalmedia) is dead. Far from it. Cinemaswill continue to find audiences foryears to come. Children will still losethemselves in storybooks. Newspaperswill be spread out on café tables. Andbands will treasure the first cut of theirnew record.

But there’s no denying the pace ofchange. A generation from now, peoplewill rely on media and informationmuch more than they do today. Cross-platform access to content – anytime,anyplace, anywhere – will be the norm.New technologies will emerge and beadopted. Disruptive players will forcetheir way into the media and enter-tainment industry.

For the time being, however, “old” and“new” media will ride side-by-side.Each will fuel interest in the other.Digital will continue to enhance theconsumer experience, enabling widerand more immediate distribution. All ofthis is well recognized by now.

All industries eventually arrive at aninflexion point. The financial servicesindustry had no choice but to embraceelectronic trading. The travel industrywas forced to accept its consumersshopping online for the best deals. Thetelecommunications industry had tocome to terms with VoIP.

Now the media and entertainmentindustry has reached this point.Companies in this sector know whatthey must do. And, as ever, there willbe no prizes for second place.

Conclusion

Copyright © 2008 Accenture. All rights reserved.

Accenture, its logo, and High Performance Deliveredare trademarks of Accenture.

About The Accenture GlobalContent Study 2008

The study was fielded for Accenture inNorth America and Europe by TheBPRI Group at the beginning of 2008.The results are based on face-to-faceand telephone interviews.

All efforts were made in good faith tosecure a balanced and representativesample of respondents.

Authors: Gavin Mann and RossSonnabend

Contributions: Greg Douglass andDavid Wolf

About the Media &Entertainment Group

For more information on this studyand what Accenture can do to helpyou reach high performance in yourconvergence business, please contact:

Greg DouglassGlobal Managing DirectorAccenture Media & Entertainment

David WolfGlobal Lead, Digital TransformationAccenture Media & Entertainment

Gavin MannDigital Media LeadAccenture Media & Entertainment

Websitewww. accenture.com/mediaandentertainment

About Accenture

Accenture is a global managementconsulting, technology services andoutsourcing company. Combiningunparalleled experience, comprehen-sive capabilities across all industriesand business functions, and extensiveresearch on the world’s most success-ful companies, Accenture collaborateswith clients to help them becomehigh-performance businesses and gov-ernments. With 178,000 people in 49countries, the company generated netrevenues of US$19.70 billion for thefiscal year ended Aug. 31, 2007. Itshome page is www.accenture.com

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