Does it add up?Convergence Survey 2011Executive Summary

“We expect convergence to accelerate but we wish it would start happening”

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Since its launch in 2005, the Olswang Convergence Survey has been tracking and analysing the effects of convergence on consumers and on industry.

For this year’s report, we interviewed over 30 senior executives from across the technology, media and telecoms sectors, and we commissioned YouGov to conduct an online survey of more than 2,000 adult consumers.

Convergence means different things to different people. For our purposes, convergence is best defined by its effects, as we have previously articulated:

“Convergence means the technological developments which result in an end-user having much greater choice and control over his or her consumption of content in the home and/or on the move, such that he or she decides what to watch, when to watch it, and on what devices, rather than this being determined by technological constraints...for us, convergence is...increasingly about how well-informed consumers will use the functionality and content which is available to them across the full range of devices, platforms and services they own or receive.” 1

In this year’s report, we ask “Does it add up?” In particular does convergence deliver truly incremental value to those whose traditional revenue streams are threatened by new forms of distribution? And are we finally on the verge of a tipping point which will lead to a fundamental shift to IP-based exploitation, or does this remain a distant prospect?

1 “But what do we mean by convergence?”; p.10, Converging Media: Olswang Convergence Consumer Survey 2008; “ “Convergence – a refresher”, p.2, The Penny Drops: Olswang Convergence Survey 2009

Introduction

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Chapter 1Devices

Certain devices are particularly associated with the adoption of “convergent” behaviour by consumers, and as future battlegrounds for those seeking to deliver (or to control the delivery of) content to end-users.

We asked the respondents to our online consumer survey to identify which of these devices they currently own and/or intend to upgrade or purchase in 2011.

Consumer ownership and upgrade plans, %

Which, if any, of the following devices do you already own? And which, if any, of the following do you plan to buy or upgrade in 2011? (Please tick all that apply)

% currently owning this device

% planning to upgrade or buy this device in 2011

iPhone

Other smartphone (e.g. Android, Symbian device or Blackberry)

iPad

Other tablet (e.g. Samsung Galaxy Tab)

Dedicated e-book reader (e.g. Amazon Kindle)- excluding iPads

and other tablet devices

3D TV

TV set which is connected directly to the Internet

Xbox 360, Playstation 3 and/or Nintendo Wii

Other internet-connected device plugged in to your TV (e.g. Apple TV)

Sky+ or similar personal video recorder

None of these

A device which allows you to watch BBC iPlayer or another “catch-up” or “video on-

demand” service on your main living room TV

0 10 20 30 40 50 60 70 80

14%

22%

3%

2%

6%

5%

3%

37%

38%

23%

1%

8%

8%

4%

1%

1%

2%

1%

4%

2%

3%

4%

72%26%

Base: All respondents

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Smartphones are clearly gaining in adoption, with 14% already owning an iPhone (rising to 22% among the 25- to 34-year-olds) and 22% (or 31% of that same demographic) owning some other form of smartphone.

Whether or not 2011 proves to be the year of the iPad 2, as promised by Apple in its recent launch event, we are confident that 2011 will be the year of the tablet. One technologist told us that he expected to see a rapid adoption of tablet devices and explained that some of this growth will be delivered as a result of the tablet’s ability to reach new demographics:

“Tablets and similar devices have the potential to engage new demographics and markets. Tablets are a good size for both portability and consumption of content. For people who don’t like or never use keyboards, the touch screen is a natural form of input.”

As the reach of tablets increases, so do opportunities for so-called “companion screen” activity. Not only do tablets offer an alternative primary screen for content consumption, they also serve as secondary devices which can be used in conjunction with a “main” screen – for example, for communications related to main screen content or to access additional, related content – enhancing the viewer experience.

Our poll suggested consumer appetite for companion screen activity. Just over a fifth (21%) of 18- to 24-year-olds said they would be very likely or fairly likely to spend 99p on an app that allows them to play along with a TV game show on a main screen.

As widespread IP delivery of audio-visual content finally starts to become more of a reality than a pipedream (whether that content is delivered over a proprietary IPTV network, or over-the-top (OTT) of proprietary networks using the open internet), the fight for control of the living room screen is becoming even fiercer.

At the same time as TV manufacturers are rolling out their own IP-delivered services to connected TVs, pay TV providers are embracing IP to deliver a greater range of content to the set-top boxes of paying subscribers, new entrants are pushing “standalone” internet-to-TV solutions, and console manufacturers are delivering an ever-richer range of media to devices previously only really considered for their games capabilities.

Perhaps the best example to date of a companion screen project by a major broadcaster is the play-along game developed by Endemol UK for the Channel 4 show The Million Pound Drop. The concept was simple, allowing people to play the game at the same time as the real contestants were playing it in the show, which was broadcast live in a prime-time slot. The show and the interaction were a great success, with Endemol reporting that, over the first series’ six-day run, 3 million games were played by viewers (ratings measurement set the overall audience of the series at 13 million, an average of 2.2 million per episode).

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Chapter 2Pipes

The fundamental issue of how to deliver content and services is one that continues to dominate the industry, especially in the UK. The government needs to deliver on high-speed broadband – and the future take-up of advanced (bandwidth-hungry) services is dependent on this infrastructure being in place, as one TV industry executive explains:

“The backbones are not engineered for streaming simultaneous programming. They are engineered for downloading and somebody has to pay for new backbones to introduce a system that will give you the World Cup final streamed to 25 million homes in the UK, never mind anywhere else.”

Hybrid networks, which use broadcast technology for one-to-many transmissions, and IP delivery for point-to-point communications, are clearly part of the answer.

A major challenge is for service providers to offer end-to-end quality of service. This plays into the strengths of both established pay TV platforms and new entrant IPTV providers. However, telcos still have to battle to avoid being pushed into the role of “dumb pipes”, as they seek to secure both content and consumer attention.

In the UK, the “net neutrality” debate is still nascent, but is likely to intensify as the bandwidth bottleneck becomes more acute and as regulatory scrutiny increases. Although some content distributors and/or rightsholders may find a commercial rationale which justifies paying for access to the fast lane, we suspect that most will not – and that they will instead push for regulatory protection against discrimination. Ultimately, the consumer is most likely to pay, but the financial model for any consumer contribution is not yet clear.

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Chapter 3 Platforms

Connectivity of devices is now a given, and raises the likelihood of the network “becoming” the platform. In the connected home, there will be more connections between different devices. This has implications for both the distribution and consumption of entertainment content, as well as the potential for broader applications such as consumers monitoring elderly relatives and managing home security.

In the short term, platforms that exert end-to-end control are likely to provide the most compelling end user experience. In the longer term, the question is whether the gatekeepers of these platforms will exploit convergence in a way which extends their control – and, if they do, whether this will harm innovation in the wider market.

Although apps are still gaining in popularity, they may turn out to be a temporary phenomenon:

“It doesn’t matter what the device is. I think ultimately apps are a stepping stone towards everything being up in the cloud, connections being so fast that you don’t need an application anymore. It wouldn’t be surprising if, within five years, no one’s talking about apps anymore.”

In the meantime, the challenge is to manage the temptation to create an app for every content offering or brand; the economics of the market mean that very few will become commercially successful.

As they seek to become the default destination for their end users, social networks may become fully fledged “platforms” in their own right.

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Chapter 4TV

Take-up of connected TV is likely to be led by established pay TV operators, who will use IP delivery to enhance, rather than replace their historic transmission systems.

Although we expect that adoption of connected TV services will increase significantly in the UK in the coming years, cord-cutting (where existing pay TV subscribers switch to new, cheaper platform alternatives) looks unlikely to happen at scale in the short to medium term.

Linear television viewing still dominates, while non-linear viewing is likely to remain tied to traditional scheduled viewing for years to come. As one industry commentator put it:

“What do consumers want on top of linear? More flexibility in how they watch their linear TV.”

The resilience of linear television is reflected in the comments of one senior executiveat a large broadcaster:

“‘Big event’ TV in the living room was still very successful in 2010 – so much for the idea that we won’t have big groups watching together because we’ll all be watching somewhere else. The high numbers for event-based viewing were so high due to shows like Strictly, X Factor, the World Cup...so overall, linear remains strong and event-based viewing within that remains strong.”

In effect, the traditional linear schedule forms a recommendation engine to guide viewing decisions, and a significant proportion of non-linear viewing will consist of catch-up television.

It is important to remember that on-demand viewing is not just delivered by managed IPTV or over the top (OTT) IP services. On-demand viewing experiences are also available over other platforms and through local personal video recorder (PVR) storage in the consumer’s home.

We asked our online survey respondents to indicate those factors which might encourage them to watch more TV on a video on-demand basis.

Consistent with previous years’ findings, the most popular factor was the ability to watch VOD on a TV display instead of a computer. However, very few respondents seem intent on buying a device which enables this, suggesting that VOD-to-TV functionality is perhaps not in itself a significant purchase-motivating factor among many consumers. Also noteworthy are the findings that:

• 36% of Sky+ and other PVR owners are not motivated to watch more (or any) VOD because they already have sufficient choice and control through ownership of their PVRs; and

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• 20% of GB adults are simply not interested in VOD because they prefer to watch TV on “traditional TV channels”, i.e. on a linear basis.

Connected TV solutions will continue to proliferate. These platforms provide significant opportunities for CE manufacturers and current or would-be aggregators of audio-visual content.

We are positive about the concept of YouView given the range of content which the platform is likely to attract and the size of the target market – although it is not a straightforward proposition to market and the platform will need to build significant scale quickly if it is to compete effectively with other connected TV solutions.

The methods through which consumers can navigate their way around the content available to them on the TV will continue to be of critical importance as the adoption of connected TV solutions increases.

“A channel can’t just publish 1,000 hours of content for the year on 1 January and say ‘ta-da, have fun’. You need to build awareness marketing and when you release it, it is the biggest point in demand, which means that broadcast still has a huge role to play.”

The traditional electronic programme guide is not dead – consumers know and understand it – but user interfaces will evolve rapidly. Other new methods of selecting and accessing content are likely to emerge and to increase the need for regulation to ensure fair treatment for content providers and checks on the power of the gatekeeper.

Our online poll showed the enduring loyalty of consumers to pay TV. 36% of those surveyed identified pay TV (either premium or basic) as the form of entertainment they would find it hardest to live without. The 45- to 54-year-old demographic is the most wedded to premium TV (such as movies and sports channels), with 20% selecting this form of entertainment as the one they would find it hardest to live without.

Social networks offer television companies the chance to build and monetise audiences, and many companies are grappling with the question of how they can make the most of a direct relationship with the audience.

“If you give people interesting insights and content about Skins on Facebook they will want to tell their friends. We have grown our Skins Facebook group from 1 million to 2.5 million fans in 3 months without having a show on air. We will put teaser content out there, try to make people feel involved and give them an insight into what is coming. To date, these activities have been about brand building but, in future, this relationship with 2.5 million fans will allow us to promote products and services such as iTunes apps, DVD sales and, potentially, the products of commercial partners such as fashion brands or beauty products.”

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Base: All respondents

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Entertainment priorities

Please imagine that you have to cut your household spending on entertainment and other similar activities in 2011. Which ONE of the following would you find it hardest to live without?

Monthly subscription to premium pay TV channels (sports and movie channels) from Sky, Virgin etc.

Monthly subscription to basic pay TV channels (pay TV channels other than sports and movies) from Sky, Virgin etc.

Buying Video games

Buying Newspapers

Buying Magazines

Buying Books

Buying CDs

Going to the cinema

Buying or renting DVDs or Blu-rays

Buying music downloads on an online music store (e.g. iTunes etc.)

Don’t know

Not applicable - I don’t spend money on any of these

25

0

5

10

15

20

14%

11%

3% 3%5%

2%

7%

18%

22%

2%

9%

4%

Chapter 5Film

The cinema has seen technological advances that have altered the theatrical experience, in particular through the installation of digital projectors. These have allowed cinemas to capitalise on the new wave of 3D movies and to experiment with a broad range of “alternative content”, from football and rugby matches to opera and ballet performances. However, for the movie industry, convergence is having its greatest impact in the way in which films are consumed in the home.

“Technology is very much the enabler here, and there are clear shifts in consumer behaviour. Consumers are now familiar with internet-connected devices, and pulling down content from services like iTunes, YouTube or wherever it might be. By having connected devices, companies are allowing consumers to get the content on their terms, and it’s allowing them to decide how they get content e.g. it’s a Friday night, it’s raining, and instead of driving to Blockbuster or HMV to rent or buy a movie they will turn on the TV and get it on-demand, so it’s really quite empowering in some ways.”

The challenge of piracy and the new opportunities in-home have brought into focus the length of the theatrical window: should exhibitors accept a shorter window in order to help rights holders tackle piracy and protect revenues from in-home exploitation, or will that have the effect of shrinking the pie for everyone?

“People will pirate content which is first made available via theatrical and then on DVD and then on TV…The only way to counteract piracy is to make movies available when the consumer wants them, and to enable consumers to pay.”

Beyond the theatrical window, in the UK much of the current focus remains on subscription models for in-home digital exploitation – and, in particular, on the challenges faced by those seeking to develop compelling subscription video on-demand (SVOD) propositions, given Sky’s exclusive subscription rights to studio content across all forms of distribution during the first pay TV window.

Interestingly, our online poll showed considerable interest in premium VOD – paying to see a movie at home soon after it has come out on general cinema release. Almost a fifth (19%) of our poll base said they thought premium VOD sounded great, because they never get round to going to the cinema these days, with this figure rising to 25% among those respondents in households with children.

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Premium VOD

Please imagine a movie you wanted to see was available to watch at home at the same time or very soon after it came out in the cinema – either online, on pay TV and/or on DVD or Blu-ray. How would you react?

0

5

10

15

20

25

30

17%

2%

19%22%

7%

10%

7%

30%

1%

6%

It wouldn’t make any difference – the cinema experience is better than at home so that’s where I’ll always see the movies I want to watch

Sounds great – I never get round to going (or I’ve got other commitments which stop me going) to the cinema these days, and I get fed up waiting for movies to come out to watch at home (whether online, on pay TV or on DVD or Blu-ray)

I currently download unauthorised copies of movies and this would encourage me to stop doing that

I currently download unauthorised copies of movies but this wouldn’t encourage me to stop doing that

I’d be interested, and if it came out within a few weeks of the cinema release I’d even thinking about paying more for it than movies currently cost to watch at home (whether online, on pay TV or on DVD or Blu-ray)

I’d be interested if I could get it on DVD or Blu-ray

I’d be interested, but only if didn’t cost more than movies currently cost online, on pay TV or on DVD or Blu-ray

I’d be interested if I could get it online

I’d be interested if I could get it “pay per view” via my pay TV provider

None of these

Base: All respondents

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Chapter 6Music

The music industry has long been ahead of the pack where convergence is concerned. Unfortunately, it also leads the pack in the way in which its business has been and continues to be damaged by piracy. The industry continues to search for a solution – not to eliminate illegal use, which is clearly an unrealistic goal but, at the very least, to reduce it to levels that provide an economic baseline for a future music industry which can afford to invest in talented musicians and their songs. As we were told by one industry expert:

“Piracy is only demand where you don’t provide a supply.” Many see this solution in the range of blossoming “all you can eat” services. However, the question remains whether the numbers can add up for all those in the value chain; while these services might deliver material revenues to record labels, it is impossible at this stage to understand how far this is a substitute for free illegal music and how far it replaces other ways of selling music that deliver better returns.

The exploitation of music in the digital world is a service business. Success will increasingly depend upon delivery of a customised range of content and other services, to suit each customer’s budget and degree of affinity with a particular act. Social media are key to maximising this engagement; but the lessons of MySpace are clear – that users want a social media environment with their own social experience at its core and not something that is primarily a sales channel:

“It’s not about how you monetise units. An album might still be £9.99, but the point is the relationship between an article and a fan. Sometimes you will give away that music for free, sometimes you might even give a ticket away for free, sometimes you might charge £100 for a ticket, sometimes you might charge someone £100,000 for a show, sometimes you might charge somebody £10 for a download but if you want the higher-quality version you might charge them £12, sometimes you might give those people a free mix tape. It’s a relationship thing, so it’s a variable pricing model, across all revenue streams.”

To explore consumer attitudes to this broad range of music-related activity, we asked our online consumer survey base to imagine that they had a voucher that had to be spent on music-related activities, and to tell us which of a range of activities they would spend it on first. From this, it is clear that the music business today is about much more than physical goods or electronic files.

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“An album might still be £9.99, but the point is the relationship between an article and a fan”

The most popular responses across our base were CDs from a favourite act (28%) and tickets to see a favourite act on tour (27%). However, this was an area where age was a particularly relevant factor, with the 18- to 24-year-olds showing a preference for live events (34%) over CDs (19%). Conversely, interest in CDs peaked among the 45- to 54-year-olds (34%), and only 21% of the 55-year-old and overs would first buy a ticket to see a favourite act on tour. Gender seems to play a part here too – 32% of female respondents selected tickets to see a favourite act on tour, compared to 22% of males.

The goal is no longer about expecting to mould consumer habits to meet the range of products being offered by a record company, but rather, as we were told:

“Monetising consumer usage and mapping our business systems around consumer habits is a key plank in our strategy going forward.”

The value of a voucher: consumers’ music preferences

Suppose you had a voucher for a set value that you had to spend on one of the following. Which ONE would you be most likely to spend it on first?

0

5

10

15

20

25

30

Music CDs by my favourite bands/artists

Music downloads from my favourite bands/artists

Subscription to a paid-for music streaming service (e.g. Spotify’s premium service without any adverts)

Tickets to see a favourite band/artist on tour

Merchandise (clothing, etc.) related to a favourite band/artist

Exclusive online access to content related to a favourite band (unreleased tracks, interviews, etc.)

None of these

Base: All respondents

28% 27% 26%

11%

5%

1%3%

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Chapter 7Publishing

Despite some blurring, there remain two clear categories of devices fighting for market share in the digital world: e-book readers and multi-purpose tablets. This is not a battle to the death, and people will continue to select according to budget, personal preference and reading habits:

“I wouldn’t [have thought it is a competition with a winner and a loser]. At the moment, everyone [who is buying these devices] is geeky and people have both, a tablet and an e-book reader. It is a different experience, for illustrated books and other books where colour is important for impact, such as kids titles, you would dump the e-reader. I think that for long-form reading, most e-book readers are lighter and easier on the eye.”

Spending on booksAre you likely to spend more, less or about the same on each of the following in 2011 compared to how much you spent in 2010?

Traditional books e-books

Will spend more

Will spend about the same

Will spend less

Will access but won’t pay

Won’t access

54%

4%

6%

18%

18%

76%

7% 8%4%5%

Base: All respondents

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We asked our respondents to identify whether they intended to spend more, less or the same amount (if anything) in 2011 as they spent in 2010 on each of print and digital books, magazines and newspapers.

For books, the results indicate a shift away from printed books towards digital consumption. The trend is perhaps less pronounced than some recent industry announcements might suggest. However, device ownership clearly has a role to play here, with 32% of iPad owners and 33% of e-book reader owners expecting to spend less on printed books in 2011 – conversely, 28% of iPad owners and 46% of e-book reader owners expect to spend more on e-books in 2011.

Spending on magazines

Are you likely to spend more, less or about the same on each of the following in 2011 compared to how much you spent in 2010?

Traditional magazines

Digital magazines

Will spend more

Will spend about the same

Will spend less

Will access but won’t pay

Won’t access

Base: All respondents

3%

43%

18%6%

30%

2%8%

4%

14%

72%

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Broadly similar patterns are seen with print and digital versions of magazines as were found in relation to books and e-books.

Magazine publishers seem enthused by the opportunities presented by tablet devices, and by the iPad in particular. One executive told us:

“iPad is an extraordinarily good device and it must have been a hell of a shock to all the other people who were developing tablets when they first saw it. We know that lots of people who were due to launch tablet devices in the first or second quarters of 2010 had to think again when they saw the iPad, as its all round quality made them realise that what they had wouldn’t compete.”

Spending on newspapers Are you likely to spend more, less or about the same on each of the following in 2011 compared to how much you spent in 2010?

Traditional newspapers

Digital newspapers

3% 2%

22%60%

11%4%

53%

13%

23%

8%

Will spend more

Will spend about the same

Will spend less

Will access but won’t pay

Won’t access

Base: All respondents

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Some 23% of our survey base said that they simply would not read traditional newspapers in 2011. However, on one measure, newspapers appear slightly more resilient than books and magazines, with just 13% of those polled telling us that they expected to spend less on traditional newspapers in 2011 (compared to 18% for each of books and magazines).

Only 17% of our base appear likely to spend anything on digital newspaper content in 2011. However, device ownership is again significant here, with 48% of iPad owner and 26% of e-book reader owners intending to purchase digital newspapers in 2011.

The debate over paywalls for online publishing content continues relentlessly:

“Publishers are wrestling with new forms of distribution. They can’t charge the same yields online as they can for print and are now spending tens of millions of dollars on infrastructure to deliver products that they can’t monetise. The Murdoch paywall is a precursor that shows how publishers are looking at new models to monetise products. Whether paywalls are good or bad, publishers need different ways to sell products – they are looking to sell bundled products to multiple audiences.”

Given the controversial terms recently imposed by Apple for subscription-based content services, it can be expected that publishers will increasingly look beyond Apple’s iOS platform for compelling pay distribution platforms.

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Chapter 8Games

Two phenomena have totally revolutionised the games industry: in the sitting room, new control interfaces, together with easily accessible games which take advantage of these interfaces, introduced by the Nintendo Wii (and subsequently launched by Microsoft and Sony); and, in the hand, the smartphone, especially the iPhone. This reverses a trend of more than three decades for games to become less accessible to “casual gamers”:

“It was games for men, made by men, shooting games or football, where you were either kicking something or someone.”

Gamification and the use of ‘serious games’ has taken off within the military and health sectors and has significant further growth potential.

The consumer experience must be made relevant to each platform: a console game can not simply be ported to a small screen.

Online games revenues will surpass those from sales of packaged games in the coming year. Games will increasingly migrate into the cloud and be delivered on a device- and platform-neutral basis.

Zynga’s success in capturing a huge audience from the propagating power of the social network – and in successfully monetising that audience through real world payments for virtual goods – has been admired by many in industry:

“That people have managed to monetise buying virtual goats is something we’re all astonished by – they have turned the whole business model on its head.”

However, whilst social media may have been embraced by many in the games industry as the new platform, the rules of the marketplace have now changed, and games developers will increasingly be squeezed by Facebook and others.

As the industry moves away from the traditional high-price console game release, so we will see many more different business models adopted (or at least experimented with), such as pay-per-level and monthly subscription:

“There are new opportunities as people figure this out; it’s about moving from analogue pounds to digital pennies. As we try to sell to millions of people, we move away from the old model of selling to the hardcore who spent lots of money. So traditional publishing is under threat; spending millions of pounds and sticking something in a shop isn’t going to work. Games are moving from a product to a service and that will continue to accelerate.”

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To explore how business models in the games sector might evolve, we asked our online survey respondents to indicate how likely they were to undertake a range of activities in relation to games and apps.

With games reaching a wider audience, and online gaming and apps proliferating by the minute, the games industry is facing the familiar challenge of how to overcome the “tyranny of choice” now faced by the casual gamer:

“With every Angry Bird, there are a lot of dead birds. It’s discovery that’s the problem... You can have the best product in the world but if nobody knows about it, it will never be a success. It can’t just spread virally – that’s wishful thinking.”

All respondents

iPhone owners

iPad owners

0 10 20 30 40 50

Buy new release games for Xbox 360, Playstation 3

or Nintendo Wii

Spend 99p to buy a game that you can play on

Facebook or another website

Spend 99p on “virtual items” that you can use in a game on Facebook or another website

Spend 99p on a game you can play on a smartphone (e.g.

iPhone) or tablet (e.g. iPad)

Spend 99p on “virtual items” that you can use in a game

on a smartphone or tablet

Spend 99p on an app that allows you to “play along” with

a TV gameshow in real time

22%

7%

6%

18%

6%

11%

35%

9%

8%

44%

16%

15%

38%

25%

27%

35%

27%

29%

Base: All respondents

How likely would you be to do each of the following from time to time, assuming you had all the necessary equipment? (Selected responses)

Games and apps

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Chapter 9Sports and gambling

Live sport remains the key driver of pay TV subscriptions and this will continue to be the case notwithstanding the effects of convergence. Coverage of live sports events does not translate as successfully as non-event programming to an on-demand world. Sports rights owners continue to confront the tension between maximising revenues from the sale of their media rights and making their sports as widely available as possible. Whilst, for some US sports, one answer has been to provide significant online coverage for free, this model does not translate easily into many other markets.

The approach now taken by nearly all major sports rights owners is to segment rights by window rather than by platform.

We asked our online survey respondents to indicate how likely they would be (assuming they had all necessary equipment) to spend 99p on a smartphone or tablet app about a favourite sports team. This type of app appeared relatively popular in comparison to others we put forward, with 11% of all respondents saying they would be likely to buy an app like this, rising to 16% of males and, significantly, to 22% among current iPhone owners and 30% among current iPad owners.

Betting apps, companion screen propositions and other interactive solutions are proliferating:

“I was staggered when Betfair got their app into the App Store and now Paddy [Power] [and] Ladbrokes all have apps in the store for their sports books. You wouldn’t have predicted that 12 months ago and that, to me, is a sign that the family-facing content owners or distribution channels will start moving into the gaming world.”

However, for many gambling companies the opportunity to expand into new regulated territories overshadows the value which convergence currently promises to deliver.

“Online gambling in all its forms … can only grow but this will mostly be due to territorial growth … [We] toe the line and don’t operate in the US or China, but there are so many countries which are massive markets, and as they open up – which is the trend – and become regulated so governments can collect taxes, they are big opportunities for [us] and all the others.”

We also asked respondents how likely they would be to use an app on a smartphone or tablet to spend 99p on a bet on a sports event they were watching. 10% said that they were fairly likely or very likely to use an app for these purposes, rising to 14% amongst males, 20% of 18- to 24-year-olds, 22% of iPhone users and peaking at 30% among iPad owners.

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Chapter 10Data

While many businesses see data about behaviour and preferences as a huge opportunity for delivering new revenue, significant structural change is required to realise this value.

“Data is where it’s at. As a result, agencies like ours want people who are good at maths as much as they want people who can build a brand campaign.”

Data capture is starting to have a significant impact on the creative process, providing more immediate feedback and allowing some content providers to develop their product after release to reflect consumer attitudes. A creative business knows very quickly today whether or not it has a hit – as one TV executive explained:

“Twitter is great – with a new show you know within five minutes if you have a huge hit or a huge problem.”

Social networks, and Facebook in particular, provide real opportunities for content owners to build defined audiences around their content, allowing a one-to-one relationship to be developed and exploited in a manner which was not previously possible.

Although the technical challenges should not be underestimated, the biggest barrier to those seeking to drive value out of audience data is privacy. We asked our respondents to consider whether they would be willing to share data about themselves, either on a personally identifiable or anonymised basis, in return for one or more of a list of possible “benefits”. On the whole our respondents appeared unenthused, particularly if they were required to share personally identifiable data such as names and contact details in return for a particular benefit (and, of course, this form of data offers the greatest potential “value” to the provider of the benefit).

Many companies want to be portrayed as being on the right side of the moral debate about privacy. While this is understandable, the true value in data will only be unlocked when data-rich businesses have the courage of their convictions and educate their customers about the potential upside to data sharing, for industry and consumers alike.

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BenefitWilling to share

anonymised behavioural data

Willing to share personally identifiable data

Exclusive offers on products you’re interested in (eg, a 15% discount this weekend at your favourite store)

Access to advert-free TV programmes, movies or music services, where you’d have to watch/listen to adverts if you didn’t share personal information

An exclusive track from your favourite artist or band

Free access on your iPhone (or other smartphone) or iPad (or other tablet device) to a game you really want to play, or free “credits” to use in that game

Free access on Facebook or another social network to a game you really want to play, or free “credits” to use in that game

Recommendations on music, TV programmes or movies you might want to watch, based on what you have listened to or watched in the past

Customised adverts when you watch TV programmes, movies or listen to a streaming music service, so you are only shown adverts for products you are likely to be interested in

Customised adverts on other websites, so you are only shown adverts for products you are likely to be interested in

None of these

Don’t know

23%

14%

8%

7%

6%

6%

5%

4%

52%

12%

12%

7%

3%

4%

3%

2%

2%

2%

66%

12%

Trading data for benefits

Would you be prepared to give a company information about you or your household if, in return, the company gave you…

Base: All respondents

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About the authors

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Matthew Phillipsmatthew.phillips@olswang.com

Matthew is a technology-focused commercial lawyer who acts for a wide range of media, communications and technology clients. Matthew specialises in broadcasting and digital media work, advising on agreements for the launch, transmission and distribution of linear and interactive channels and services, and he has been recommended by one of the leading legal directories for his “commendable knowledge of emerging technologies”. A self-confessed gadget freak, he advises on the commercial and legal implications of convergence for a number of leading UK and international broadcasters, rightsholders and platform operators, as they seek to exploit content and services on new devices and via new distribution methods.

John Enserjohn.enser@olswang.com

John provides commercial and regulatory advice to clients active in all aspects of the media and communications business, particularly those offering music and video content via digital platforms, whether TV, web or mobile. His clients include record companies and broadcasters as well as ISPs, portals, software developers, suppliers of interactive TV technology, football clubs and mobile operators. John writes and speaks regularly on a range of topics relating to interactive media and both of the independent legal directories rank him as one of the UK’s leading practitioners in e-commerce and digital media.

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www.olswang.com

Matthew PhillipsPartner

+44 (0) 20 7067 3167

matthew.phillips@olswang.com

John EnserPartner

+44 (0) 20 7067 3183

john.enser@olswang.com

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