The media market has historically been structured as a series of vertical sectors: TV, radio, printed media and games. Rights have been sold by sector, with content produced for a single platform on the basis of those rights. The scarcity of the means of distribution (e.g. ownership of newspaper distribution infrastructure or ownership of a spectrum broadcasting licence) has enabled owners of those scarce resources to command a premium from advertisers and consumers, and thereby support the sometimes significant costs of production.
Linear TV has been the mainstay of the media market in the developed world for 50 years. Sustained by a combination of advertising revenue, subscription payments and public funding, broadcasting to TV sets has evolved relatively slowly.
Terrestrial and cable systems have been the principal distribution mechanisms for TV content. In the last 20 years they were joined by direct-to-home satellite TV, increasing the competition in TV distribution in many countries. Concurrently, digital transmission technology has reduced the cost of distribution, seeing a 40-channel platform evolve into a 400-channel platform, increasing choice and supporting limited on-demand services.
In the last three years, however, the pace of change within the media market has accelerated dramatically, leading to a more-complex environment in which to create and distribute TV content.
- The digitisation of production has significantly lowered costs, broadening content production to a wider community of amateurs as well as professionals, leading to an explosion in the quantity of content available.
- The evolution of devices that support both linear broadcast and IP-distributed content has made content more accessible.
- The widespread adoption of DTT services in most developed countries, including the digital switchover in many, has significantly increased the number of licences and has accelerated the fragmentation of traditional audiovisual markets.
- The evolution of wired and wireless broadband networks, in particular the increasing availability of sustained 2Mbit/s broadband, has provided an alternative way of distributing low- and standard-definition video content.
As a result of these developments, not only are the traditional barriers between vertical media sectors dissolving, but also the traditional points of control for broadcasters, namely their broadcast licences, are diminishing in value.
Therefore, the media industry appears to be moving towards a more-horizontal structure, differentiated by capability across function, e.g. production, aggregation or distribution, rather than control of scarce resources (see Figure 1).
Figure 1: Potential evolution of the structure of the media industry [Source: Analysys Mason]
The rapid increase in digital content production, device proliferation and take-up (TV, mobile, PC, games consoles and other devices), and evolving broadband networks are increasing consumer choice and, therefore, fragmenting content consumption. This makes it harder to retain audiences for particular content, and hence monetise those audiences through advertising or subscription services.
Competitive advantage is therefore shifting in favour of content aggregation, as consumers want to find content they value quickly and easily. More than ever, the content interface presented to the user, be it a device-based electronic programme guide (EPG), application interface or browser screen, will determine the success or failure of content.
For TV broadcasters, these fundamental changes raise three major issues that must be addressed within their strategy:
- With the fragmentation of linear TV output and the increasing importance of thematic channels in the programme mix, how can broadcasters optimise their digital programming strategy to maintain viewing share across all broadcast TV platforms?
- As IPTV evolves from being another means of delivering linear TV content, to offering an interactive entertainment experience, to users combining linear and IP-delivered interactive content (as envisaged in the BBC’s Project Canvas), what will be the implications for content production processes, programming and monetisation?
- As content is increasingly offered across multiple screens, how will the value chain evolve? How can broadcasters profitably manage the creation of content for both linear and on-demand delivery across multiple platforms?
Analysys Mason works with players throughout the media value chain to identify appropriate strategies and implement solutions. Our experience has enabled our clients to realise maximum value from consumers and maximise returns to shareholders.