Media Economist

Comment and analysis on the changing media landscape. All views are my own. Follow me on @AVEYSEYMAY: var _gaq = _gaq || []; _gaq.push(['_setAccount', 'UA-37104888-1']); _gaq.push(['_trackPageview']); (function() { var ga = document.createElement('script'); ga.type = 'text/javascript'; ga.async = true; ga.src = ('https:' == document.location.protocol ? 'https://ssl' : 'http://www') + '.google-analytics.com/ga.js'; var s = document.getElementsByTagName('script')[0]; s.parentNode.insertBefore(ga, s); })();

[mediaeconomist]

The Law of Accelerating Returns means digital transmedia entertainment will flourish

In my last blog I wrote about how mobile data traffic is set to explode - it is expected to more than double every two years in the short to medium term. When we see this type of growth rate in semiconductor circuitry development it’s called Moore’s Law, and it got me thinking.

Futurists such as Ray Kurzweil, have luckily for me, also done a lot of thinking about Moore’s Law, and have extrapolated the exponential growth rate to other areas where technological evolution occurs. They call it the Law of Accelerating Returns.

Kurzweil predicts that the 21st century is going to see the largest degree of technological advancement in our history, and that the rate of this advancement, will increase as each technological breakthrough speeds up our ability to solve problems. Ultimately, it seems, we will reach a point in time where the rate of technological and intellectual advancement happens almost instantaneously. Ray calls it the singularity, and it’s near. (His book, The Singularity Is Near is a good read)

Interestingly, Facebook as a platform, a repository of content, point of content discovery and personal recommendations, are experiencing The Law of Accelerating Returns first hand.  Mark Zuckerberg recently said that Facebook now plan to ‘an equivalent of a Moore’s law of sharing’, where the amounts of data people share roughly doubles every year. 

This growth is coming from a big increase in the use of mobile devices, which is why Facebook have now launched Facebook Home and refer to themselves as a mobile first business. Other media content industries, music/radio, the press, and TV, are at different stages of becoming digital, Internet first companies.

Given that digital is becoming the mode of carriage for all media, media in turn becomes subject to Law of Accelerating Returns. So, it’s clear that tomorrow’s media landscape is going to look very different from today. After all, Facebook is only 13 years old and Twitter 7 and Vdio is just 6 days old.

As ‘traditional media’ businesses converge and distribute their content through Internet connected devices, so the lines between them will increasingly blur. Print brands already look more like TV channels, and TV channels and producers more like app developers and social media sites. I’ve discussed this topic in detail here and here.

So, how is the Law of Accelerating Returns affecting content?

The impact is manifold, and it is certainly rapidly reducing digital production and distribution costs. In theory therefore, entertainment products should become further enriched, multi-platform and transmedia. 

From original caveman paintings to books, cinema, TV and computer games, all advances in communications technology have lead to us being able to tell stories in richer, more sophisticated and quicker ways.

Connected screens and new media platforms are driving change in how we consume and interact with media and entertainment. Already, a lot of our TV entertainment is transmedia thanks to mobile apps and social media sites, Twitter and Facebook. It’s just not very sophisticated most of the time and we don't think of it in such a discreet terms.

TV shows with accompanying mobile apps are proving to deliver more emotionally engaged audiences who have consequently higher brand favorability to advertisers. Sophisticated transmedia formats also give content producers the opportunity to build communities of hard to reach audiences and interact with them more regularly than just a 1-hour slot on TV on a Sunday.

The latest transmedia product is Defiance, which launches on the 16th of April 2013.

TV broadcaster Syfy and games developer Trion have teamed up to produce it. It’s a sci-fi transmedia product that meshes a computer game and TV series into one.

Their website claims that “the Defiance TV series is a revolutionary weekly drama that impacts the game, and gives you the chance to change the show.” Sounds like a grand ambition (it is rumoured the project has cost a $100 million) and suggests they really want their community to drive the narrative.

Of course, in the epoch of the ‘Internet of Things’ and transmedia storytelling, where your kettle is talking to your toaster, who’s to say your toaster won’t end telling you a good story? (see title picture of Jesus)

[mediaeconomist]

4G and mobile video content are the engines of growth for the media industry

2012 was a watershed moment for mobile video. For the first time ever, mobile web traffic exceeded desktop web traffic. This was driven by mobile video, which by the end of 2012, represented 51% of all mobile web traffic. Cisco forecast these trends to ramp up over the next 4 years.

Cisco isn’t very good at names but they do have interesting insights. On the 6th of February Cisco published the snappily titled ‘Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2012–2017’. It makes for fascinating reading.

Their numbers for future mobile web traffic growth are huge. Mobile network connection speeds will increase 7-fold by 2017 and corresponding global mobile data traffic will increase 13-fold between 2012 and 2017, from 1.6 EB to 11.2 EB per month. Tellingly, by 2017 two-thirds of the world’s mobile data traffic will be video (see fig 1).

Fig 1. Mobile web traffic by data type

Smartphones and tablets are the devices through which all this traffic will flow (see fig 2) aided by the increased availability and speed of 4G. Cisco predicts that by 2017 4G will be 10 percent of connections, but 45 percent of total traffic.

Fig 2. Mobile web traffic by device type

Online video is already the engine of growth for digital media companies like Google. Youtube, through their investment in content producers both amateur and professional, and through their skippable ad formats, have managed to push up their video ad CPMs.

Nikesh Arora, Chief Business Officer at Google, said Youtube moves the needle with regards to ad revenue, and that the company’s ad revenue growth in the Americas was driven by “mobile and Youtube.” Already a staggering 25% of their global video views come from mobile.

Christian Schmalzl, Global Investment Officer at Mediacom Worldwide writes, ‘The online video market has adopted a clear structure in the US but remains less developed in EMEA. IN the US, three clear tiers have emerged: first the TV broadcaster/catch up sites, second the video aggregators like Hulu and YouTube, and finally the video ad networks.’

A fourth tier that’s starting to develop is social video, which took another step forward in 2013 when Twitter launched Vine to take on Viddy and Social Cam. It’s an exciting sector yet to be monetised or adopted by advertisers.

All these companies are taking advantage of the big gap between the amount of time people spend on mobile devices and the amount of advertiser dollars/pounds spent on those platforms targeting them.

According to the IAB, digital video advertising increased 43% in the UK to £69.8 million from £49.0 million, accounting for 12% of online and mobile display in the first six months of 2012; the equivalent share was 9% in the same period in 2011. Informa is forecasting a global US$37 billion OTT-video market in 2017, made up of three key video-revenue streams, advertising, subscriptions and transactions.

The ecosystem around online video will expand massively too. Video streaming optimisation companies like Rightster and Conviva are growing as they help brands quickly distribute and monetise their video content, with a good end-user experience in mind.

As the quality of online video increases and the trend of audiences turning to live streaming/watching on demand through mobile develops, it’s likely we’ll see increased parity between online mobile video ad CPMs and TV ad CPMs. They’ll start to meet in the middle.

This isn’t bad for traditional broadcasters, as technology has so far served to incrementally add to the amount of audio-visual content being consumed rather than substituting it. However, there will come a tipping point when linear broadcast TV will start to wane. Ofcom’s 2012 Communications Marketing Report shows how 16-34 broadcast viewing is starting to taper off (see Fig 3)

Fig 3. Average hours viewed per day by age group

One last thing to consider: how consumers will navigate through the ever-increasing supply of video content? Content discovery is an area I’ve discussed before on this blog but it will become ever more important. The future seems bright for the mobile video industry.

[mediaeconomist]

Santa’s multi screening affect on TV consumption

What did you get for Christmas? Chances are, if you’d been very good all year then Santa didn’t give you a lump of coal but something a little sleeker, a tablet computer? Not all retailers have reported their Christmas sales yet but it seems that tablets were the technology must have gift for 2012. Some experts have predicted that post Christmas tablet penetration in the UK could now be as high as 30%.

Santa may not have realised, but this Christmas he’ll have helped progress some underlying trends in changing TV consumption habits.

The ramifications might not be immediate, but they are manifold and fundamental, affecting root and branch change in every area of television: production, broadcast dynamics and advertiser demands.

The IAB in the US have looked at what happens to linear television viewing as ownership of connected screens goes up. As you can see below the more devices owned the less linear TV is watched.

Figure 1.

The BBC’s iPlayer figures from October 2012 bear out that people just love watching video on mobile devices, on their own terms, where they want. Santa’s deliveries saw the BBC report a 40% increase for viewing on tablets and 66% on mobiles compared with Christmas Eve.

It’s not just time and place shifting effects that mobile connected devices have on broadcast linear viewing of TV programmes. How people interact with them has changes too. Viewers are now online, sharing their views on programmes via social networks (see fig 2), finding out more info on the show, hunting for similar content, shopping for products in the show, all while simultaneously watching the show. It’s a catch all called 2nd Screening.

Figure 2. Likelihood of Using Social Media While Watching Television 

Source: The IAB, The Multi-Screen Marketer Report May 2012

Although social media commentary and other 2nd screen activities aren’t a particularly new phenomenon, it has taken a while for producers, broadcasters and advertisers, to start to understand what this behaviour change means for them and how to best exploit it.

Shazam and Zeebox are a couple of good examples of companies who are building the nascent 2nd screen plumbing; helping make connecting through to complementary content easier. There are some good examples of how these and other apps are being used by advertisers to engage with viewers on 2 screens, here. The Million Pound Drop ‘play-a-long’ app, is probably the best example of programme makers building a popular proprietary app.

It seems that advertisers have been keener to try and connect with consumers through the 2nd screen apps while programme makers and broadcasters have been more conservative. Twitter, Facebook and Youtube has been their main 2nd screen focus. The costs of activation are low and there some 10 and 33+ million users in the UK on Twitter and Facebook respectively.

In the short term, TV broadcasters and producers are asking themselves how to use social networks to build, maintain and retain audiences. While in the slightly longer term they’re working out how they can monetise and charge a premium to advertisers for access to their ‘highly engaged’ (advocate) audiences.

Facebook, Youtube and Twitter have different roles to play in audiences’ relationship with programming. There are no hard and fast rules on which platform to use, and when in the pre, during and post lifecycle of a show to use it. Optimising will vary depending on the genre of show, audience, creative assets/resources available and businesses objectives.

However, Twitter with the help of SecondSync, have been exploring what role they play in the TV ecosystem.  According to their figures some 60% of their users are active at the same time as watching TV, 40% during peak. Twitter view themselves as the online public discussion forum for TV, and more real time than other platforms, see figure 3.

Figure 3.

  Their research reveals there are two main characteristics that define how twitter is used in conjunction with TV, discovery and engagement. Figure 4 shows how discovery(viewing) of Dynamo: Magician Impossible built during the show as people twitted about it and buzz built. Figure 5 meanwhile shows how people engage with shows differently depending on the type of show.

Figure 4.

Figure 5.

There is still a lot to learn in how to best employ 2nd screening habits into TV programming but this Christmas Santa has provided extra impetuous for content producers and broadcasters to master it. Ultimately, TV programmes need to been seen as being more than just x number of minutes of linear broadcast. The good shows, after all, transcend TV and become part the social currency that helps to sustain our culture. 

Many thanks to Oliver Snoddy at Twitter for his insights and time.

[mediaeconomist]

Is there anything good to watch tonight?

We are all familiar with the maxim ‘content is king’, which if you Google you’ll find attributed to a certain Mr Bill Gates of California. It is from a speech he made in 1996 where he asserted  ‘Content is where I expect much of the real money will be made on the internet, just as it was in broadcasting.’

For much of its infancy the internet was seemingly putting paid to Bill’s idea. But as piracy starts to be seriously tackled (at least in developed economies), advertising dollars move online and businesses work out how to charge consumers for their content, Bill’s view is looking more and more prescient. The speech is well worth a read, check it out here.

Bill’s speech didn’t, however, describe a future, our present, where people can access content including linear TV, over a plethora of internet connected devices. There are now hundreds of TV channels on cable and billions of videos on the internet across thousands, if not millions of sites. 

We’re at a stage now where we’ve never had so much choice over what to watch, when to watch it and on which platform or device to watch it on.

Indeed, keen amateurs are uploading 72 hours of video a minute on to Youtube. Broadcasters and established TV production houses are putting their content libraries online through their own media players and the likes of Netflix, Lovefilm and Blixbox. While hundreds or illegal video streaming sites offer the latest American hit shows until they get shut down. Then there are new niche broadcasters in between, the AdultSwims, Maker Studios, VBS.tv, Pinch TV, etc, offering content too. There is just so much to watch, so little time to do so.

But not all content is equal. People aren’t just going to substitute broadcast linear TV programming with Youtube amateur funnies. They aren’t interchangeable, but they are of equal importance in a consumers diet of video content.  It is the effect connected mobile devices and TVs are having on broadcast linear TV viewing which is more fundamental. People are already bypassing scheduled linear TV as the latest BBC iPlayer figures demonstrate as do the IAB’s multiscreen marketer research.

But for all of this choice we’re still left with the question ‘what should I watch tonight?’ In simpler analogue times the choice was narrow and navigation straightforward. The printed TV guide listed what was worth watching on TV and entertainment stores like HMV or one of the big four supermarkets was where you went for DVDs. 

Today's world is much more complex with unlimited digital choice and fragmentation. With that comes the problem of navigation.

It’s with this new broadcaster viewer dynamic in mind that content discovery and recommendation becomes king and I think there are 4 big drivers that will determine how people decide what to watch: trusted brands; influential tastemakers; big ‘personal’ data; social buzz/recommendation.

Trusted brands that serve specific audiences (no matter how niche) will play a vital role in aggregating video content from around the web. They’ll act much like magazines and newspapers; make, curate and recommend content for audiences that share common interests. Newspapers and magazines already do this of course, though so far more as a bit of fun than as a core offering.  Expect a long tail of niche lifestyle editorial sites/apps establish themselves’ as content guides to the video web: redux is a good example worth checking out.

Influential tastemakers, the ones with big Klout scores, will be another way we navigate and decide what’s worth watching. Celebrities/critics/tastemakers act in much the same way as a trusted editorial brands. Their recommendations on what’s worth watching and where, is likely to become more important than it already is.

Big ‘personal’ data and algorithms: where recommended content is based on what you search for; what you check into or view; what other people who are ‘similar’ to you watch; what your friends like and what has successfully been AB tested. Peel, Get Glue and Viggle are just a few companies who are designing their content discovery businesses on the back of this.

Social buzz/recommendation. Twitter and Facebook commentary have made the TV water cooler moment instant and potentially global. Being able to join in with your network will determine what content you end up watching (the herding effect). So, what’s trending amongst your network and the wider population acts as a ‘word of mouth’ recommendation and as social currency. A Buzzfeed for TV, as well as Twitter and Facebook, are the type of properties that will flourish. 

It was a significant criticism of yesterday's Leveson Report into Britain's national press that the inquiry gave so little credence to what was said on social media despite the recent spectacular examples of the new reach and power of this medium.

Out of the 4 content discovery drivers it’ll be the one, or combination of, that proves most useful to consumers that will succeed. Zeebox seem well placed to act as an online video content guide (all though at the moment they’re limiting it just to linear TV) and seemed to have got the mix of big data and social buzz/recommendation right in their offer. 

[mediaeconomist]

The New TV Paradigm

So, the Mayans got it wrong. I may be taking a chance but it looks like the end of 2012 does not mean the end of the world. Phew. The Mayans can still teach us a lot however, not least how hard it is to make predictions on what will happen in the future. It is after all that time of year where the media industry collectively gazes into its crystal ball to see what important trends will emerge next year.

The demise of the Mayans also shows us how quickly once great civilizations can disappear, almost overnight. History can be viewed as a long list of glorious empire usurped by glorious empire. This is true in business too, with the usurper 99% of the time equipped with technological advantage and foresight. And it is these forces of change that will eventually bring geeks control of the universe, them or robots.

The biggest disruptive force in media today is digital and it’s in the process of finishing off many a ‘paper print’ industry. It has forced media brands online to survive and as a result massively increased the availability of content. And, as Clay Shirky puts it “digital is becoming the mode of carriage for all media”.

Digital, through cheap, internet connected digital devices and software is having the same democratising affect as the first printing presses. More fundamentally for the ‘glorious traditional TV broadcaster and production empires’ is the proliferation of cheaply produced video content. As the barriers to entry drop so their competition set is exploding.

As Daniel Leff, Venture Partner at Globespan Capital Partners puts it: ‘We are in the early stages of a video creation, distribution, consumption, content bundling and pricing paradigm shift that will lead to fundamental and transformational shifts in the TV ecosystem’. The rate of change will ratchet up in 2013 as net connected TV ownership reaches a ‘critical mass’ and wider ownership of mobile connected devices changes consumption habits.

With access to good content, unique content recommendation algorithms, and ability to crunch and make sense of vast amounts of data (quantative and social), internet and digital first companies - Google, Apple, Microsoft (Xbox), Amazon (through Lovefilm), Netflix, etc are best placed to eat the traditional broadcasters advertising lunch. Google isn’t just betting they’ll be best at finding content viewers want to watch but they’re actually investing in their own original content too. Content remains king.

Then there are start-ups, like the Nimble TV, Vidora or Maker Studios, that could end up affecting the most fundamental change. These companies are busy working on a technological advantage based on a unique perspective on consumer TV consumption.

Of course broadcasters aren’t blind to this and are making provision through their own online media players, IPTV service Youview, and second screen apps such as Sky’s stake in Zeebox or Channel 4’s Million Pound Drop play along app. But while big broadcasters and producers remain fixated on overnight ratings as the key measure of success they will be usurped, or worse still, end up a Mayan.