How can news organisations make the shift to multi-platform?

The central challenge of the news business has been turned on its head.  It’s no longer a matter of keeping up with the news. Now the challenge is to keep up with consumers.  ITN Consulting Principal Gary Rogers explains.

The media environment has evolved rapidly over the last five years. Firstly through the growth of online, then mobile and most recently tablets.  News organisations have been good at rolling out new products on new platforms to keep up.  However, this has usually meant building separate operations, resulting in higher costs and a lack of editorial coherence.  The challenge now is to evolve to truly multi-platform operations that can serve audiences “anytime, anywhere”, based on genuine integration within the organisation.

Consumers have made an effortless shift into the 24 hour, multi-platform news cycle. Data from the US shows 70% of desktop/laptop owners and more than half who have a smartphone or tablet are using their device to access news.  The evidence suggests that those with mobile devices are particularly frequent news “snackers”. 

US consumers use multiple devices to get their news

This shift is not so simple for news businesses that are trying to adapt. Globally, newspapers facing circulation free-fall are shifting their attention online, but struggling with advertising, paywalls or hybrid freemium models to make it pay. And broadcasters need to change their thinking too. Back in 2010, ITN Consulting carried out research that found most people had heard the stories in the headlines before the anchor uttered a word.  (See chart)

ITN Consulting’s independent research showed most people had heard about the news before they saw it on TV

As a result ITN’s news division (which has the contract to produce the news for ITV, Channel  4 and Channel  5) re-examined how it added value in terms of analysis, context, narrative skills and high production quality, so viewers were getting more from a story than they could get from their online browsing, and had a reason to watch again. 

Refining the product is vital to staying relevant to consumers.   But it is not the whole story.  For many organisations the time is right for a more fundamental look at whether the current structure of news operations is the best way to serve the increasing range of output media.  Does it make financial sense and is it making best use of the editorial firepower?

Broadcasters are shifting quickly.  In the UK, The BBC has placed a highly integrated multi-platform operation at the heart of its newly developed newsroom at W1, London, for the first time bringing together all its journalists.  In Australia the ABC is looking at how it can best co-ordinate its journalism and resources across its many programmes and platforms.  ITN Consulting has been working with the ABC on this project.

We believe that organisations need to look first at how news is gathered if they are to deliver the strongest journalism across each platform:

• Multi-platform is not just a distribution strategy but also a way of thinking about content. It should inform how you plan to cover stories;
• Barriers between platforms should be broken down and replaced by story-based commissioning,  dividing tasks on the basis of gathering content for all, not parallel plans and separate teams for each output;
• Stories must be told across the day, across different platforms. The audience won’t wait for you, and you need to be part of the ongoing conversation. This may mean adjusting your priorities; and
• You must share what you know within your organisation.  Internal competition is healthy but not if it means that one part of your organisation is being beaten by a commercial competitor because another part didn’t share intelligence.

These steps require considerable cultural shifts in how journalists typically look at their job.  Journalists are rightly focused on their own end-product but, in the new world of news, that end-product is no longer one place at one time. Most news businesses recognise this, but too few have refined their operations to deal with it.

News organisations need to review both their output objective and their newsgathering structure if they are to survive and prosper.

ITN Consulting is a specialist media strategy and operations consultancy with offices in London, Singapore and Sydney. We have worked with leading broadcasters globally to restructure their news operations for the multi-platform world.

BT mounting pay-TV title challenge against Sky… Or is it Virgin?

Hot on the heels of its surprise coup of Barclays Premier League rights, BT’s rugby rights acquisition shows it has real intentions in the pay-TV league. But is there room at the top table?

First the football, now the rugby. The temptation to fill the page with sporting clichés and analogies is overwhelming, but whichever way you look at it, BT is mounting a serious challenge for a pay-TV crown long held by BSkyB.

When news emerged of the telecoms operator’s acquisition of 38 Barclays Premier League games in June, the media industry let out a collective gasp. What happened to Al Jazeera? Where next for ESPN? Can anyone really afford £6m+ per game? The news probably came as a shock to Sky too, although they doubtless will have been preparing for a price hike and challenge from one party or another.

In reality, the shift isn’t that surprising. Sky has long been able to fund its rights acquisitions through the huge cash engine that is its home subscription business. Over 10m subscribers pay an average of £540 per year to receive a mix of TV content, broadband and calls. That ESPN, or Setanta for that matter, could continue to compete on their £10/month subscription revenues was a bridge too far.

BT, like Sky, have cash. Lots of it. The group generated £6bn profit last year (vs. Sky’s £1bn) with over £2bn free cash flow (vs. Sky’s £0.9bn). That’s the kind of backing that’s required if you’re going to take on Murdoch in pay-TV and come anywhere close to winning.

But how worried will Sky be? BT is not a media company, yet. Its pay-TV service BT Vision has only 7-8% of Sky’s customer base and nothing like the quality, depth and breadth of content. Even within sport alone, cricket, golf and rugby league fill a huge chunk of Sky’s schedules. That’s before you look at Sky Atlantic, Sky Arts and the £600m that the platform has pledged to invest in annual original content.

Further to this, if BT is planning to launch a sports channel, which looks increasingly likely, they will be relying on Sky’s retail and business sales teams to flog the service into the millions of satellite homes and pubs they control.

So maybe Sky aren’t the real target here. Perhaps the people who should really be looking over their shoulder are those at Virgin Media. The cable company has relied on its network of super-fast broadband to sell its product into around 4m homes and has divested its content production capabilities. The features and functionality of their set-top-box are being rivalled by even the free-to-air platforms and, now, as BT rolls out nationwide fibre, Virgin’s high-speed USP is being challenged. The cable company’s next move will be an interesting one.

Whatever the strategy, and whichever rival is in its sights, BT has spent big and the impression is they haven’t finished yet. Their activity so far will have a combined price tag of well over £1bn in the next 3 years. To recoup this they are going to need to drive large numbers of subs - probably over a million of them just to break even – in a highly competitive and regulated market.

Not an easy task, but cash and ambition can get you a long way in this world. Just ask Manchester City fans.

ITN Consulting is a media strategy and operational consultancy with offices in London, Dubai and Singapore.

How can incumbent pay-TV services compete with emerging OTT platforms?

Emerging OTT services such as Netflix and Apple TV are driving cord cutting in the UK pay-TV market, presenting the first real threat to such platforms since Sky’s launch in 1990. In this article we explore why pay-TV platforms are likely to remain dominant and discuss the approaches to packaging and content that will enable them to do so.

Over-the-top (OTT) services deliver content to TVs and other devices through an internet connection, generally without the need for fixed-term subscriptions. This may be through a dedicated set-top-box, such as that which YouView are soon to offer, or as an app within an existing device, as is the case with Love Film on Xbox. Current UK offers tend to be focused around VOD, but linear channels and live streaming of content are also possible. Much hype has been given to the growth of these platforms, with Netflix’s recent launch in the UK and the delayed YouView project due to finally be unveiled in the coming months.

Incumbent pay-TV providers’ rights deals are currently preventing new OTT services from acquiring the premium content they would need to really grow in the UK. They may be able to acquire this content in the future, however, making them a serious threat that pay-TV platforms need to mitigate against now. We have identified three key areas in which pay-TV platforms are competing in order to stop OTT services’ growth:

Bundle TV in with other products

Bundling pay-TV subscriptions with broadband, home phone and other services locks consumers in and helps to prevent cord cutting. Introductory discount offers and freebies such as retail gift vouchers (such as the Marks and Spencer vouchers currently offered by Sky) can further incentivise customers to sign up to a number of services.

Case study: Virgin Media, UK

64% of UK cable operator Virgin Media’s customers now take a triple-play package. Whilst annual churn figures are not publically available, a rise in the number of customers taking bundled products has lead to the operator recently announcing their best subscriber retention for two years. Triple and quad-play subscribers are seen as the ‘gold standard’ for Virgin Media, whose strategy of upselling products has successfully moved them into profitability this year, despite the increasing threat from OTT.

Extend the content offer outside of the main TV set

Whilst pay-TV services were historically developed to be watched in the customer’s front rooms, OTT services have been developed across TV, computer, tablet and mobile screens. This has resulted in a confused and complex approach to multiscreen and multiplatform content by most pay-TV platforms.

In the UK, Sky charges an additional subscription fee for access to channels on a second TV set in the home, although it does offer all subscribers a selection of channels on the move for free through Sky Go. Conversely, Virgin Mobile advertises access to channels on TVs across the home for no additional fees, but has a complex and expensive approach to streaming content on tablet and mobile.

Case study: CanalSat, France

An innovator in this area is CanalSat France. The pay-TV platform offers access to content across all TVs in the home and on any other device for one combined fee.  This includes the ability to access content through the use of an Xbox console instead of a STB, enabling multiroom viewing without incurring additional hardware costs. Integration with the Kinect motion sensor also allows users to browse the EPG using their hand gestures instead of a remote control.

Incumbent pay-TV platforms must think of themselves as multiplatform content providers, not just a service for watching TV in the living room, if they are to remain ahead of OTT entrants.

Offer a competing non-subscription OTT service

To maintain its subscriber base in the face of growing OTT rivals, Sky has recently announced the unprecedented move of launching its own non-subscription OTT service.

Case study: Sky, UK

Sky’s Now TV will aim to capture the 13 million UK households that do not currently have a Sky subscription. It will offer a selection of Sky’s premium content on either a pay-per-view or contract-free subscription basis.

A crucial risk for Sky is that this could result in cannibalising their existing subscription market, with existing customers cancelling their lucrative monthly payments to opt for this lower-cost approach. With content selection and marketing campaigns used to target Sky’s different customer segments in the right way, however, Now TV could be the solution that enables Sky to maintain its profitable pay-TV business whist successfully taking share from new OTT entrants.

Sky is particularly incentivised in this area. As one of the UK’s largest advertising sales houses they are believed to be using their OTT service to develop a targeted advertising solution which could eventually be rolled out across their services.

ITN Consulting is a specialist media consultancy with extensive experience in pay-TV. We have recently helped an European IPTV operator to understand the product strategies used by rival platforms and developed an OTT market entry plan on behalf of one of Asia’s largest telcos.

Where next for Groupon and its clones?

Vouchering has exploded in recent years. The rise has been led by US-based Groupon which, after reportedly turning down a $6bn offer from Google, floated with an astonishing IPO valuing the business at around US$12.7bn

Around the world, similar services have blossomed at an electrifying rate. In the UK alone we have seen Groupon, Living Social, Keynoir and Wowcher to name just a few. Even Trinidad and Tobago has recently launched its own service, CariboDeals.com, to capitalize on the trend.

But how long can this growth continue? Groupon is under increasing scrutiny for its accounting practices and the strength of its underlying business model. Its market cap is now US$5bn lower than when it floated (at 25/04/12).

So we ask “where next?” for Groupon, Living Social and the army of clone vouchering businesses.

Why have we seen a boom in vouchering companies?

Marketers need measurability – executives are under pressure to measure the success of their campaigns and are turning to acquisitions-based models. We have witnessed this most obviously in the UK where, since 2009, online advertising has overtaken TV

A perfect storm for consumers - recession and increasing consumer aspirations are driving people to seek out methods by which they can live a higher standard of life without the need to substantially increase their wealth. Vouchering has become socially acceptable.

Shifts in technology have enabled vouchering agents to connect marketers and consumers – vouchering is no longer a mass-market, expensive, print-based operation. Internet and smartphone technology means that anyone can offer a voucher to anyone, anywhere at any time, with conditions that can change as the deal goes on.

What are the models for vouchering?

Groupon is the market-leading name in vouchering, but is not the only model in town. Businesses such as Pizza Express have invested in technology to manage their own vouchering services, and aggregators such as My Voucher Codes have sought to pull together marketer-issued promotions into one, centralized location.

Exhibit 1: Primary routes for consumers to access vouchers

Where will Groupon go next?

Fundamentally, Groupon’s core business looks sound. Consumers and marketers will continue to engage in a discounting relationship as they have done for hundreds of years.

However, we are already seeing signs of cracks in Groupon’s specific implementation:

• Barriers to entry are low. Almost every market has a local Groupon-type business, and local owners are more closely tuned into local market conditions
• Small businesses are growing weary of the model. Whilst some retailers have used Groupon to great effect, many have reported a lack of repeat business and disenfranchising their existing loyal customer base
• There’s only so many fish pedicures to be had. Typically low-value products offered by Groupon-type services have been “low hanging fruit”, but as consumers grow tired of these products the appetite for the services will wane

To stay on top, Groupon will need to innovate. Until now, all vouchering agents have been frantically chasing the long-tail of small businesses offering low-value products at low prices to vast numbers of consumers. So far, this has been seen as a licence to print money.

After a high-level view of the key revenue levers for vouchering businesses, we believe there are three key strategies for vouchering companies to pursue:

Exhibit 2: Key revenue levers in vouchering

1) Exploit the technologies available
Group-buying is only the first step down the road of technology-enabled vouchering. Building on this, and the consumer data available in smartphone applications, we believe deals  agents should:

• Expand location-based mobile services, e.g. automatically offering deals to customers in a locality
• Increase targeting of deals based on consumer data. 40-year old women want different products to 18-year old men, even within the same retailer – who should you offer the free glass of wine vs. the free beer?
• Develop dynamic bidding platforms – Marketers could change commission values, override rival deals and change their offers based on the customers available and the competition present at any time and location

2) Explore new and old vouchering business models
Whether it’s group buying, discounts or a standard BOGOF, consumers don’t care about the mechanism behind a deal.

Consumers also don’t care who originated the deal, be it an aggregator, a vouchering agent or the marketer itself.

What consumers care about is getting a product they want at a value that suits them.

Deals agents should develop and test a range of deal models away from their original offering, combining direct discounting with mechanised deals such as group-buying.

3) Focus on niches

So far, vouchering companies have struggled to attract high-value marketers and high-value consumers.

Selling a car for £10,000 or a watch for £300 can yield more value than a fish pedicure for £10. But to attract these customers and these marketers requires a more focused, niche offering.

Developing targeted product categories (e.g. beauty, men’s fashion) and targeting niche audiences (young professionals, retirees) could help drive customer and marketer loyalty and thereby increase deal value and frequency.

ITN Consulting is a specialist consultancy focusing on the media sector. We have advised global media platforms and production companies on digital business models and using media to develop retail-based services.

Can free-to-air broadcasters survive and prosper?

On the surface, Free to Air (FTA) broadcasters look terribly exposed. Their core business model is under threat, yet to survive they have to move from their well structured markets into full competition. Nevertheless, we believe that Free to Airs are well placed to survive and indeed to prosper. To do this they must focus on retaining their position as the best way to reach a mass-market audience.

The Free to Air business model can be pictured as a virtuous circle. The FTAs command a large share of the available audience, often generating these mass-market audiences over a short space of time. Advertisers are prepared to pay a premium to reach these mass-market audiences. FTAs use this advertising revenue to acquire or commission the best programming. This enables them to command a large share of the audience… and so it continues.

Exhibit 2: Virtuous cycle of FTA broadcasting

The transformation of the broadcasting market threatens this virtuous circle. As new services develop and the audience fragments, FTAs risk losing their large share of the available audience. Any FTA that falls from this position will find that their business model quickly breaks down and would be unlikely to survive. Therefore, to survive and prosper in the new world, FTAs need to nurture the virtuous circle, even if it is at the expense of margins. New digital channels (the Australians call them multichannels), catch up TV, web hybrid services and premium on demand should be seen first and foremost as vehicles to maintain (or even grow) the FTAs’ disproportionate share of available viewers and thus to sustain the core ‘advertising funded / free’ business model. Any incremental revenues represent a secondary benefit.

The US broadcasters in particular have recognised this – perhaps because they face the greatest competition.

Exhibit 2: FTA broadcasters launching new services

We expect most broadcasters to survive as important multiplatform players, but some will get ‘shaken out’ over the next five years.

ITN Consulting and our partner Venture Consulting have advised Free to Air broadcasters in Australia, NZ, Singapore, Malaysia & South Africa on their multi-platform strategies. Between us, we operate ITN Venture Consulting in Singapore.

Spotlight on Asia: Malaysian OTT

More and more players are challenging Malaysia’s incumbent pay-TV operator (Astro) and its FTA broadcaster (Media Prima). They believe that the 50% of Malaysian households that do not subscribe to pay-TV will come into play as technology innovation reduces access costs and as household incomes rise.

Exhibit 1: The Malaysian TV platform market

Telekom Malaysia (TM), Maxis, YTL, ABN and several other niche players have either launched new services or have them in the pipeline. As is happening around the world, the Malaysia TV market suddenly looks crowded.

How will the OTT drivers of success play out in Malaysia?

Early entry: All the players have launched commercially, but Astro, Telekom and Maxis are best placed if they can leverage their existing customer bases.

Many devices: Astro’s B.yond is now available on smart phones/ tablets and Media Prima’s Ton Ton service is accessed on via PCs/ tablets. However Maxis and Telecom should be able to integrate their services into their device portfolios relatively quickly.

Broad content offering: Astro has the exclusive rights to the EPL and most Hollywood blockbusters but there is also strong demand for vernacular content. As ‘true’ media companies, Media Prima and Astro should be best placed, but will their teams be given the freedom to develop compelling services?

Deep marketing pockets: The incumbents (Telecom Malaysia, Maxis and Astro) certainly look strongest, but will they be willing to invest in securing customers on these new platforms? Certainly TNZ’s track record is patchy.

Real world synergies: Astro still looks to be the best placed player by far. However, the involvement of Ananda Krishna’s Fetch in developing Maxis’ TV platform suggests that Malaysia’s leading media entrepreneur is looking to split the market between premium pay-TV (Astro) and ‘pay-lite’ (Maxis).

Customer focused innovation: Finally, the future of media will revolve around greater customer choice, participation and engagement bringing viewers personalisation, targeted recommendations, active peer reviews and input from their social communities. Who will innovate fastest? Players need to ‘fail fast’ as they see what works and what does not. Ultimately, the winners will listen to their customers and respond quickly to meet their needs before the competition.

In summary, it is hard to pick winners in today’s Malaysian market, but the battle lines are already being drawn. The established players (Astro, Maxis, Telecom and Media Prima)
are best placed, but only if they get the funding and management support they require. It will be an interesting few years.

ITN Venture Consulting’s team has been working in Malaysia since 2000. In recent years we have developed strategic service roadmaps, designed customer value propositions, assessed competitive and regulatory dynamics, evaluated technology solutions and vendors, defined organisation structures and produced business cases.

Who will win in the crowded OTT market?

It is the classic dilemma. New entrants are racing to create digital media propositions. They all believe they can grab share of the over the top (OTT) market, but it is a zero sum game; so who will the winners and losers be? We believe that early entrants, with a broad content offering, across many devices, deep marketing pockets, real world synergies and who are prepared to invest and innovate will be the survivors and winners.

There are five broad categories of potential players in the OTT market.

1. Broadcasters and Pay-TV operators looking to defend their core businesses
2. Telcos looking to create more ‘sticky’ customers (i.e. reduce churn)
3. New pure play entrants, including technology players
4. Device manufacturers looking to generate incremental revenue streams
5. Retailers looking to transition from physical to digital media

In this fluid market, we believe that all new entrants have a chance of success, but that within 3-5 years, the vast majority of sales will be through a small number of players, driven by competition and economies of scale. We already are seeing signs of consolidation in more developed markets (eg: Disk / Blockbuster in the US and Amazon / LoveFilm in the UK).

In our view, there will be six key drivers of success:

Early entry: This is a classic land grab. Just as electronic programme guides (EPGs) deliver the vast majority of eyeballs to channels on the first page and Google delivers search eyeballs to results in the first five categories, the vast majority of OTT views will be secured by those players with the greatest prominence on connected devices. These will largely be the first movers.

Many devices: There is no way around device proliferation. We have Apple TVs, connected TVs, iPads, iPhones, connected DVD players, etc. The winners will be those players who establish a brand and positioning that sits above individual devices and who are present across all these devices. Players like the (US) Netflix,the (UK) BBC’s iPlayer and the (Japan) Hulu / DoCoMo JV are well established in this regard. For this reason, we expect the manufacturers to struggle over time: if Sony’s Qriocity can only be hosted on Sony devices then it will be disadvantaged versus its competitors.

Broad content offering: Viewers want to get everything in one place. For a rental (tVOD) or electronic sell through (EST) service that means having every blockbuster movie – which in turn means a deal with every studio. For library, subscription (sVOD) services, it means having a great selection of content available. Clearly this favours those with either the deep pockets needed to pay significant Minimum Guarantees (MGs) or with the leverage to minimise them. Access to local language content is also important.

Deep marketing pockets: Even if a service is launched earlyand has wide reach and a broad offering, it will struggle without marketing support, especially in a crowded market. This suggests that new entrants will struggle unless they can leverage significant marketing dollars either from investors or strategic partners.

Real world synergies: Again, in a crowded market, real world synergies will play an important role in determining winners and losers. Pay-TV players can cross-sell from their core offering; retailers can promote in their physical outlets; both can leverage existing relationships with content owners. Telcos can zero rate their content. New entrants and, to a lesser extent, manufacturers will suffer from a lack of ‘real world leverage’.

Customer focused innovation: Finally, it is not good enough to have all the pieces of the jigsaw described; they are necessary but not sufficient. The winners will embrace customer choice and empowerment as the key tenets of their services. The web world is about personalisation, recommendations and peer reviews, social interactions and building communities. Successful players will embrace and build upon these ‘Web 2.0’ service components to deliver truly compelling user experiences.

In summary, we back existing broadcast players, entrants with global scale and leading retailers to do well. We expect that manufacturers and telcos will need to work harder to build meaningful businesses in the medium term.

Venture Consulting is a media and telecoms strategy consultancy based in Sydney, Australia. Between us, we operate ITN Venture Consulting in Singapore.