The Keynote Session on Friday comprised a well matched threesome of Saul Berman of IBM, Erik Huggers of the BBC and Rory Sutherland of the Ogilvy Group UK. These might be the best three “futurists” of the industry. Raymond Snoddy, the moderator had little work to do because each of the presenters had a lot to say about the state of the industry and the prime challenge for the foreseeable future – – – how to make money in a rapidly changing, technology driven market.
Berman presented the refined numbers and managed to deliver his scary message for which he is famous – – – don’t follow the mistakes of the music industry. His message further enhances the need for a “sixth sense” if not complete clairvoyance in discerning the next twists and turns as new technologies are adopted and then adapted by a young consumer audience. However, an interesting number is that over 50% of television watchers are over 50. Success means appealing to both the technology challenged (those whole can’t figure out how to set a VCR clock) and those who instantly invent new ways of using new products.
Saul’s slides contained convincing numbers. He warned against owning a dominant share of a dying business as he suggests the cable companies in the US are on the way to doing. The challenge of the future is fragmentation and choice. Content must be relevant and integrated. The numbers continue to show, however, that ad revenue still dominates in broadcast vs. pc and phone delivery. There is simply less revenue in digital migration. He suggested a look at the reverse blade theory where the content is free and some other value item is revenue generating.
The Gadgeteers are another place to look – – – cool kids with not as much discretionary income but time on their hands to adapt technology. Figuring out their next move and what turns them on is the key to the future. That begs the question, what if the music industry had seen it all coming and had figured out a way to ride the peer to peer monster?
Finally, he said a few words of reassurance regarding personal data and its use. People will allow the use of personal data if it’s “in context” with the delivery of content. He defined several models including the free content in exchange for eyeballs – – – ad tolerance goes up as dollars spent go down but there still needs to be a place for those who will pay more for content to avoid ads. It must be a sliding scale allowing consumer choice. Don’t try to guess the market. Advertising is dead, Marketing is in, was the message. He defined that by saying, “Pay attention to Payer Innovation, stay ahead with pricing innovation and product innovation.” and he ended with, “Money may go elsewhere… if we don’t get with it.”
Second up was Erik Huggers, who presented the plans and strategies of the BBC. One had to extrapolate from his model and ask what might work for other smaller players. There were some enlightening numbers starting with the fact that digital usage of BBC content for the Bejing Olympics, in one day, surpassed all digital usage from the Athens Olympics. Growth is good. The game changer is the Internet and it’s going to be winner takes all to those who figure it out.
Again, fragmentation is the difficulty. His number is 23 different “flavors of content” that the BBC routinely standardizes. The message is that there needs to be standards and quick. One strategy, for a large player, is to dominate the market with their own standard, so Erik brought forth the BBC iPlayer as an example, a device which may have the affect of standardizing media delivery. Giving third parties the platform will also contribute to building a standard.
Reformating and repurposing is costing a huge sum and the users are dictating at this point. From a business perspective the message is clear, delivery must be standardized to avoid unpredictable costs of ever changing delivery technologies.
Erik then moved to dicussing the on-line future of the BBC or what he termed “Connected TV”. Using the application CANVAS they are combining linear broadcasting with random internet content to create an unified experience. This has the effect of democratizing access to the living room.
There was no doubt in his message, that using the R&D of the BBC, the plan is to create a standard platform – – – the big gorilla technique, modified by sensitivity to market changes and consumer whim.
Rory Sutherland was the closer with a rather animated talk, sans Powerpoint, and including some jibes at freemarket fundamentalism. Conventional economics does not apply in this new era. The recent crash shows this to be true.
He warned of too much reliance on spreadsheets instead of intuition about the market. As an example he said that youth focus has been a mistake. How we define our audience affects our created market and profits. Conventional models for profit no longer make sense. Conventional economics may not apply anymore.
He then spent some time talking about figuring out what people will and will not pay for. There is some counter intuitive stuff here. Example: new channels do not dilute but are additivie. Channel preferences do not trump other channels. And, people pick channels over content first. Again, he said, “The channel by which the content is provided makes a difference”.
Rory used the example of the fast food drive up window scenario. A fast food place has a line of cars for the drive up window while the store goes empty. Why don’t the people in the back of the line park their cars and go in to order? Message: people are fundamentally lazy and irrational in their choices.
He then enlightened us by explaining, that in the context of the Internet, people will not pay for volume of data but they will pay for more speed. In other words horsepower trumps size of vehicle.
Another surprise, while Internet usage has gone up, so has television viewing, leading Rory to wonder if watching TV is an “inherent need”. He got a laugh out of that from the audience. Maybe humans have evolved screen dependence?
The final parting message was that the proposition that “people don’t pay for value, they pay for scarcity” is gone. There is not a trade between TV and digital. The two are additive.
Between these three presenters the message is clear, throw away old market models, learn ways to be intuitive and embrace the change – – – or die.