A new study released on Tuesday by professional services firm EY (formerly Ernst & Young) finds that 70% of media and entertainment companies identified in the report as “digital leaders”—those driving more than half their revenue digitally—are willing to accept short-term revenue losses for long-term digital growth.
And 65% of those surveyed say they are prepared to cut legacy media investments to support new digital efforts.
All of which speak to the companies’ acceptance of the positive reinforcement that comes from their digital practice and success, as emphasized in the study, titled “Sustaining Digital Leadership! Agile Technology Strategies for Growth, Business Models and Consumer Engagement.”
The companies are using real-time social engagement and big data analytics to put customer voices at the center of their innovation, with the goal of driving multiplatform product development and integrated cloud-based distribution for an “anytime/anywhere” customer experience.
Among these companies that have fully embraced digital as a vital part of their business operation, 85% say they want direct relationships with their customers. That is further facilitated by their access to customer data, which 77% say they can tap into in real-time.
“Developing and delivering content remains at the core of what media and entertainment companies do,” says John Nendick, global media and entertainment leader at EY. “New technologies have simply redefined many elements that are integral to these businesses, from the creative process to the intimacy of relationships with customers. We see leaders across all media subsectors embracing digital technologies to drive growth in their businesses.”
Core Four For Digital Success
The study suggests that although there is no “one size fits all” model for digital success, research reveals four areas companies should focus on to achieve a leadership position in digital: (1) Innovate and rebalance; (2) Embrace risk; (3) Leverage data and analytics; and (4) Manage technology relationships.
“Innovate and rebalance” includes making a decision to move into digital, creating a portfolio of opportunities, diversifying the company’s offerings and business models, penetrating new markets and assimilating digital technologies.
“Embracing risk” involves launching into digital rather than learning before you launch, being opportunistic and agile, knowing when to persevere and when to shut down a failing product or service, and understanding the risks and monitoring them.
“Leveraging data and analytics” involves gathering pertinent data, integrating it across the business, providing real-time analytics that support decision-making and incorporating data into the product and service offerings.
And “managing technology relationships” involves assessing in-house resources to see how they align with a decisive digital strategy, choosing technology partners that can help simplify workflow and driving change in legacy systems and processes.
Among the digital leaders in the study, 58% believe new products and services will be among the greatest drivers of growth. Those new products and services can either be created in-house or acquired by buying other businesses. Getting to market faster with new or evolved products was mentioned by 48% of digital leaders as a way to drive growth, while 29% tabbed enabling international expansion, 28% suggested improving the understanding of customers and 26% named enabling a more direct relationship with the customer as a driver.
While 64% of all the media and entertainment companies in the study said they rely on their in-house personnel to collect, store and analyze data and act on the results, 51% of those defined as digital leaders see alliances with outside technology partners as a strategic priority.
The study cites different examples of outside alliances being formed, including one announced last spring between Starcom MediaVest and Twitter. One element of the relationship involved the creation of a social TV lab that explores the relationship between Twitter and TV. The lab is jointly staffed by Starcom MediaVest and Twitter personnel and explores return on investment and changes in audience behavior resulting from using Twitter and TV together during regular scripted TV programming or during major live events.
Steve Canepa, general manager of IBM’s Global Media & Entertainment Industry practice says in the study that for M&E companies to succeed in the digital era they must shift from a mass-marketing model to delivering content that matches what individual consumers want. This, he said, means creating a process that leverages big data analytics to build a more nuanced customer portrait, tailors content and streamlines content delivery across multiple channels.
“Faced with a deluge of content from many sources, people will gravitate toward whoever can provide the experience that is most in tune with what they actually want,” Canepa says. “We’re at the very early stages of understanding these new connected audiences and using that understanding to shape content development.”
Leaders and Trailers
Canepa said last year IBM worked with a client to determine the impact of movie trailers broadcast during the Super Bowl telecast. Before the game, IBM built audience profiles by analyzing five million blog posts and one billion tweets over several weeks. Then during the game, it analyzed 12,000 tweets per second, mapping them against specific audience profiles to gauge the impact of the trailers.
“We could tell if audience intent to see a movie was going up or down while the trailer was airing in real-time,” Canepa says.
Netflix offers another example of a company “willing to radically change its business to stay competitive,” says Jonathan Friedland, chief communications officer at Netflix. “We went from being a domestic DVD company to largely a global streaming company in three years. And in the last year, we’ve also gone from being a licensor of content from others to a major producer of original series and films.”
Another factoid in the study—social networking companies expect their role as content distributors to increase 22% in the next two to three years.
EY’s Nendick says, “Media and entertainment companies may well be furthest along the digital transformation journey that is sweeping through all industries today, given that their very content and services are more readily digitalized. But it is still early in the journey. Key to success is remembering that developing and delivering great content remains the core of M&E, and we see leaders across all media subsectors embracing that core and using new digital technologies to drive growth in their businesses.”
The 48-page study is based on a survey of senior executives at more than 550 global media and entertainment companies and technology companies. The report also includes information from more than two-dozen executive interviews, secondary research and EY partner insight and analysis. Survey respondents were from the fields of advertising, broadcast and cable, publishing and information services, filmed entertainment, interactive gaming, music and social networking, as well as from the technology industry.