Insights

View full profileMike Curl

Delivery Director & Founder, Bluefin Solutions
Media and Finance

The Challenges of Digitisation in the Media Sector

As Bluefin Client Partner for the media sector, it's been fascinating to be part of the roller coaster ride as media companies all try to adapt to fast changing times. The main challenge affecting them has been - you've guess it - the move from traditional physical product to digital offerings. Many  have failed to adapt quickly enough whilst others spotted the potential opportunities early and have flourished.

Lower Barriers to Entry = Increased Competition

One of main business impacts of "digitisation" on the media industry has been the lowering of barriers to entry. Setting up global music stores, advertising agencies, book publishing houses,  newspapers or a printed directory from scratch is either prohibitively costly or very slow. But small start-ups have grown from nothing to become highly profitable, successful organisations almost overnight. In the music industry, most record labels were initially against music download and streaming sites before learning to live with, if not love them. Directory companies such as Yellow Pages and Thomson have struggled against the might of search engines and the plethora of user driven review sites such as Trip Advisor, Yelp, Trusted Trades etc. Book publishers have had to deal with freely available ebooks (when out of copyright) and initiatives such as Google Books, plan to scan and digitise millions of books and works of reference.

Lower prices  for digital media

At the same time as increased competition, many media companies have discovered that consumers don't value a digital product as much as a physical one and this is reflected in the price they are willing to pay. For example digital music downloads are usually cheaper than compact discs, in addition to music lovers now being able to cherry pick their favourite tracks for pocket money. The following market research data shows the upward digital movement and the overall slide downwards.

Ebooks are another case in point. Yes, profit margins may be higher due to much lower distribution costs and non existent printing cost, but the volumes don't appear to have compensated yet leading to a smaller pie all round.

Piracy - The Scourge of the Digital High Seas

So at the same time as increased competition and reduced psychological price points, there is also another challenge that digital media has faced since day one: piracy. The photocopying of books and copying of compact discs to tape was always possible but never really a threat to the industry due to the effort involved and the resulting downgrade in quality. However digital copies are perfect and indistinguishable from the original and very easily to make and distribute. Yes, copy protection systems are helping prevent this but there are some very clever and determined people out there with too much time on their hands.

Keeping Track of Royalty and Copyright Payments

A further challenge, which is more of a technological one, is how to track and count what is going on out there in the digital world. Consumable digital media - such as music, ebooks, adverts, tv and movies are all typically made available in many places at once, consumed on a huge variety of different devices, and at many different prices. For anything involving royalty and copyright payments, this is a major headache and the impact of getting it wrong is significant. As a result, royalty audit and contract compliance has been a very good business to be in of late.

Solutions coming in Part 2

The media sector still offers enormous future opportunities but the rules have changed for good. I've covered some of the main challenges here and in the next part of this blog, I'll look at what solutions and technologies media organisations are putting in place as they continuously evolve in response to the changing digital environment.