Media
Delivery Director & Founder, Bluefin Solutions
Media and Finance
The challenges of digitisation
As Bluefin Client Partner for the Media Sector, it’s been fascinating to be part of the rollercoaster ride that has seen media companies trying to adapt to fast changing times. The main challenge has been – you’ve guessed it – the move from traditional physical product to digital offerings. Many have failed to adapt quickly enough while others, which spotted the potential opportunities early, have flourished.
Lower barriers to entry = increased competition
One of main business impacts of “digitisation” for 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 can be 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 and, 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 TripAdvisor, Yelp, Trusted Trades etc. Book publishers have had to respond to freely available e-books (when out of copyright) and initiatives like 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. This is reflected in the price they are willing to pay. For example, digital music downloads are usually cheaper than CDs, 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 pricing slide downwards.
E-books are another case in point. Yes, profit margins may be higher due to much lower distribution costs and non-existent printing costs. 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
If increased competition and lower margins aren’t enough to contend with, there is also another challenge that digital media has faced since day one: piracy. The photocopying of books and copying of CDs 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 can be almost indistinguishable from the original and are very easy to make and distribute. Yes, copy protection systems are helping to combat this issue, but there are some very clever and determined people out there looking to make a relatively quick and easy, if illegal, buck.
Keeping track of royalty and copyright payments
A further challenge, and more of a technological one, is how to track and count what is going on out there in the ever-expanding digital world. Consumable digital media – such as music, e-books, adverts, TVs 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.
Meeting the challenges head on
The pace of digital convergence and adoption has changed the rules in favour of the most technologically savvy and innovative players in the media sector. But that doesn’t always have to mean getting out the cheque book. Taking the best of existing business models and processes and blending that with new and cutting-edge solutions can help fast followers catch up to and succeed along with the early adopters.