Transcript Presentation

Prospering in
An Era of Disruptive Change
In Media & Entertainment
February 6, 2007
FTI Consulting Overview: Who We Are
 $800 mm Publicly Traded Strategy Consulting Firm
 One of the fastest growing companies in the US (Fortune)
 2,000+ Consultants
 Specializing in corporate finance, economics, marketing,
litigation support and corporate communications
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Economics Consulting
Corporate Finance, Transaction
Advisory Services
Business Communications
Consulting
Forensic &
Litigation Consulting &
Technology
Focused on Top-Line Revenue Growth Strategies
and Marketing
Top Line Growth
Strategy
Organization
• Market opportunity
assessment
• Segmentation
• Brand portfolio
• Launch models
• ROI optimization
• Pricing
• Business Unit
• Marketing and Brand
• Market research/ Insight
teams
• Sales
Process
•
•
•
•
•
Customer knowledge
Innovation/ NPD
Market planning
Brand management
Performance metrics
and benchmarking
Analytic Competencies
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• Decision Architecture
• Bayesian Decision Tree
• Econometric Modeling
• Cognitive Decision Sampling
• Real Options Pricing
• Game Theory
• Scenario Planning
• Mix Modeling
• Mathematical Programming
Our Clients: We’ve Seen Marketing Best Practices Across
Industries…
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Our Reputation…Thought Leadership in Marketing
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Our Intellectual Capital – Books, Articles, Workshops
Books
Articles
Workshops &
Speeches
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Radical Marketing (Harper, 2001)
The Infinite Asset (Harvard Business School Press, 2001);
60 Trends in 60 Minutes (J. Wiley & Sons, 2002)
Numerous chapters in books, including: Financial Times Handbook of
Management, HBR on Brands, HBR on CRM, and MBA in a Box
– HBR: “See Your Brand Through Your Customers Eyes” (2001)
– Sloan Management Review: “Achieving the Ideal Brand Portfolio”
(2005)
– Strategy+business: “How to Brand Sand” (1998), “Bring on the
Super CMO” (2003), 21st Century Launch Models (2007)
– CMO Magazine “Come Together” (2005)
– Plus: Business 2.0, Journal of Business Strategy, FT, Fortune, Wall
Street Journal, Estrategiay Negocios, LA Times, Ad Age, Brand Week,
Straits Times, etc.
– Major organizations: American Marketing Association, Direct
Marketing Association, American Bankers Association, etc.
– Leading companies: PwC, Pfizer, P&G, Kraft, Philip Morris, Lego,
Gap, Dupont, Cemex, Ford, Kellogg, Bose, Hershey, SAP, Alcoa, etc.
Three Titanic Forces Converge: 1st in a 4-Part Series on Media
• The goal of this series is to seek
underlying causes
• To focus not on what is
happening, but why it’s
happening
• The series is in four parts:
– 3 Titanic Forces Converge
– Network Economics
– Managing in an Era of Mass-Niche
Duality
– Strategies for Adaptation
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The new marketing reality (affecting all industries)
US Ad Spending Out of Whack
0%
5%
10%
15%
20%
25%
30%
TV
Mismatched
Spending
Newspapers
Economist, July 2005
Radio
Ad skipping
threatens ad
revenues
Fragmented
Reach
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Magazines
Internet
US Ad Spending
Time Spent
35%
40%
It’s Official: Gates Says Web Will Revolutionize TV In
10 Years
Dah…..
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3 Titanic Forces Converge
• The Rise of Openness
• Broadband
• Many-to-Many Networks
• Causing extreme divergence in audience
fragmentation and content choice
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1st Force: The Raise of Openness
• With the internet came open standards: http, ftp,
html, mp3/4, etc.
• Openness means barriers to entry fall because
the tools needed for startups are readily
available for free or for small licensing fees
• The really bad news for the majors: No Market
Equilibrium
• Creates a seemingly chaotic environment of
constant innovations entering the market
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Walled Gardens Collapse
Very High Fixed Costs,
Spectrum Monopolies, etc.,
Little consumer choice
NBC
CBS
TNT
Discover
WB
E!
ABC
AMC
ESPN
Disney
Oxygen
QVC
History
Fox
Golf Ch.
Cable Infrastructure Develops
with excess capacity,
Still high rents for network
startups
(Oxygen $400 mm to launch)
Consumer Choice Expands
No Significant barriers to
entry except legitimate
content
Heavy.com
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From Simple to Complex…Record Companies Risk Losing
Their Relevance
Web creates a Label By-Pass
Artist
Label
Facebook
Blogs
Retail
Radio
MTV
Consumer
Record Label’s Traditional Role
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iTunes etc.
MySpace
Band Site
Temporary Equilibriums May Re-emerge
• In low barier-to-entry environments, equilibriums can
still emerge, but they are short-lived
• After 1st Dot-Com, Yahoo, AOL, and MSN emerged as
the major portals sharing a dependable portion of the
page views and ad revenue
• With the advent of MySpace, College Facebook, their
position begins to erode
• On the web, new models and technological innovation
will continue to cause instability
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2nd Force: Broadband
• The emergence of broadband
will be as important as the
invention of the car vs the
horse and buggy
• 60%+ of US households have
it
• Some European and Asian
countries have higher
penetration and faster service
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Some Conservative Predictions – Broadband Enabled
• Video will become far more “immersive” on the web
as speed, quality and picture size improves.
• Every TV show and movie will be available on
demand somewhere on the web.
• The browser and the TV will merge in the living
room, creating a “cable bypass.”
• Conventional TV networks and cable broadcasting
will reduce to 1/3 of their current viewership and
skew toward seniors, who are slower to adopt new
technologies.
• DVD-based video games will disappear and be
replaced by web-based distribution.
• Games may begin to seriously rival television
audiences as they gain broader appeal.
• Advertising will remain the dominant financial
model, but will be individualized, more flexible,
more measurable and less intrusive.
• Peer-to-peer distribution will become the dominant
legal transfer protocol on the web for video.
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1954: Rand Envisions the Personal
Computer…
3rd Force: Many-to-Many Networks
• The world has been living with a
broadcast model for the last 60
years.
• Cable and broadcast TV, radio,
newspapers, portals and websites
are all one-to-many networks
• While the internet is built on a
many-to-many network
technology, most services don’t
use it this way: email, skype, are
1:1 or 1:n
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Metcalf’s Law: In a many-tomany network there are N2
connections
Many-to-Many Networks Are Powerful
• YouTube is now streaming over 100 million streams per day
• Hard to dislodge
• Accustream predicted their were 31 billion streams of user-generated
content in 2006
• P2P traffic now exceeds HTTP traffic on the web
• Three Reasons For N:N Power:
– Unbounded Size
– Efficient Search
– Super Distribution
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Super Distribution
“Swarming” Dampens This
n
0
5
10
15
20
25
30
35
40
45
50
Simple Viral Distribution: 2n
2n
n:
0
1
2
2n
1
32
1,024
32,768
1,048,576
33,554,432
1,073,741,824
34,359,738,368
1,099,511,627,776
35,184,372,088,832
1,125,899,906,842,620
Grow th of 1 vs 100 Viral Chains
120,000
100,000
1 Chain
80,000
100*2N
100 Chains
15 mm
60,000
40,000
20,000
0
2
3
4
6
N
19
8
10
3n
1
243
59,049
14,348,907
3,486,784,401
847,288,609,443
205,891,132,094,649
50,031,545,098,999,700
12,157,665,459,056,900,000
2,954,312,706,550,830,000,000
717,897,987,691,853,000,000,000
Some Interesting Observations about N:N
• Once large, very stable: YouTube, Ebay, Skype
• The market may not need two???
• What’s emerging:
– N:N News
– N:N TV
– N:N Games
– Content may be inherently N:N, but has been shoe-horned into 1:N all
these years
– Encourages place- and time-shifting
– Content far more elastic in terms of format, length and interactivity
than we have been conditioned to believe (same with advertising)
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Next in Our Series on Media…
• Part II - Network Effects: The emerging dominance of “network
externalities” and a new concept: The Network Good
• Part III – Managing The Mass-Niche Duality
• Part IV – Strategies for Adaptation
• To Get On The Mailing List, Email Bruce Benson at
[email protected]
• Blog: FTIMedia.wordpress.com
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