Role Confusion, Incompatibility Slowing Digital Content Market
Digital content will provide “complete new business models” and “the flexibility to be creative” for content owners, carriers and others, but confusion over the “content lifecycle” -- standards, protection and operational issues -- is holding the market back, KPMG analysts said in a USTelecom Web presentation Tues. The clash between and within traditional players like telcos and music labels, and new entrants in hosting and delivery solutions, will be resolved over time, but many questions remain. “The rules of the analog world don’t apply anymore,” and some of the telecom stalwarts will leave the “ecosystem,” said Senior Mgr.-Risk & Advisory Services Trent Larson.
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Companies are rightly concerned about jumping too fast into the digital world, Larson said. There’s risk new offerings could cannibalize revenue from existing services -- as, say, offering rich multimedia messaging could cut into voice traffic: “It’s something we all have to take a long, hard look at.” In an interactive poll, analysts asked attendees whether they see cannibalization from next-generation services now; 2/3 said no. “As the market matures, we'll start to see those numbers shift,” Larson warned.
Operational inefficiency must be reduced, but it’s not clear who in the ecosystem should take the lead in several areas, said Senior Mgr.-Risk & Advisory Services Sanjaya Krishna. The ecosystem includes content creators (artists, developers), owners and providers (labels, studios), carriers (wireless and broadband networks), aggregators (go-betweens like InfoSpace), 3rd-party hosting and charging platforms (like QPass), and off- portal operators that provide content outside the wireless carriers’ “walled garden.”
Data exchange standards between the players are “very minimal,” Krishna said. Asked who can best manage functions like wholesale billing, he said for the digital content industry there’s “really nothing like” the 3rd- party firms that handle telecom roaming records, and such support functions would be much appreciated by carriers and owners. Such “clearinghouses” are “certainly not a slam dunk… but an opportunity to bring some order among all these players,” he added. Other operational challenges include verifying that displayed rates for content on the screen match the billing system rates, deactivating time-limited purchased content when it’s supposed to expire, and identifying glitchy transactions so consumers aren’t charged and owners aren’t paid, Krishna said. “Certainly the revenues are growing,” but the interaction between players is “still not as robust as it probably will be a few years from now,” he said. Of the presentation’s questions, poll participants were most divided on who should take the lead on standards development, running from 27% for owners to 38% for 3rd parties. The Internet Protocol Detail Record Organization is working to overcome this divide, Krishna added.
“Purpose-made content for distribution to mobile devices” or IP-enabled devices will grow quickly, Larson said. The insertion points for advertising within TV programs are obsolete in an on-demand IP world: “Content can follow a natural duration based on the content itself,” such as 30-sec. video clips and 3-min. music videos. But owners and carriers need to keep in mind the target device for content, as most users won’t spend 2 hours watching a movie on a small screen, he added.
Digital rights management (DRM) will open vast new markets for content, the analysts predicted. “Without some form of tracking and monitoring… there’s no business model that can work,” Larson said: DRM “will play a huge role for new distribution models.” By targeting consumers with varying prices for different content, privileges and conveniences, all regulated by DRM, businesses can foster “the personal, one-to-one connection with the consumer.” “Phased release” -- letting someone pay more for content ahead of its official release date -- is one such example in early use, he said. A quarter of poll participants said their firms were using DRM in some form.
Long kicked around as a transformative principle, “superdistribution” will further improve efficiency and consumer loyalty for all players, Larson said. A sort of regulated peer-to-peer (P2P) system, superdistribution lets users buy content and share it with a handful of people in preview form, who can then buy a license to keep the content for future access: “The power of a referral market for a viral market… is one of the most effective ways of distributing information and content,” and needs “no incremental marketing to reach consumers.” Network and device support are in the way for now: “We need to work out a few fine-tunings on this,” Larson said.
The urge to come out on top among competitors is winning out over efforts at collaboration, analysts said, and poll participants agreed (62%). The Motorola Rokr phone with iTunes, largely a market flop, showed the damage that competition -- in this case, between carriers that want to sell their own content, and owners that want customers to use their content on multiple platforms -- can wreak on a potentially revolutionary product. Collaboration should become more common as players find their core strengths in fluid markets, Larson said.