SPONSORED EDITORIAL
The digitisation of the entertainment industry is disrupting life for existing businesses but it is opening up a myriad of opportunities for new ones. A recent seminar and exhibition, staged by the Australian Technology Showcase, Stanford Association Australia and AIMIA, identified where some of the serious opportunities lie for businesses in the new state of ‘play’.
Since the launch of the compact disc in 1982, the entertainment industry has ridden an accelerating rollercoaster into a digital future. Now, with the mass adoption of broadband internet, almost any form of entertainment can be delivered directly into the home at any time.
These changes have at times meant bad news for traditional entertainment companies, who have lost some control over the distribution of music, movies and other content, and have subsequently lost revenue along with it.
But the general upheaval brought on by the digital revolution has also created opportunities for new companies with the techniques for providing options and solving problems for consumers and content creators.
iTunes, for instance, is now the number one seller of music in the US, surpassing retail giants such as WalMart. One of the reasons for its success is its technology, which easily helps consumers find music that they will like.
Despite the rise of so-called user generated content sites such as YouTube (the media research company Nielsen found that 13 percent of all web content created in Australia is generated by users), the increased number of entertainment channels means the demand for creative people to be generating good quality content has never been greater.
As audiences have become more fragmented across those new media channels, consumers need new services to help them find and organise the entertainment content they like. Similarly, advertisers need new tools to help find those audiences and market to them.
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A recent panel discussion hosted by the Australian Technology Showcase (ATS) and Stanford Australia Association, in conjunction with the Australian Interactive Media Industry Association (AIMIA), examined some of the opportunities being created by the rise of digital media in the entertainment sector.
During the discussion, the leader of IBM Global Business Services’ Media and Entertainment consulting practice in Australasia, Lee Silverman, identified that consumer trends in digital entertainment are leading directly to business opportunities for entrepreneurs. Silverman says we have become a society that is accustomed to getting the information and entertainment it wants, when it wants it.
“We’re no longer dependent on the newspaper industry and the broadcast industry to control and schedule when you learn about world events or your own interest in entertainment,” says Silverman. “You can download video to your phone or any format you choose, and are able to pick the time and the amount that you chose to consume.”
But this requires a lot of innovation – both in business models and technology – and that is stimulating what could become Australia’s next big growth industry. According to PricewaterhouseCoopers, the digital content component of the Australian entertainment sector will be valued at $28 billion by 2011, which is equal to 3.5 percent of Australian gross domestic product. Already the digital media and advertising industry employs more than 300,000 people.
According to Tony Surtees, the chief executive of Prime Television’s digital media group iPrime, new technologies are giving greater control to consumers and allowing them to collaborate together in meaningful ways to recommend content, or even create their own. With consumers in control, traditional entertainment businesses need to realise that some existing models, particularly those that restrict the consumer access to entertainment, will eventually fade away.
“You can’t control the market – the market will find content it is interested in and will find a means to access it any way possible,” says Surtees. “All of these barriers that try to protect property tend to get in the way of the distribution models that emerge regardless.”
But content creators still need to be compensated for their work, which leads to new opportunities for companies that can find ways to help them get the return they deserve. That means creating advertising services that are far more targeted to the preferences of the consumer, which in turn is creating new opportunities for technology companies to provide these services.
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Digital technology has also led to the fragmentation of markets. By making all forms of content easily accessible, digital media has led to what Surtees describes as a shift from “hundreds of markets of millions of people, to millions of markets of hundreds of people”, as the so-called “long tail” phenomenon puts more control over access to content back into the hands of consumers.
That has meant that content providers can chase after (and monetise) much smaller specialist audiences, and has also led to the growth of companies with skills in audience measurement and segmentation.
“Digital advertising is leading a shift in business models, as well as the capacity to monetise content in different ways,” says Surtees. “One thing is clear – who owns data about consumers, and how those companies use that data and how they share it, will largely determine in the future where the value chain happens to be.”
Some more traditional media businesses, such as XYZnetworks (which produces channels for the Foxtel and Austar subscription television services) have been adapting accordingly. XYZnetworks has been working to increase the amount of content that his company offers through its channels’ websites to further extend their reach.
The director of digital media from XYZnetworks, Scott Hochgesang, says that as these business models evolve, partnering will increase in importance.
“Companies can’t do it all, and as dominant as one may be in internet, television or mobile, this is really all about reach,” says Hochgesang. “We’ve made a big commitment to pushing digital music and selling music through our channels. We’ve cut deals with companies like Apple, and are producing television shows which are countdowns of the top songs which are downloaded on iTunes.
“We’re developing websites that will have large online advertising components, and rolling out our channels on mobile television and tapping into new revenue streams. And partnerships are going to be very important in this new space.”
For US-based Erin Turner, who is the senior director of online publishing for the video and computer games publisher Trion World Network, digitisation of the entertainment industry is also leading to broader distribution opportunities for content creators.
“The content can really come from anywhere, with broadband an always-on connection that is available to most households,” says Turner. “There is a wide range of distributors who are aggregating audiences, and are interested in aggregating content for those audiences. So it is much easier today than it has ever been for developers of games to find publishers or communities for distributing content.
A number of Australian Technology Showcase members are already positioning themselves to take advantage of the opportunities that are emerging in the digital entertainment sector in Australia and beyond.
The digital services company TigerSpike has created technology that matches digital content delivered on mobile networks to the multimedia capabilities of the handsets that receive it. This technology was just one of the factors that saw TigerSpike ranked as the eighth fastest growing company in Deloitte’s Fast 50 ranking for 2007.
And it is a global opportunity. TigerSpike recently opened offices in New York and London, where it is working with clients such as publisher The Daily Mail Group and the mobile telecommunications carrier O2.
According to TigerSpike’s chief executive officer Luke Janssen, this year his company will derive half of its revenue from overseas.
“The great thing about the American and UK markets is the sheer number of consumers and therefore more digital touch-points,” says Janssen. “Towards the end of this year we’ll be looking at high seven figure revenues. The UK and US expansions are still in their early stages, but are looking to be lucrative moves in the medium term.”
Making it pay
One of the keys to the development of the digital entertainment industry is the capacity to generate revenue to pay for the creation of content. ATS member enikos has created a technology called the Enhanced Media Platform that allows website publishers and advertising networks to mix together different types of video advertising in a manner that can be distributed out to sites across the web.
The company has commenced a pilot project with a large advertisement serving network in the US. The enikos technology is being used to make money from that company’s video content.
enikos’ chief executive officer Mike Nicholls says the potential market for video advertising has been estimated at US$4 billion.
“There is no one dominant standard in video advertising, and there is no one dominant standard in video serving,” says Nicholls. “This technology takes all of the video formats and different kinds of advertising, pushes that into a ‘widget’ and allows them to syndicate it.
“What our addressable share of the market is I don’t know, but it’s highly significant. It could be a US$50 million or US$100 million a year business. The scale of the market in the US is massive.”
The opportunities for innovation are seemingly limitless. Another Australian Technology Showcase company, FST, has created FancyPants, a technology that allows eye-catching graphics and multimedia content to be easily displayed on small devices such as next generation mobile phones, television set-top boxes, portable media players and retail kiosks (these are sometimes also called ‘embedded’ devices, as the technology is embedded into the function of the device itself.
According to FST’s strategic business development manager Stan Ghys, this technology will be essential as consumers come to expect their content to be more accessible and seek broader functionality from devices, while wanting a look-and-feel they can personalize.
In April, FST demonstrated the latest version of its technology at a major electronics conference in Silicon Valley, and is now in discussion with some of the world’s largest consumer, industrial control and medical electronics manufacturers.
“The product allows them to easily develop applications that integrate graphics, video information and visual effects on a screen, such as dynamic graphical menus with multiple video thumbnails running simultaneously, with real time scaling and blending, per demo videos on our web-site, www.fst.net,” Ghys says.
“We developed FancyPants specifically for embedded environments, so it uses minimum hardware resources. That means that the manufacturers can reduce their hardware costs while differentiating their products by dramatically enhancing the end-user experience.”
The company also bundles custom application design and development services, and its initial customers include Toshiba in Japan and VeriFone International in the US
“We’re on track to be the de facto standard around the world for people developing multimedia interfaces in devices,” Ghys says. “We’re forecasting multi-hundred million dollar turnover by 2015 and welcome discussion with prospective venture capital partners for accelerated growth.”
The Australian Technology Showcase was developed in the lead up to the Sydney 2000 Olympic Games, to showcase innovative Australian technologies with global market potential. Since then, more than 700 innovative SMEs have been independently assessed and admitted to the Showcase. This group includes some of Australia’s most successful global innovators, including Resmed, Integrated Research, Broens Industries and Animal Logic. For further information about the Australian Technology Showcase and how your company can get involved, visit www.ats.business.gov.au
