UK: Media Predictions - TMT Trends 2007 - Part One

Last Updated: 18 January 2007
Article by Igal Brightman

Most Read Contributor in UK, August 2017

Foreword

Welcome to the 2007 edition of the DTT TMT Industry Group’s Media Predictions.

The media sector has again had a vibrant year. As forecast last year, digital music’s popularity has continued growing, helped by the increasing range of online retailers and MP3 players. The television industry has also experienced much change, with the launch of ever larger television sets, a spurt in the uptake of high-definition equipment and huge excitement, though little revenue, from IPTV.

The falling price of memory and processors has enabled further digitization of the media production process. The video-game market has seen considerable progress online, with rapid growth, albeit from low levels, of participation in virtual worlds. Radio has continued its reinvention, both in the expansion of digital services and the launch of new digital sets. Both audience fragmentation and convergence have offered challenges as well as opportunities for all media players. Meanwhile, consumers themselves have had a hand in changing the media landscape – the number of blogs worldwide now exceeds 60 million1 and user-generated video content has become headline news.

The outlook for the media sector in 2007 is similarly interesting. 2007’s Predictions cover: the commercialization of social networks and user-generated content; the disparity in metrics used to quantify new media and traditional media; opportunities in China’s media sector; the growth of real economies within virtual worlds; the long tail’s alternative forms; the immediacy of VOD to PCs; public participation in television programs; the growing symbiosis between online publications and paper sources and finally the cost of free media.

I am often asked how the DTT TMT Industry Group’s Predictions differ from the many similarly titled reports produced by other organizations. I believe Predictions has a unique combination of objectives and methodology.

The Predictions series has been designed to provide a diverse selection of views and thoughts that challenge, inform and engage industry leaders and executives. It neither aims, nor claims to be, a comprehensive forecast of every anticipated event.

The methodology used to generate the Predictions series is revisited every year. The 2007 series of Predictions has included inputs from conversations with member firm clients, contributions from DTT member firms’ 5,000 partners and managers specializing in TMT, and discussions with industry analysts.

This series of Predictions has incorporated two additional sources. The first is a series of 36 interviews with leading executives from around the world on the key industry theme of convergence. This global primary research exercise, spanning the TMT sectors, produced a wealth of insight, much of which is reflected in many of this year’s Predictions. The interviews, collectively published by DTT as a book, Convergence Conversations, are available from www.deloitte.com/tmt.

The second source is a column, Drowning by Numbers, that the Financial Times invited Deloitte & Touche LLP in the United Kingdom to write on a fortnightly basis. Some of the ideas for Predictions have been tested in this column.

I hope that the result of our endeavors provides you with plenty of food for thought for the year ahead. On behalf of DTT’s TMT Industry Group, may I take this opportunity to wish you all the best for an enjoyable 2007.

Igal Brightman
Global Managing Partner
Technology, Media & Telecommunications

Executive summary

In 2007 user-generated content could increasingly complement established media output2, perhaps to an unprecedented extent. Digital user-generated content is often cast as the conqueror of established media. Blogs, citizen journalists and amateur film makers have all been portrayed as threats to publishers, professional columnists and established media empires. However in 2007, as in years to come, owning a professional-quality video camera, a PC or a mobile phone is unlikely magically to imbue the majority of people with talent. Indeed, some user-generated content may increasingly be seen as a vindication of, rather than an assault on, the professional media industry. Nonetheless, some digital usergenerated content is likely to have a role in the professional media world. Much as readers’ letters, listeners’ phone calls and children’s drawings are expected to continue feeding into newspapers, radio shows and television programs respectively, their digital equivalents are likely to be used in a similar way. Additionally, media companies could well find that the online channels that serve up usergenerated content could become not only a powerful new promotional vehicle, but also an efficient and effective medium for scouting new talent.

Public participation in television has come a long way since producers first used studio audiences to create a sense of excitement for programs. Now millions of viewers participate in programs, directly influencing their outcomes. A key driver for the growth in participation has been technological advance in the forms of: rising broadband penetration, ubiquitous ownership of mobile phones and the development of platforms capable of handling thousands of simultaneous calls or text messages. Participation’s role in television is also likely to be driven by sharp declines in advertising, one of the major sources of revenue for the television sector. In 2007, the key forms of participation, voting, competition television and television shopping, all of which are based around a call to action from the television show to its audience, are likely to generate increasing revenues. However, the television industry should be careful not to let participation become regarded as a panacea. All formats of participation should be subject to constant reinvention; for example voting should not be regarded as solely relevant to light entertainment. In addition, companies offering television shopping should ensure they have two core skills: CRM and logistics. Broadcasters using competitions within programs should monitor regulations carefully.

China is likely to remain one of the most tantalizing media sector opportunities in 2007. China’s 1.3 billion inhabitants would suggest massive potential, but this is likely to remain frustratingly hard to tap into during 2007 and possibly beyond. While China’s GDP is expected to continue growing strongly, only a minority of Chinese citizens are likely to have sufficient income to consume similar amounts of media to citizens in developed countries. Media companies targeting the Chinese market should have a realistic view of opportunities in 2007. China is a unique market, blending opportunity and challenge like no other country. Entering the Chinese market is likely to be quite different to any other in terms of scale, approach and timeliness.

A copy and paste approach to targeting China, based on attempting the same business model as in a media company’s home country, is unlikely to succeed. A blend of precision and patience will likely be required, with companies taking a long-term strategic approach enjoying the greatest likelihood of success. During the course of the year, the print media may increasingly realize that the relationship between paper and pixels may not always be about one versus the other, but more about a symbiotic, profitable coexistence. Both digital and physical publishing should enjoy strong success in 2007. Internet advertising should continue on its way to becoming a $20 billion industry. But 439 million people may still buy a newspaper every day. Digital and paper will retain their distinct strengths and may often be able to promote each other. Profit from both paper and pixels should be possible if publishing companies always seek to reinvent traditional formats and develop new products and services that use the unique characteristics of both online and printed text. Online-only publishers may turn to paper to raise profitability. Some blogs, for example, may generate more revenue as analog books than in their original online format.

The Internet has given rise to the online store, which in turn has revealed the long tail: the potential to yield value from media companies’ back catalogs. Many in the media sector may hail the long tail as a panacea. However media companies should not rely on the long tail to rekindle spontaneously the appeal of every title in their archive. Vast repositories of content available for sale over the Internet may struggle to sell even a tiny fraction of the volume generated by blockbusters, due to the still rather rudimentary nature of search and recommendation tools. Indeed the Internet may even serve to increase the dominance of the blockbuster. Websites selling all forms of content, from music to movies, are likely to list the most popular content prominently. Thus in 2007, while the potential of the long tail may grow longer still, it may be the thick, short start of the tail that is worked hardest and is most productive.

In 2007, the need for metrics that provide like-for-like comparisons between traditional and new media performance is likely to become more obvious. This should replace the old approach of using different sets of metrics that may flatter new media’s performance, underestimating the true impact of traditional media as a result. Comparing unique users or downloads for social networks to viewing figures for television stations, for example, may paint an unrealistically rosy picture of the former. Balanced, comparable statistics that clearly show the relative performance of all types of media, both old and new, should be used to ensure that investors’ expectations are properly managed, advertisers’ budgets appropriately allocated, and acquisitions are accurately priced. The public’s readiness to pay for content varies between geographies, changes over time and is influenced by a growing range of factors, from technology to disposable income. The challenge for media companies in 2007 is to second guess how the public’s perception of value may change, on a market-by-market and even segment-by-segment basis.

A benefit of this fluidity is that a reduction in the price paid for one format, in one market, is likely to be balanced by an increase in another. The year should see much experimentation with pricing for all types of media. For example television programs that were broadcast free may become available for purchase via Internet downloads.

Social networks enjoyed massive success in recruiting users in 2006. Their key challenge in 2007 is likely to be to monetize their massive user bases. Social networks are best known for offering 15 megabytes of fame to all for free. One of social networks’ revenue opportunities may be to offer gigabytes of privacy for a fee. Proud parents enjoy distributing photographs of their children to friends and family via the Internet. But they might feel more at ease if they could control exactly who was viewing those pictures. Friends may want to share videos of their weddings, including entertaining but indecorous escapades. But they may be prepared to pay to ensure that only their intimate circle, not prospective employers or existing peers, can see their uninhibited moments.

2007 should see substantial growth in the number of movies that are made available simultaneously on DVD in the shops and for download via VOD over the Internet to PCs. VOD’s allure is that it has the potential to exploit the 21st-Century consumer’s passion for instant gratification. But the addressable market for VOD is likely to remain very small. While close to 300 million consumer broadband connections are forecast for the start of 2007, fewer than five percent of these may be fast enough to support high-quality VOD. As a result, media companies should not see VOD as a panacea, but rather as one of a growing number of routes to market. Differentiation is likely to be essential, as VOD will have to compete with well-established and inexpensive alternatives, such as rental by post. For most DSL subscribers wanting instant access to blockbusters, a swift walk to the local video rental store may be the most immediate route to satisfaction.

The real world value of transactions taking place in virtual worlds is likely to rise through 2007. Second Life’s overall GDP for 2007 could be close to $700 million. Members of some virtual worlds may be able to withdraw cash from their virtual bank-accounts via realworld cash machines. A small handful of individuals are expected to make a healthy living from virtual worlds. But for the vast majority, particularly those in developed countries, virtual worlds are likely to remain little more than a recreational activity throughout 2007. If virtual worlds’ economies were to grow by 10 percent per month, GDP per capita by the end of 2007 would still be under $700 per annum. A sense of perspective is required. The games industry should question how large the addressable market for such fantasy games really is. The number of individuals with the desire and means to spend $15 per month, 50 hours a month and some $500 a year on their alternative life may be limited. Indeed the majority may already be customers. Governments should be alert to any attempts to exploit the mechanisms of virtual economies to undertake criminal activity. Money launderers may use trade in digital artefacts and virtual currencies as a new means of money laundering.

Making digital, user-generated content useful

Digital user-generated content has been cast as the eventual conqueror of the established media world. Blogs could batter established media empires. Citizen journalists may render the professional columnist redundant3. Amateur film-makers, armed with camera phones, could even topple Hollywood4.

This view has been gathering steam during 2006 and may become even more prevalent in 2007, as the volume of blogs grows, the specification of mobile phones improves and the number of websites supporting user-generated content rises.

Yet the majority of user-generated content is likely to remain mediocre, and thus of little interest or value to most. Essentially it is not likely to pose a major threat to the media industry.

In 2007, the majority of blogs and bloggers, while being available to the billion Internet users around the world5, may well find themselves ignored by most of that number. While a few thousand blogs may attract significant traffic, few of the estimated 60 million bloggers6, excepting those columnists who have just rebranded themselves as such, may be able to make a living from their weblogs alone7. By the end of the year there may still be just one example of a news site of any scale that is based solely on citizen journalists8. In 2007 the role of the individual with a camera phone may be recognized as being more like that of a digital eyewitness, providing a photographic or video-based comment on an emerging news story, rather than a journalist trained to analyze and interpret an unfolding event9. Websites whose original ethos was to collect user-generated content may find their most popular content is user selected rather than user created10.

Indeed, in 2007, as in years to come, owning a professional-quality video camera, a PC or a mobile phone is unlikely magically to imbue the majority of people with talent, much as it is improbable that a paintbrush could produce a budding Picasso. In many cases, usergenerated content may increasingly be seen as a vindication of, rather than an assault on, the professional media industry.

However, this does not mean that digital, user-generated content has no role in the professional media world. Indeed in 2007, all forms of user-generated content should complement established media11, perhaps to an extent that has never been seen before. As well as readers’ letters, listeners’ phone calls and children’s drawings continuing to feed into newspapers, radio shows and television programs, respectively, their digital equivalents are also likely to be used in a similar way – to complement professional content.

Further, digital, user-generated views may well be used to provide informal feedback on a wide range of media, and websites featuring user-generated opinions and recommendations may also be used, subversively or openly, as an increasingly important research and marketing channel.

Bottom line

In 2007, digital, user-generated content may offer more of an opportunity than a threat to incumbent media companies. The more media companies take an opportunistic stance towards user-generated content, the more they are likely to be able to exploit its potential value. The industry should consider, for example, how such content can be incorporated into traditional media formats.

For user-generated content to be meaningful, clearly it has to generate revenue, directly or indirectly12. While using the public’s content for program and new concept creation can generate revenues13, that opportunity is likely to be limited.

More broadly however, the established media sector could grow its top line by using user-generated content channels to raise awareness of existing, forthcoming and archive material, grow market share, engender loyalty and, indeed, identify new talent.

A media company could publicize a new media property by creating a buzz in social networking sites and virtual worlds. Music companies have used social networks to raise the profile of emerging acts14; some established bands have attempted to maintain profile by playing concerts in virtual worlds15. They could also use user-generated content as a means of gaging reaction to established content, from television shows to newspaper columns. Companies could either analyze discussions on Internet forums16 or ask consumers directly to review new movies, plays and restaurants, rather than just rely on the opinions of professional journalists. This approach could create a more interactive and intimate relationship with customers17.

Digital, user-generated content could be used to enhance the loyalty of an established media format, such as a television show based on viewer’s videos. The broadcast show could feature a selection of the producer’s picks; the best of the rest could then be made available online for viewing and rating. The most popular of the Web-based videos could then be broadcast on the following week’s show. This approach could both retain interest in the show and add viewing hours18, drawing the focus of eyeballs away from the PC and back to the television.

New media companies could also use digital, user-generated content as a means of establishing new content. Thus the A&R function of music companies, or the talent-scouting unit of a movie studio could partly move online. However media companies should recognize that online searches for talent can be just as arduous and painstaking as the physical quest.

Profiting from participation in television

Audience participation has contributed to the enduring popularity of television since its first days as a mass medium in the early 1950s. Producers used studio audiences to create a sense of excitement for programs. Wide, pan-shots of audiences emoting in response to shows helped engender loyalty to programs and made viewers feel like a part of them.

Since then, participation has come a long way, and now millions of viewers participate in programs, directly influencing the outcomes of some of the most popular shows in television19. This trend is likely to continue through 2007.

Use of participation is also being driven by technological advances, in the forms of rising broadband penetration, ubiquitous ownership of mobile phones and the availability of platforms capable of handling thousands of simultaneous calls and text messages. These advances have enabled new, instant ways for audiences to connect with television programs on a wide scale 20 21.

Participation’s role in television is also likely to be driven by sharp declines in advertising, one of the major sources of revenue for the sector22.

In 2007, the key forms of participation, all of which are based around a call to action from the television show to its audience, are likely to generate increasing revenues.

Voting, whereby viewers communicate with a television program to influence its outcome, may generate hundreds of millions of dollars in revenue in 2007, particularly in countries where the use of premium-rate calling and messaging services is legalized23. The United Kingdom has seen spending on voting via text messaging rise to $458 million per year24 25. In 2000, that spend was zero.

Competition television, where viewers call in to participate in competitions in a game-show format, is likely to become more popular among television networks worldwide as a means of boosting the bottom line. In European countries, competition television can generate up to tens of thousands of calls per hour, at rates of up to $2 per minute26.

Television shopping generates revenues by encouraging the audience to purchase products being demonstrated on the program. Viewers participate in the program by affecting the price and even by speaking live to the presenters. Revenues from television shopping may reach billions worldwide; in the United Kingdom alone they may reach close to $1 billion in 2007, with strong growth predicted27.

Other forms of participation may also emerge in 2007. Text-to-speech participation, in which viewers’ text messages are read out on air by virtual hosts is likely to become a popular niche for late-night shows28. MMS messages may also become a more popular form of participation, with viewers sending in photographs to be broadcast29. Similarly, mobile and webcam video contributions are likely to become more commonly broadcast. Additionally, reverse auction programs, in which viewers use their mobile phones to bid, are likely to grow in popularity, after initial success in India and the United Kingdom30.

Bottom line

The television industry should not regard participation as a panacea. However effective deployment of participation programming could have a significant impact on audiences, loyalty and revenue, even in developing economies31.

In considering voting, the television sector should ensure that it remains relevant for its audiences from year to year. As a marketing concept, it should not be allowed to stagnate, otherwise revenues from voting may well decline. For example while the audience for the UK series of Big Brother has remained constant, voting volumes have declined by 60 percent from their 2002 peak. Voting should also be diversified. It currently predominates in the light-entertainment sector, but could also be relevant in other genres, from politics to nature programs, and even interactive drama32. The information generated by voting, such as telephone numbers, could also be used for marketing and viewer research, legislation permitting. Similarly, callers to a program could be sent a reminder to view, just prior to the next installment, potentially boosting, or at least maintaining, viewing figures.

Television companies considering entering the home-shopping market should ensure that they have two of the core skills of any retailer: good CRM and robust logistics. Customers who have positive interactions with call centers and who receive goods promptly are more likely to become repeat customers.

Broadcasters offering play television programming should monitor regulations concerning this format carefully. A key recommendation is to ensure that competitions are genuinely competitive: questions should not be so simple such that regulators may redesignate the activity as a lottery, thus potentially changing its taxable status. Some shows’ competitions were regarded as so simple that they prompted a public consultation33.

Cracking China’s media sector

China’s sheer size and growing importance in the world economy give it an almost irresistible allure to media companies around the world. Yet China is a market in transition, particularly in its media sector34, which remains of strategic importance to the Chinese government, both in terms of its economic value and also because of its ability to influence35.

China’s population implies a massive potential market36. But that potential may be hard to tap into. While China’s GDP continues growing at a rapid pace37, only a minority of Chinese citizens have the disposable income to consume content in a substantial way. The bulk of China’s 1.3 billion inhabitants38, some 800 million people, still live in relative poverty in rural China39, with limited access to contemporary media40.

Furthermore, government censorship and restrictions on foreign ownership and private enterprise have made China a challenging market for foreign media companies to develop. In 2006, the Chinese media market has appeared to tighten up, rather than open, to foreign media companies41.

Piracy is another big challenge for all types of media and is likely to remain a key issue in 2007. Illegal copies are likely to be available everywhere, in cafes, bars, major retailers and even in the workplace42.

Yet there should still be steady growth in the value of China’s media sector in 200743. Broadcast and cable television are expected to grow steadily, with a forecast value of $18.8 billion by 2009, a 66 percent increase over five years. China’s film and entertainment business may be worth $143 billion by 2009, compared to only $46.4 billion five years earlier44.

Thus the liberalization of the Chinese media sector is likely to remain slow and sporadic in 2007 and beyond, although opportunities are likely to tantalize both established and emerging media companies.

Bottom line

Media companies targeting the Chinese market should have a realistic view of opportunities in 2007. China is a unique market, blending opportunity and challenge like no other country. Entering the Chinese market is likely to be quite different to any other in terms of scale, approach and timeliness. A copy and paste approach to targeting China, based on attempting the same business model as in a media company’s home country, is unlikely to succeed.

Media companies need a blend of precision and patience. Precision means identifying where China’s biggest gaps are. One of the most immediate challenges China faces is the Beijing Olympics. China is likely to want to make a showpiece out of broadcasting the games45. It is likely to need existing skills to help attain this aim46. Over the longer term, the Shanghai World Expo in 2010 could also provide an opportunity, as China aims to show off its media skills.

Patience is likely to be a prerequisite47, and businesses attempting to challenge the pace of change or idiosyncratic local rules may find themselves punished48. Media companies should focus on laying a solid foundation for long-term success by increasing their market knowledge, building their brands, and forming positive relationships with Chinese business partners and government agencies, rather than trying to rush for market penetration.

Media companies should also consider the fact that China aspires to become a leading adopter of DTV. It is currently testing systems across the country49 in preparation for nationwide accessibility before the Beijing 2008 Olympic Games. However, as of 2005 only 4.4 million households had DTV50. Given the scale of deployment needed in such a short timescale, foreign companies may well find opportunity in assisting Chinese DTV operators.

One of China’s key aims is also to establish its own companies as global powerhouses. China’s government would like its media companies and also its major national brands, such as PC manufacturer Lenovo, to become leading multinationals. The opportunity for western media companies is to enable Chinese companies attain this aim, particularly with regard to establishing global brands51.

Finally, western media companies should take time to understand that the Chinese government’s rationale for controlling the extent of the media sector’s liberalization in not necessarily just about exerting strict control over its citizens. China remains a command economy whose transformation into a market economy is highly challenging.

Paper, pixels and profits

The pixel has often been portrayed as paper’s long-term replacement; in the long-run, online may just be another channel to market for quality content.

Digital subscription and advertising revenues now comprise over 18 percent of business publishers’ and 10 percent of consumer publishers’ total revenues52. Internet advertising is on its way to becoming a $20 billion industry53. Online classified advertising generates more than $2 billion in revenues54. One forecast has predicted that 2043 may be the year in which the last newspaper is printed in the United States55.

Yet, currently 439 million people in over 210 countries buy a newspaper every day56. Over 1.4 billion magazines are sold each year and numbers are rising57. Book sales exceed three billion annually58. The relationship between paper and pixels, it seems, may not always be about one versus the other, but more about a symbiotic, profitable coexistence.

In 2007, the print industry may therefore start making its future more certain by focusing on two areas: understanding and exploiting the unique characteristics of print, which cannot be replicated via other media, and turning the threat of the Internet into an opportunity. There may even be scope for the newspaper sector to reverse some of the declines it has suffered, particularly in more developed markets59.

A key reason, in 2007 and beyond, for the enduring consumer appeal and commercial success of print is its practicality and its universality. Unlike its digital equivalents, print needs no power supply or network access. Print is portable, foldable, inexpensive, lightweight, legible in sunlight and accessible to anyone who can read.

The increasingly widespread and vibrant growth of free newspapers is evidence of continued demand for the printed word, even in markets such as the United States, where newspaper circulation has seen sharp decline60. Free dailies can increase the total number of newspaper readers, without cannibalizing revenues from existing titles61. And most importantly, free papers tend to appeal to younger readers62, whose attention and loyalty should become a key strategic objective in 2007.

With just 285 million broadband connections63 serving a global population of 6.5 billion, paper retains an unassailable lead as the best route to the mass market. Further, for any article greater than 800 words with photographs or graphics, print is typically preferable to most readers64.

Nonetheless, in parallel, print media companies are likely in 2007 to continue making more active and profitable use of the Internet, to compensate for some of print’s inherent weaknesses: its content cannot be updated in real time, and print-runs imply up-front risk. Newspapers are generating a growing proportion of their revenues from online advertising65, magazines, particularly special-interest titles, are enjoying revenue growth from online subscriptions66.

Conversely, online-only publishers may also start looking at the printed page as a means of boosting their revenues. Printing may be the best way of monetizing previously digital-only content.

During the course of 2007, print media companies are likely to make increasingly diverse and creative use of both paper and pixels, to support revenue growth, fuel innovation, defend their core business and expand their relationships with customers.

Bottom line

Publishers and other media companies should create a balance between paper and pixels. The sector should assume that it may take many years, or even decades, for the Internet to match the accessibility of paper. Even then, readers may often prefer to curl up with a good book, newspaper or magazine, rather than remain hunched in front of a monitor. In the meantime, profitability from both paper and pixels is possible if companies reinvent traditional formats, developing new products and services both online and in print.

Newspapers could complement printed versions of stories by using the Internet to distribute multimedia accompaniments to them. Podcasts, audio interviews, additional photographs and even articles that never made it onto the printed page could all both attract new readers and keep existing ones loyal.

The growing availability of free news on the Internet may be best addressed by a change in editorial approach. Rather than simply reporting the news, newspapers and current-affairs magazines may wish to focus more on opinion pieces, essays, editorials, in-depth analysis and features, all of which may be better suited to paper forms than the Internet67.

Publishers should also consider reinventing formats where necessary. Free papers and magazines, with a deliberate youthorientation, a strong visual identity and a substantial amount of readers’ contributions could all add to a resurgence of the printed word68.

Publishers should understand how and when online advertising will have its greatest impact. Classified advertising, such as recruitment and personal columns, is most critically at risk as it is moving rapidly online69. Unless publishers move to use the power of the Internet in this area, either alone or in partnership70, the classified advertising market, which represents up to one-third of revenues71, could soon be lost to specialized Internet players.

Online-only publishers may also want to consider turning to paper as a source of revenue, not least as a means of reaching customers who are not yet online. Their digital content may even be more profitable as analog. The recent success of titles such as "PostSecret: Extraordinary Confessions from Ordinary Lives72" suggests that there is a growing market for books based on blogs and other content that was previously only found online.

The digital tail comes in many shapes and forms

The Internet has given rise to the online media stores, capable of selling both physical and digital products on almost endless virtual shelves. The largest online stores are able to offer their customers millions of products, all of which are readily accessible.

While customers of a physical store may get exhausted at the mere prospect of browsing through millions of goods, online customers are offered two tools that have the potential to accommodate a huge variety of choice: a search tool and a recommendations engine. The former allows the customer to pull information on any content in an instant. The latter pushes suggestions to the user. This combination of push and pull has the potential to revitalize the ever-growing back catalogs owned by media companies.

Previously forgotten content in theory becomes more accessible to the general public. So books that have long been out of print may suddenly discover another lease of life. Television programs, long since consigned to the archive, may find a new audience, decades after they were originally broadcast. This impact is known as the long tail73.

To many in the media, the long-tail phenomenon has been embraced as a panacea. Even if new releases do not turn into blockbusters, the long tail means that the back catalog has the potential to become a more productive and potentially profitable line of business, less prone to the seasonal sales spikes and massive marketing costs of new releases.

However media companies should not rely on the long tail to rekindle the appeal of every title in their back catalog automatically. Even with search and recommendation engines, the vast repositories of content available for sale over the Internet may struggle to sell even a tiny fraction of the volume generated by blockbusters. In short therefore, the majority of sales may well always be generated by a minority of product74.

As a means of exploiting the long tail, recommendation is not perfect, particularly if recommendations are driven purely by technology, and that technology is driven solely by historical purchasing behavior75. While one customer’s purchase may consist of a couple of CDs in the same genre, another customer may well be collecting gifts for a wide range of friends and family. So the purchase history for one may make little sense for anyone else with a different combination of friends and family (in other words, potentially everyone else in the world). Similarly, search is only a useful function if users have a good idea of what they are looking for, and more importantly, if the content has been tagged, or otherwise identified, correctly. For the vast majority of content produced before the digital age, which is by far the bulk of all professional media content in existence, and even some of the content created digitally, this is not yet the case.

Further, while technology may have the potential to enable the long tail, in many cases it also serves to promote a short list of blockbusters. Websites selling all forms of content, from music to movies, provide prominent lists of the most popular content.

The real estate of a website is clearly physically smaller than that of a shop display, favoring the display of a top 10, as opposed to a shop’s top 20. As for content sold over a mobile phone, such as a ringtone or a song, a general inability to browse extensively means typically only a top five is possible. As a result, for content sold over a mobile phone, the tail is rather short indeed76.

Thus in 2007, while the potential of the long tail may grow longer still, it may be the thick, short start of the tail that is most productive.

Bottom line

Media companies should embrace the long tail, while recognizing its limitations.

Historically the Pareto Principle, which implies that 20 percent of content generates 80 percent of revenues, has been a reliable rule of thumb. As such, a singular faith in the power of the long tail could be counterproductive. There is little evidence to suggest that the majority of customers have either remarkably eclectic tastes, or huge reserves of free time to spend searching through online archives. Media companies should therefore seek to balance the long tail against the Pareto Principle. In practice, this means selectively making available a wider range of material – but not necessarily all material. Certain types of content will, almost by default, have broader appeal. Hit television series are always likely to hold more appeal than local news that is yearsold.

Content which did not sell when first released may well have failed due to its mediocrity; in most cases the passage of time is unlikely to have enhanced its appeal. Not only is this a sensible approach from a consumer perspective, but it is also economically more tenable. While the cost of digitizing archive content is falling, in aggregate the cost can be substantial.

More importantly, sophisticated tools exist that can help media companies to analyze what types of content Internet users are interested in, by compiling and analyzing blogs, reviews, chat rooms and other forums77. Such tools should become much more widely used as a means of informing the process of digitizing the back catalog and stimulating the long tail.

Better search and recommendation tools are also likely to be essential, as is accurate tagging of content. Media companies should be prepared to invest in the best solutions. But investment in technology may not be the only answer. In 2007, it is still likely to be the case that human beings, assisted by computers, will be able to provide better advice than any technology alone78. Making more intelligent and active use of customers’ experience and knowledge, as well as their passion for content generally may well be the most productive way of benefiting from the long tail in 2007.

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Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.