Forbes India 15th Anniversary Special

Great Content Will Always Attract New Revenue Streams: John Nendick, E&Y

Superior content driven by new technologies will help media companies dominate the digital platform, says John Nendick, Ernst & Young's global media and entertainment head

Deepak Ajwani
Published: Jul 3, 2014 06:12:39 AM IST
Updated: Jul 1, 2014 05:52:46 PM IST
Great Content Will Always Attract New Revenue Streams: John Nendick, E&Y
Image: Joshua Navalkar
John Nendick, global media and entertainment head of Ernst & Young

Having spent over 30 years in the business, consulting for top media firms and being associated with marquee events (the Emmy Awards, the Golden Globe Awards, and the American Music Awards) in the entertainment space, John Nendick, the global media and entertainment head of Ernst & Young (EY), has witnessed the convergence of media and technology, and the migration of consumers from traditional to digital platforms. He believes that television is still the dominant medium in the industry. But the definition of TV has changed. They are driving content as well as scripting new chapters on how TV is viewed. Media companies that are oblivious to this changing audience will only flounder. Broadcasters should invest in people who can use new technologies to drive quality content, Nendick tells Forbes India.
Excerpts from the interview:

Q. What global trends do you see in the media and entertainment (M&E) sector that Indian CEOs need to watch out for?
The EY view of the future of M&E is that it will be led by the consumer driving the bus. The introduction of new technologies, be they devices or delivery mechanisms, will put consumers in the driving seat, in terms of what they choose to consume, when and how.

M&E companies need to look through that consumer lens and examine changing consumption patterns, their business model, and the infrastructure they need. Consumers will have the ability to change the way they consume content. Companies need to work towards adapting and not fighting this change.

 Most companies have traditionally been business-to-business, but with migration to digital, they need to gear up for the business-to-consumer mode. They will have access to data on consumer trends and loyalty. But it has issues of privacy, confidentiality and [the companies have] the responsibility of handling this data.

Q. CEOs are facing a dilemma on how much they should invest in the future while still protecting the present. How does one strike the balance?
Fundamentally, it’s all about content. One side of media business is the content side, and that is becoming all the more important. No new technology or distribution channel will make content irrelevant. All that technology is doing is enabling more transparency and providing many windows. Great content will always get greater exposure, attract new revenue streams and great branding. Mediocre content will not be any more profitable; rather, it may be less profitable.

On the distribution side, which is where technology investments will need to be made, it will indeed be a balancing act. What the video world certainly can’t afford to do is what its music brethren did, which was to be in denial of what consumers wanted (individual Songs Vs complete albums). Leading M&E companies should embrace change without over-investing.

Q. On the TV-viewing front, what trends do you notice abroad that you believe will soon play out in India?
A. Broadly, I notice three trends:
1) Time spent on TV is going up: Despite rumours to the contrary, time spent in front of the television is increasing. TV today is no longer a box in your living room. At EY, we define it as a screen, which could be in your living room, bedroom, bathroom mirror, backseat of a car, something your wear on your wrist or have on a tablet or smartphone. Television content is being replicated and resold on many devices, and digital consumption is adding numbers to the TV audience, not reducing it. It’s a more profitable business now. More profitable than the cinema business—the highest revenue grosser till now.  From a pure bottom-line perspective, the TV content business is in its golden age. 

2) Binging: People are watching significant amount of content in one sitting. For instance, Netflix has exclusive rights to ‘House of Cards’, if it buys 12 episode rights. It then chooses to make all the episodes available on day one as opposed to a linear TV model where content is aired on a decided frequency of daily or weekly. These episodes are available exclusively only on Netflix. Hulu and Amazon do the same.

Binging is now being used as a clever tool for marketing a new channel. For instance, in the US a new cable channel, FXX, will air 550 episodes (25 seasons) of ‘The Simpsons’ continuously for 12 days in August 2014. This will help them give visibility as fans will check out FXX to watch their favourite show, and through promos will learn more about the channel. Instead of spending millions on advertising, this is a better way to use your own archive and promote a channel. For example, Star TV can run all episodes of ‘Kyunki Saas Bhi Kabhi Bahu Thi’ in one shot if it introduces a new GEC [general entertainment channel].

3) Alternate Content: Alternate forms of programmes are being distributed today around the world. One example is multichannel networks on YouTube. Small production companies produce content that is cheap, not of TV grade in terms of equipment. But they have a cult group following. When 4G is in place here, there will be a lot of distribution access possible for that kind of content on the online platform. 

YouTube is already a challenger to television. Traditional media is looking at YouTube channels to see what millennials are watching, how they can deliver that content, and what revenue streams can be developed from it. Recently, YouTube video producer, Maker Studios, was acquired by Disney (a traditional TV company) for half a billion dollars. The same potential exists in India where producers here can create global content out of India for millennials.

Q. Monetisation and the evolution of the digital content business model are still not firmly in place. No one has a clear idea on it. What do you make of this?
Different media sectors are in different stages of their journey. Music is largely a digital business today—starts from downloading to streaming—and is a paid one at that. The book [publishing] business has made a successful migration from hard copy to e-books, and margins for publishers on the digital platform is better than paperback. 

On the video side, migration to digital is still in its early stages. But companies such as Netflix, Hulu and Amazon are meeting at least one criteria for success—customer usage. They have enough viewers: Netflix has over 30 million customers who pay $7.99 a month. Our view is that there is a maturity phase to come here [in India]. There is a need to get consumers to consume first and get used to the medium. Then there is a way to teach consumers that they need to pay a fair value for the content. 

Q. What can Indian M&E companies learn from mistakes that were made by companies in the West?
The first step is to recognise that technology has put the consumer in the driver’s seat. Companies need to look at what ‘wechnology’ can enable. We may see it here and we have seen this in other countries before. If today India is behind on broadband or infrastructure, then the arrival of 4G may take India to the front of the line. It might be a leap. We don’t need to follow technological advances in a linear fashion.

Q. Will broadcasters, who distribute through cable and satellite network, get disrupted when 4G comes in? Will more content be consumed on the internet via telecom company pipes instead of traditional cable?
On the pure delivery companies Vs distribution companies, yes. Ultimately, whatever the consumer is consuming, it will be through the pipes from the distributor. Some of those distributors, for instance Comcast in US, have an initiative called ‘TV Everywhere’—which means that when Comcast subscribers pay for cable, they have access to the content not only on their TV sets but also on other devices. Distributors are making sure that they move with the customer, beyond what might be the traditional device.  

Q. Do M&E companies need to get into the business of internet pipes that supply the content, or do they just need to make sure that their content is available on all devices?
If you look at an M&E value chain then you have: 1. Content production or acquisition 2. Content distribution via different channels 3. Customer ownership. You can focus on any one of those three and be successful. You can choose to be in two or all three and yet be successful. All three are viable on their own. 

Q. How does social media affect the M&E sector?
Based on the numbers we have, even though a huge number of people are spending enough time on social media, it’s not a lot. It’s more of a snacking phenomenon than a five-course meal. We don’t find that social media is disrupting the traditional media content consumption, but it’s perhaps complementing by way of a second screen or additive. That’s the consumer lens. But on a media company’s side, it’s a good to use it as a branding and marketing technique. 

Q. What changes do organisations need to make today to adapt to these changes?
Media and entertainment companies need to develop a different set of muscles than they had for linear. They need to have digital asset management tracking, security around IP, customer data, customer confidentiality norms, and so on. Digital eliminates physical, but there is a lot of infrastructural change that needs to be made to deal with customers in digital realm. Traditional media companies need to spend time with digital leaders.

There are also ‘people challenges’. Significant people changes need to be made. Traditional media companies need to spend time with the digital leaders of today. They need to look at their younger team mates and explore newer digital trends. AT EY, we have 1.8 lakh employees and average age for EY now is 27. We need to get younger and look though the consumer lens.

Q. What advice will you give a 23-year-old who wants to make a career in the M&E space?Where would you advise him to focus his energies on?
It’s not new, but with the technology advancements happening and broadband as well as 4G coming in, distribution of content in India will change soon. And this will spawn opportunities for top-quality content. Acquisition, curation, marketing and distribution of top-quality content will be a success.

Distribution channels are supplemental ways to monetise content. We believe that content is king and top-quality content will be in demand. It will flourish, but mediocre content will not be rescued by new distribution channels.

(This story appears in the 11 July, 2014 issue of Forbes India. To visit our Archives, click here.)

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