MEDIA MUST ADAPT TO THE DIGITAL AGE

The Changing Face of Media

By Atique Naqvi | Dubai, UAE | Uploaded on the blog recently**

Credible information is the victim of the digital age. 

New technologies are enabling information to reach wider audience, but media and entertainment companies must overhaul business strategies to remain relevant in the digital age.

Recently on Facebook two news items were shared frantically – one announced the death of Hollywood legend Morgan Freeman and the other talked about the death of Indian-British nurse sucked into the British Royal Family prank pulled off by two Australian radio jockeys. The former turned out to be a hoax, while the latter was breaking news, indeed. The information channels have not only changed their mediums in today’s world, but the generators of information and content have changed as well.

Amateur writers, filmmakers, musicians and citizen journalists are aplenty on the world wide Web, and for the past few years they have become aggressively active. However, hoax items such as news of Morgan Freeman’s death have put a big question mark on citizen journalism. Media analysts say people will continue to trust established sources such as broadcasters, magazines, newspapers and renowned websites for their daily dose of information rather than social media networks and a large number of Web video platforms.

News is just one aspect of the wider changes experienced by the global media sector. Director of Bain & Company’s Paris office, and leader of the firm’s EMEA Media and Entertainment practice, Patrick Behar, says there are five elements playing catalyst to the evolution of the media industry. “Innovations in media are largely shaped by five underlying trends: abundance, where consumers want to access an “infinite shelf” of content; personalization, where consumers are increasingly segmented by their interests; aggregation, where fragmented audiences converge toward powerful digital platforms; community, where social networks are becoming key to content choices; and lastly engagement, where consumers are actively involved in content discovery and data creation.”

Explaining further the dynamics of changes in media, Behar says: “The pace of innovation, far from slowing down, has increased over the past few years. Apple took 20 months to sell one million iPods after the device’s introduction in 2001; it sold a million iPads in less than a month in 2010.

“Facebook has grown from 60 million active users in 2008 to more than one billion in 2012, establishing itself in the exclusive league of global platforms alongside Google. And new platforms continue to emerge even faster – Instagram has grown from 10 million to 100 million users in less than a year.

“However, such competition for consumer attention is not without casualties. In the digital world, just like everywhere else, consumer expectations can be misinterpreted and value propositions deployed at the wrong time or in the wrong place. For example, US household penetration for 3D TVs is only at about three per cent – and much less in terms of actual usage – in spite of a strong push from the consumer electronics industry. Two years after its launch, the much-awaited Google TV revolution has captured less than a million households.

3D TV has failed to take off after Avatar movie euphoria.

“Even the social space is not exempt from growing pains – 80 per cent of Myspace’s users have left the service, and Apple shut down Ping after only two years. In our view, those platforms that have become part of the everyday lives of millions of consumers in less than a decade tend to hinge on a set of deeply rooted social, economic and cultural trends, which are the genuine, consistent sources of value creation for the content industry,” says Behar of Bain and Company.

In the Arab world, the changes in the media are surely led by global market forces, but recent political upheavals have also accelerated innovations in the media and entertainment sector. Partner, managing director and head of Boston Consulting Group in the Middle East, Joerg Hildebrandt, says: “The recent political turbulence across the Middle East and North Africa region has led to a reshaping of the regional media industry, especially in countries directly impacted by the uprising. There are encouraging signs of liberalization of the print and broadcasting sectors, leading, overall, to a revitalization of the sector.

“Most importantly, the demographic structure of the population across the MENA region plays a large role in the changing landscape. The fact that more than half of the total population is below the age of 25 represents an inherent strength for the media industry. This young population constitutes the early adopters of technology and is driving media consumption.

“Another important element of the media industry is content generation. Local and Arabic media production (e.g. films, music, books, online websites, etc.) has been relatively limited in the past. Arabic web content still only represents a low singledigit percentage share of total web content. However, increased internet penetration across the MENA region and boosted online activity and content generation on local and regional blogs will further drive Arabic media production and consumption, offering new opportunities for media companies in the region,” says Hildebrandt of BCG.

Reflecting upon the history of media in the Arab world, Principal at Booz and Company, Jayant Bhargava, says there was a phase in the early 1980s when the Arab world largely had print media, and it was an extremely localized media. “Every country had its own newspapers and radio was not totally liberalized. The late 1990s saw the advent of Pan-Arab television channels and that transformed the media scene quite a lot. It gave avenues to Pan-Arab advertisers to reach a wider audience through one medium unlike local newspapers.

“The localized television channels failed to beat pan-Arab broadcasters such as MBC in capturing viewership. The high cost of producing audio-visual advertisements for SMB local advertisers. . . they prefer print media. In the past few years, several new radio stations are being launched in the GCC, which will compete with print and outdoor for localized ads,” says Bhargava, adding that the region’s media sector has seen both ups and downs in the past five years or so.

“From an upside perspective, there has been liberalization in terms of new radio station licenses, especially in Saudi Arabia, and we have seen a substantial uptake from the digital as well. From 2009 until 2011, the downside was in terms of decline in advertising revenues. On average, advertising in the Middle East dropped by 15 per cent from 2009 until 2011, which is a big decline in just three years,” says a principal at Booz & Co, and according to him media and entertainment put together in the MENA region is approximately $12 billion.

Analyzing different forms of media, Hildebrandt of BCG, says print media has demonstrated good resilience against the decline in circulation and advertising spend that can be observed internationally. However, one can see (as much as reliable figures exist) that this resilience is also weakening in the region, with print media showing the lowest growth in the past five years. The Arab spring has also led to the growth of independent news outlets, with established government papers giving way to new titles.

Print media is growing in the Middle East on the back of Arab Spring.

Interestingly, the magazine market in the region still shows some growth in terms of the number of titles. This is especially evident in niche segments, such as women’s magazines.

On broadcast media, he says: “Traditionally, the TV landscape in the Arab world is dominated by free-to-air (FTA) satellite television. Recently, pay-TV has seen some growth; however, overall penetration remains limited. While 500-plus FTA channels are available in the region, one can still observe an increase in the number of channels. However, growth has been relatively flat in the past year. Ongoing initiatives such as the ‘peoplemeter’ (audience measurement mechanisms) in some GCC countries are perceived as enablers to further increase advertising revenue in the TV sector, which remains very low compared to mature European or US markets.

“The online and mobile space has continued to grow at a rapid pace in recent years and the uprisings across the Arab region have contributed significantly to the increased time spent online and the popularity of social networking platforms. Other segments such as mobile apps are still gaining momentum and online business models are also widely viewed with renewed confidence.

“Furthermore, governments in GCC markets have taken the lead in boosting the ICT infrastructure and are actively nurturing the growth of the digital ecosystem. However, digital advertising spend still remains fairly low across the Arab region due to the varying levels of ICT infrastructure, networked readiness, smartphone penetration and a limited talent pool (on the agencies and advertisers side),” says BCG analyst, adding that the total media advertising revenues will see a compound annual growth rate ranging between five and seven per cent until 2016.

“While the biggest segment remains print media, one can see stagnating evolution in this area; future growth will mainly come from digital media and TV.” Indeed tough years lie ahead for print media, mainly newspapers. The media companies that only produce print editions will have to change their business model to survive in the digital age. Giving the example of Dubai-based newspapers, which traditionally have had a very strong classified segment, Bhargava of Booz & Co says that classifieds are going digital. “When you have a free ad platform such as Dubizzle, why should a small advertiser pay to post an ad in a newspaper?”

The media houses in the region realize the importance of going digital. Dubai’s Gulf News and Abu Dhabi’s The National newspapers have tablet editions and they have also integrated radio and video services. Dubai Media Incorporated’s Emirates 24|7, a business newspaper, became the first media outlet in the region to drop its print edition, going completely digital in 2010.

Hildebrandt says: “One can observe an increase of time spent online, while the time spent for TV does not decrease. Consumers’ time and money spent on media consumption are growing due in large part to the emergence of new methods of media consumption. Multi-tasking has become an established way of consuming media. As an example, consumers with home Internet access can watch TV and go online simultaneously. And then there are a growing number of hybrid media experiences, such as newspaper websites. These experiences combine activities such as watching, listening, reading, and sharing (e.g. reading an article and watching the video reportage).”

The increasing popularity of digital media has not only affected the production of content, but also the traditional revenue generation model. Hildebrandt of BCG says: “The evolution of technology will continue to shape media consumption. In the Mena region, one can observe substantial programs to increase Internet speed and penetration (e.g. GCC markets such as the UAE, Qatar) and evolution towards fiber connections at home, which will further boost online media consumption and production. The increasing penetration of smartphones and nomadic internet connectivity (such as 3G or 4G dongles) will most likely further increase the digitization of media content. The future will be multi-screen HD digital content, consumed at home or on the go.

Revenue generation models will evolve from high unit price content ownership to lower unit cost content access.”

However, one challenge before the media houses is to monetize digital platforms. Chairman and CEO of Menacom Group, Joseph Ghossoub, says: “Globally, traditional media is still finding it difficult to monetize their digital platforms. Where they used to charge consumers for the newspapers, today consumers can get the same news for free digitally.

“The media is, therefore, looking to create exclusive premium content that they could charge for, but the evolution of social media and connectivity creates a big challenge for this content to remain exclusive.

“In the Middle East, digital media platforms are still in the evolutionary phase with media owners simply transferring their mainstream content on to the digital platforms. The way consumers use digital media in our region is different from traditional media consumption, and it is important for media houses here to further strengthen digital content. However, there are clear signs of action being initiated and it would be only a matter of time before traditional media leverages the power of digital media platforms more effectively,” says Ghossoub.

On monetizing media platforms, the chairman of Menacom adds: “While online subscription as a revenue model is gaining ground in some key global markets, especially in the West, in most parts, content is still accessible for free. In fact, social media has broken down most barriers in information dissemination. Today, social media is regarded as the driver of the social change that is happening in the Middle East region by lending the youth a platform to voice their concerns.

“While traditional media is looking to generate revenue streams by charging the content, we must not overlook the fact that a new breed of readership is gaining ground. Social media influencers and opinion makers are taking fast precedence over the views and analyses by traditional media sources, which often reach the audience late. The challenge is not about freedom of expression being curtailed or about the difficulty to access content, but about how the freedom to express across multiple platforms is used responsibly,” says Ghossoub.

Some of the challenges that the media industry will have to watch for are laid out by Patrick Behar of Bain and Co. He says: “Commercial platforms, confronted with the explosion of digital cultural products and services, and what it offers and demands, will continually have to reinvent business models that blend new consumer needs with creative innovation.

“Regulators will face the demanding task of adapting legal frameworks to fast-paced innovation, both in terms of technology and business models. And artists, while enjoying more creative resources than ever, will have to manage the daunting prospect of receiving direct, continuous audience feedback; develop their own marketing and social media skills as a complement to those from labels and other professionals; and face emerging competition from a wider range of talent.

“Successfully and simultaneously addressing such imperatives represents a formidable challenge for the media industry, but bears the promise of an equally formidable prize. Make diversity its primary value creation engine for the next seven years,” he says.

The most critical challenge, according to Menacom’s Ghossoub, will be to sustain revenue generation model. “With an abundance of content being available online for free, the media industry will have to explore new avenues to ensure that their investment in content generation translates to viable revenue streams. Managing copyrights is another area that will be critical in the coming years, especially with the difficulty to manage and monitor multiple platforms.”

** Originally published in TRENDS magazine/website. www.trendsmena.com