|Where’s the beef?
|Chief Creative Officer, Endemol Group, Chairman, Endemol UK
|Endemol Group, Endemol UK
Peter Bazalgette is Chief Creative Officer of the Endemol Group and Chairman of Endemol UK. Endemol’s initial public offering, IPO, and listing on Euronext Amsterdam took place late in 2005. He has personally devised several internationally successful television formats. He also brought Big Brother to the UK. Peter’s book about the international business of TV formats, Billion Dollar Game, was published in 2005. Peter Bazalgette is a Non-Executive Director of Victoria Real, Zeppotron, Brighter Pictures and YouGov.com. He is a former Non-Executive Director of Channel 4 in the UK.
Technology comes first, but content makes it a success. Mobile TV and IPTV technology are here, but we have only begun to invent the content these new, always-on, highly interactive services will offer. Variations of current fare, re-packaged for the new media, will be important, but new types of content we can barely imagine will also arise. The potential is vast, but so is the uncertainty about what to do, how to do, and who will own the value chain.
So there I was, talking to delegates from the worldwide television industry in Cannes, a matter of weeks ago. My presentation was entitled, somewhat abusively I admit, ‘It’s Digital Media, not New Media, stupid!’ My point was that there is nothing ‘new’ about this any more. Unlike the hype and the hyper-ventilation of the late 90s dotcom boom, mobile TV and IPTV are now up and running. Having come to the end of my Power Point slides I added, almost as an afterthought, that I had been in the business of television entertainment for 27 years. For all that time I had been grabbing the attention of viewers in one place only: their homes. Now, for the first time, my colleagues and I have the prospect of entertaining people, 24 hours a day, absolutely anywhere. I have since had this postscript quoted back at me a surprising number of times. There is nothing like a truism to get people thinking. But now those of us in the content industry have to turn this opportunity into hard dollars. Content may be king, but who is going to fund its regal progress in the future? The first thing to remind everyone is that current content models are far from bust. In the past two years, traditional media stocks have consistently underperformed the general market indices. The change sweeping through media technologies like a typhoon makes investors nervous. Still, we should remember that broadcasters still command billions of viewers from whom they earn billions of dollars. They commission billions of hours of programming paid for by billions of advertising minutes, and those revenues are actually forecast to grow rather than contract over the next three years. So forgive the American management cliché, but in my company we regard mobile television as far more of an opportunity than a threat. It is something that is growing alongside the television industry from which we can benefit every bit as much as the telcos and the Internet service providers. Two rules Amidst all the rapid change and the clamour of soothsayers there are two reliable rules we would do well to remember. They sharply illustrate how big the current opportunities are. The first rule is that hardware always comes first, but it needs compelling software to sell it. When the cinema was introduced in the early 1900s or radio in the 1920s or television in the 1940s, they only became mass media once the content guys had imagined how to create great shows. The second rule is that whatever the technologists invent a new medium for, it is invariably colonised for a completely different purpose. Here are three examples from the past decade. The worldwide web was created for academics to exchange information. Compare that modest ambition to the number of extraordinary ways in which it now dominates our lives. SMS messaging was invented for telephone engineers to send each other messages. The world’s youth had a different view as SMS rapidly became an addiction. And picture messaging (MMS) was marketed as a way we could send each other images on our telephones. But that was not the outcome. Mobile phone owners now use their handsets as digital cameras and get the results printed for their album. As a result Nokia has suddenly become the largest manufacturer of digital cameras in the world. These are classic examples of what I like to think of as the Law of Unintended Consequences. And thank goodness for it. We know about the Mobile TV and IPTV technology. But we have only begun to imagine the content that these new, always-on, highly interactive services will offer. That is what we mean in the UK when we ask the question, Where’s the Beef? It means, quite simply, where is the real value? This is a question we are only starting to answer. Mobile TV and IPTV are already being exploited by content creators in a number of ways. The most significant thus far, in terms of revenues, are those that emanate from existing television shows. We can ‘stream’ live from reality shows on 3G mobiles and via the web. This is a revolutionary development which includes live spectacles, such as sporting events, but goes far beyond it. Traditionally a television show edited for transmission uses no more than five per cent of the material that has been shot. This is true of reality shows such as Big Brother. But now fans can follow all the action, the raw material, streamed as it happens. In just three territories (Italy, the UK and Australia) Big Brother recently sold six million downloaded minutes of streaming to 3G mobile owners. In common with several other producers and broadcasters, we are also able to offer complete soap operas. Fans can order them to watch at a time that suits themselves, during a lunch break or when they are on the move. Soaps lend themselves well to the small screens of mobile handsets. This is because the characters and situations are so familiar the limited presentation is compensated for. ‘Mobisodes’ Another way of exploiting existing television brands is the creation of unique ‘mobisodes’. With many shows including soaps, the producers can create short episodes exclusively for online users to download. Other entertainment formats can offer ‘behind-the-scenes’ material exclusively for Mobile TV or IPTV users. This is now routine with music talent series such as Star Academy, American Idol and The X Factor. All these TV-inspired properties can also be aggregated into ‘channels’. These are not schedules in the television sense, but rather branded libraries based on specific genres like Reality or Comedy. The real prize, the ‘killer application’ of the future, may well lie in entertainment that is created specifically for digital media, owing nothing to television at all. The best new ideas to emerge will exploit the peculiar properties of digital media. For instance, collaboration between a digital platform, a traditional content creator and a videogames designer would produce a multi-faceted proposition of immense potential. If you want to know more precisely what I mean then you will have to wait. This is one of the areas my company is currently exploring and it is a little early to share it with anyone else. There are, of course, many unanswered questions that emerge routinely as this new media playground takes shape. One is posed by the consultant, McKinsey, in their recent report, ‘Capturing Opportunities in Mobile Entertainment’ (Nov 2005). They ask which type of player will win control of the value chain – content providers (i.e. broadcasters and producers) or access providers (i.e. platform owners). They argue that premium content players are well positioned since most operators lack production skills. Another consultant, Informa, predicts 125 million mobile TV users by 2010. Which technology, though, will they predominantly be using? 3G offers more individual choice, but is a heavier, less economic, use of spectrum. Broadcast systems, such as DVB-H, can send out ‘broad’ signals in the same way that television is distributed, but they do not allow consumers to decide precisely what they want to watch, as the programming is linear. Alongside these two are the new generation of iPods and games consoles, which enables the downloading of content that can be viewed at leisure, even where signals are poor or non-existent. The Economist (Jan 2006) recently said that the potential for mobile TV is vast, but so is the degree of uncertainty over how it should be put into practice. Step forward As these questions resolve themselves content creators and platform owners have much to learn. When we discuss an entertainment proposition with a telco we normally end up speaking to the marketing department. However, their skill is to sell content, not select it. There also needs to be much more transparency in tariff structures. It can be both confusing and poor value when users have to pay both for content and for downloading it. The development of advertiser-supported, ‘free’ models for content on both mobile and broadband would also be a huge step forward. In the US, News Corporation is piling into digital media as fast as it can so that it can get as close to a ‘triple play’ offering as possible. Also in the US, Google now sells shows like CSI online (and its shares are enjoying a multiple of a hundred). In Italy the mobile operator, 3, has bought Canale 7, a television channel. And in the UK the mobile operator, Virgin, is attempting to join forces with the cable television company, NTL, to offer a so-called ‘quadruple play’. These are, indeed, heady days, but in the end the sophisticated technology and the tumescent business deals do not matter a jot. It is only compelling content that the users care about. That is where the beef really is.