New business models

So how can media companies turn the technology-led trends of personalisation, portability and convergence into new revenue streams?

History has shown that a successful magazine formula in one country can often be replicated in another: French Lagardere Group has successfully rolled out women’s  magazine Elle into foreign markets; Emerging technology is also encouraging publishers of business information to experiment with new markets; Reuters, has plans to use
broadband and video-on-demand to attract new audiences.

“Technological change gives Reuters a great opportunity to gain access to customers in a cost-effective way. It will enable us to increase the relative importance of our fledgling direct-to-theconsumer business,” comments Chris Ahearn, Global Head of Editorial at Reuters.


Chris Ahearan, Global Head of Editorial, Reuters

A bright future for advertising Market fragmentation has prompted leading media services agencies such as WPP to start shifting the emphasis of their business away from traditional ‘above-the-line’ advertising towards ‘below-the-line’ consulting services, public affairs and other non-advertising activities. But it would be wrong to see advertising as a doomed industry.

In fact, PricewaterhouseCoopers forecasts advertising to increase at a 5.3% annual compound rate between now and 2008. Online advertising shines out in particular. After a slump in the wake of the dotcom crash, it is set to grow by 12.7% annual compound rate over the next three years. Over the longer term, embedded advertising offers an exciting new platform for advertisers and their clients. The concept is similar to product placement in movies, and is already used in web content.

But more sophisticated versions are expected to appear in video games, software, web browsers and even active desktops on mobile phones in the next few years. These forms of advertising will be highly targeted and their performance will be more easy to quantify than traditional broadcast or print advertising.

Interactive media, in particular Internet TV, opens up opportunities to sell as well as market products to a well-defined audience. The opportunities for television commerce (or “t-commerce”) will increase as interactive shopping services become more sophisticated and widely available. Television shopping channels in Germany are expected to earn over Û1bn sales in 2005, according to the German mail-order association BVH, and sales in the German t-commerce market alone are projected to grow to Û5.1bn by 2009.

Creating and protecting premium content
“The proliferation of media channels means that now, more than ever, media firms need access to top quality content if they are to build strong brands and attract paying audiences. The Internet has turned a lot of content into a commodity, and a commitment to quality content is the only way to survive,” says 3i’s Krümmer. Companies also need to develop the right content for increasingly demanding and specialised audiences.

“Twenty years ago there was only a small source of content and only one way to distribute it,” says Valery Talma, Managing Director of technology, media and telecoms for investment bank Calyon. “Today there is a huge fragmentation of content, with dozens of producers of programmes, and there is free TV, pay TV, cable, satellite, and digital terrestrial television, as well as sports rights companies and other new segments of the TV industry. Now, everyone has to decide where to place their bets.”

Michael Grade, Chairman of the UK’s BBC, believes that licence fee payers increasingly want to receive content through digital channels, and the corporation has already made significant investments in Internet content and services. Freeview, a free-to-air digital platform partly owned by the BBC, is a further example of how public broadcasting can and must exploit new channels.

But the success of these projects invariably depends on the corporation’s ability to bring first-class content to each new channel. “At the end of the day it is all about content, which is why we regard our core business as being content creation,” says Grade.


Michael Grade, Chairman, BBC

Protecting valuable media content in the digital age is vital. The media industry already loses billions of euros each year to piracy and copyright theft.

This problem can only be aggravated by the fact that tools to enable consumers to copy content (such as DVD burners) are included as standard in almost every new PC. Media companies will have to continue to crack down hard on copyright theft and focus their efforts on professional pirating businesses that are flooding the market with counterfeit goods.

There are many reasons to be optimistic about the prospects for Europe’s media companies. There are plenty of examples of European companies with great brands, great content, and with exciting plans to extend these assets further into digital media. But they will need to adapt their organisations to capitalise on these opportunities.

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