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The Disruptive Trend to Pay for Content Once

By 2011, consumers will be spending in excess of 50 percent more on entertainment content than they did last year, but it likely won't be for using the same content via different media, according to a new industry report by Understanding & Solutions.

The upsurge of content, combined with much-improved delivery infrastructures, is increasingly allowing consumers to choose when, where and how they consume their entertainment. Recent industry activity and the take-up of home video, TV, music and gaming across multiple delivery platforms are already laying the foundations for significant growth in the sector, particular through three key categories.

- Home Video and TV: electronic sell-through and online VoD, linear programming, TV based video-on-demand (VoD), mobile TV and theatrical box office.

- Music: online, mobile, and subscription radio.

- Gaming: online and mobile gaming.

"Going forward, we'll see the highest percentage growth coming from mobile and online," says Alison Casey, Business Director of Content and Services, at Understanding & Solutions, "though in volume terms, both will remain relatively small scale until after 2011, when compared with established platforms such as broadcast Pay-TV. More importantly, multiple formats will co-exist, as different delivery methods and platforms will suit different consumers in different situations. With content moving seamlessly from mobile to online to TV, the challenge for the industry will be to ensure revenues aren't cannibalised, as consumers will only want to pay for their content once."

"Although these new platforms bring new challenges," continues Casey, "we're going to see digital delivery outgrow all other aspects of home entertainment, helping to increase the global content industry's revenues by over 8 percent per year (CAGR) through to 2011."

If the process is managed effectively, content holders will yield additional revenue streams from both new and catalog content, though formats will have to evolve. In the mobile sector, for example, it will be re-purposed and/or totally unique short-form content that will be most successful.

"This new multi-platform world is creating a revenue shift," says Casey. "Theater owners, retailers and broadcasters will continue to be important, but the new media infrastructure providers -- including telcos, ISPs, mobile operators and social networking services -- will begin to take a larger slice of the revenues."

However, of all the different players vying for a position in the delivery of digital entertainment, it is the existing Pay-TV operators that are in the strongest position. Unlike the mobile operators and telcos, content is already their primary focus and this will be a key lever for consumer uptake.

Although unpaid video and music file sharing via P2P account for a large proportion of content downloading, new services have created viable revenue streams. Online, mobile and Pay-TV are beginning to provide a platform for new content delivery, often generating legitimate revenues in emerging markets for the first time.

"This is particularly true for mobile," says Casey, "and by 2011 approximately 75 percent of all mobile subscribers will live outside the USA, Western Europe and Japan. Historically, territories such as China and India have generated small revenues from packaged media sales, and the new digital revenues in these markets could surpass those generated from physical media."

The emergence of user-generated and low-budget independent producer content distribution is also providing an alternative to expensive paid-for content -- and competing for consumer mind-share and time online. These services, accessed by millions of users worldwide, will increasingly achieve revenues for the service providers through advertising.

This transition to dominant online digital delivery will not happen overnight, but has major implications for content holders, service providers and consumers. With more choice and diversity, the market segments will become progressively more fragmented, and companies will need to work smarter.

That said, I believe that the most significant disruptive trend is place-shifting of paid content. Savvy consumers who subscribe to pay-TV services, as an example, won't pay mobile service providers an additional fee for the same content that they already receive at home. This is why solutions from companies such as Sling Media and Orb Networks will gain market adoption -- mostly by word-of-mouth from current satisfied customers.

All the more reason then why mobile phone service providers need to be thinking about how they are going to offer different content -- that can't be found elsewhere -- to their customers. Clearly the problem with most current wireless carrier value-added service strategies is that they don't add meaningful and distinctive value.

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