DMI08: Digital Media Here, Monetization Not

What an interesting conference. The takeaway is that the infrastructure is here for both digital and mobile digital media, but the monetization models are not and the content owners are growing desperate. We are at the disruptive stage, where newspapers and TV stations are laying off and only SOME players have figured out how to make money from the new way younger people want to consume content.

I’ve got a lot of facts and figures here that corroborate the intuition we all have as early adopters (aka people with iPhones).

Has it Happened Yet?
According to Richard Cottrell, the CEO of Accenture Digital Media Services, which was formed to provide managed services to some of the big content providers, 2008 is the year Digital Media became a reality.

30% of the music industry’s revenues come from video now, and by 2012 it will be 50%. 500 new online companies exist now that didn’t exist ten years ago, generating $2.9b for rights owners. I didn’t realize how big a driver the iPhone was for this.

Music was the first shifter to digital distribution, and we know how the RIAA still feels about this, so how do we extrapolate that to film? 85% of video consumed today is prerecorded. But only 23% is consumed on TV.
By next year, a 15% increase in online consumption of media expected, driven by a generational shift. The younger the person, the happier he/she is watching TV over IP. We are coming close to the time people will be making a choice between cable and IP, not having both. How do you think this is making the TV industry feel?

Because of the shift, the channel brand is almost irrelevant. Only the content matters. You watch “The Daily Show” on Hulu, not on Comedy Central, because on-demand services are more compelling. Even among older people, one third of adults watch some content via alternative devices.

It is difficult not to see the handwriting on the wall, so 63% of companies are pursuing a content distribution strategy across all three screens (TV, online, and mobile; 55% of executives think mobile video will be mass market in 3 years; and 53% of media execs believe social media is their highest growth opportunity. They just need to figure out how to get there.

Of course this creates great disruption:
–Managing content across multiple channels requires a new, complicated supply chain
–Enabling new business models that produce a compelling alternative to “free” is still a challenge
–Understanding end user bahvior, preferences, and consumption patterns is just evolving
–Controlling the complex economics to deal with rising costs and pricing pressures is not there yet

Monetizing the “Great Consumption Shift”
Daniel Khabie, Digitaria Interactive, says marketers have taken their heads out of the sand. 66% of marketers claim to be advertising within online video today; 19% more expect to be before year end; 55% of Americans have broadband. And by the way, America has very low numbers compared to other countries.

To do this, 48% of marketers use podcasts.
36% of marketers expect to use widgets
34% of marketers expect to use social networks (because social network adoption has risen to 41% this year).

Kasey Lobaugh, Deloitte, says CEOs will soon recognize that what they thought was 7& of sales driven by the web turns out to be 50%, and that will drive digital marketing big time.

Go take a look at one of the only content providers that has learned how to handle this new method of distribution. KCRW, a Los Angeles station, has built a special media player, which it has has used to monetize digital content successfully. Before the new player, the consumption metrics were already huge:
1.7 miiion hours of streaming content a month were consumed, as well as 1.3 million podcasts a month
650 original performances are available on demand, by artists like Coldplay, Beck Norah Jones, etc. Some of this is original stuff, and some of this is their archives. Once they started streaming, KRCW realized there was a major demand for its archives, too. But it’s a big expense to stream all that content.

How does KCRW pay for all this? It is monetized by “buy now” opportunities for customers, and by underwriting. Because the media player integrates with social networking sites and other applications, it becomes a destination for buying and sharing content. This player have produced a 100% increase in underwriting revenue for the station.

Thanks to Phoenix-based Limelight Networks (NASDAQ:LLNW) for the opportunity to attend this conference, which is mostly for its partners and customers.