The New Media Value Chain: Part 1

Brightcove 7/31/2013

Paul Goetz is the senior vice president of sales at Brightcove. This post is the first in a two-part series in which Paul explores the creation of the "new" media value chain.

Beginning in the 1950s, mass TV audiences were built, and an intrinsic relationship formed between big brands that wanted to promote their products, and programmers that were eager to build audiences and monetize their proprietary content. Until recently, these relationships have essentially remained the same. But, undeniable forces have emerged to challenge and break down the historical media value chain. Rather than being a static group of consumers waiting patiently for content to be delivered, audiences have taken control.

Consider the "traditional" media and entertainment value chain:

  • Content creators: the creative force behind content (i.e. actors, directors, screenwriters)
  • Content owners: studios
  • Production and aggregation: TV or film production companies
  • Distribution: broadcasters
  • Consumption: audiences access content via cable or satellite providers

And on the advertising front:

  • Advertiser (brand)
  • Creative agency
  • Media planning and buying
  • Publishing (through broadcasters)

Essentially, for half a century, a reliable system was in place where brands worked with agencies, that then drove advertising buys. Media planners then effectively aligned ad buys with content produced by the studios. The studios in turn distributed the content to broadcast (and then, in the 1970s, cable). Sitting at the bottom of the funnel ready to absorb this content was the audience. It was an incredibly linear process where everybody had a place and was seemingly happy with--or resigned to--their place in the television world. The entire process was built on volume.

Technology creates the conditions for change...and the audience is calling the tune
Technology and consumption habits have turned this process completely on its head. For instance, viewers are moving the industry and shifting priorities by consuming content from a plethora of devices, channels and sources. Consumers are taking advantage of a litany of media consumption options: streaming via PC; online video on a mobile device or tablet; over-the-top (OTT) and video apps. At the same time, they have taken control of the end game by selecting when to skip advertising, serialize programming and more. One thing is clear: audiences are no longer sitting at the end of an aggregate chain waiting to be communicated to. Instead, audiences are an active participant in the content they are consuming. Audiences have forced change. And now, dependent upon where players previously sat in the traditional value chain, they are now faced with either tremendous opportunity or fear-inducing threats. Where will the audience be, and what's the best way to reach them?

Lower barrier to entry
While broadcasters have traditionally held tremendous influence in the broader media chain, their influence has begun to waver. And this is because the barrier to entry to the content distribution sphere is lower now than it has ever been. Take FOX as an example. Over many years, FOX acquired a cadre of independent local television stations, until it had amassed enough to be viewed as a true broadcast network. And then, FOX bought the big programmers to gain access to the studios. Once it had enough content in its arsenal, the company launched and has evolved into the FOX we know today. Conceivably, in the past the barrier to entry to become a player the broadcast industry was an exorbitant amount of money.

Such careful, meticulous planning--and capital output--isn't required in the current climate. Now, for roughly $1 million or less, including the cost of technology and resources to build apps and/or power distribution, I would argue that anybody can create their own content engine. For instance, Amazon is crowdsourcing its original programming. Even YouTube, known for it source of endless, free video entertainment is getting into the paid subscription business, with the hope that people will pay for unique, niche content. Rovio, creators of the popular Angry Birds franchise have launched their own online video portal, Angry Birds Toons. Basically, with appropriate strategy and technical support, direct-to-consumer engagement is achievable--and quickly. It's as easy as: building an app, gaining approval from the App Store or Google Play and strategizing for both Web, mobile and OTT delivery.

Volume vs. value
Concurrently, advertisers and content publishers know more about their audience than ever before. And that's because the content flow operates in a different way. If you own the app, or you're monitoring the Twitter dialogue, you can emerge with a highly developed idea of just who the viewer is, ensuring that you can derive far more value out of a very selective media placement. While $50 CPM was traditionally considered a great ad placement, $5 per person could now ensure that you're directly reaching your target audience--undeniably a high-yield return. Essentially, participation opens a value opportunity because the death of volume is truly based on fragmentation, yet the rise of value is predicated on quality over quantity. It used to be necessary to get everybody in front of the television to watch a weekly program in order to enjoy meaningful revenues. Now, that's just impossible--and measuring a single audience is not realistic. Instead, because there are so many new content choices, the real opportunity lies in creating a highly targeted, high-value audience.

In our next installment, we'll discuss the rise of content marketing, "big data" and its place in the new media value chain as well as how and why cable providers are innovating to stay relevant.