Media at the crossroads – embrace digital or die?

4 Sep 2012

Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Pin on PinterestShare on RedditEmail this to someone

Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Pin on PinterestShare on RedditEmail this to someone

Ireland’s US$4.8bn entertainment and media industries are set to enjoy a 2.7pc growth in 2012 after several years of decline, a global Media Outlook Study by PwC predicts. However, in reality the picture is not as rosy as it sounds – traditional media entities, such as newspapers, are in decline.

In a market where fewer under-25s are buying newspapers than ever before (this writer knows 24-year-olds who have yet to buy their first newspaper), preferring to snack on content shared across social media available on their smartphones, the growth of media in Ireland in 2012 will be predominantly driven by digital.

In 2012, the Irish internet advertising market was valued at US$187m and is set to grow at an annual rate of 15.4pc to US$383m in 2016.

This will position internet advertising as the largest advertising channel in Ireland, representing almost 30pc of the total 2016 advertising market, PwC’s latest Global Entertainment & Media Outlook predicts.

Other segments of the industry which are expected to perform well over the five-year period include internet access (9.1pc CAGR), TV subscriptions and licence fees (4.6pc CAGR) and video games (4.6pc CAGR).

While newspaper publishing remains the largest segment in Ireland at US$902m in 2011, continued declines in print circulation and near-term decreases in print advertising will lead to a half of 1pc compound annual decrease during the next five years to US$878m in 2016.

Book publishing, magazine publishing and filmed entertainment are also expected to see compound annual decreases during the next five years.

Writing on the wall – get with it or get out

PwC’s Bartley O’Connor says that to survive Irish media will need to embed digital in their DNA. “It’s been going this way for awhile and they need to embrace the way the world is going; either get with it or get out. The writing has been on the wall.”

O’Connor says that turning to digital isn’t an easy option for many traditional outlets and abandoning a long-standing model for new digital models doesn’t make sense and won’t work.

“In reality the more progressive of the traditional media houses are trying to keep two models going – the existing traditional business that still commands loyalty as well as moving towards an integrated digital strategy.”

O’Connor stresses that this move to digital is not just about processes, it will be about people, as well.

“People in areas like broadcasting and newspapers will want to continue to do what they’ve always done, so not everyone is going to make the transition.”

That transition involves accommodating new forms of media, such as video along with text, understanding metadata, developing a personal brand, engaging in social media strategies to encourage the sharing of stories and paying attention to analytics. It also means realising that readers will no longer communicate solely via ‘letters to the editor’ but will stress their views rather loudly via social media platforms like Twitter or Facebook.

“Younger people in these organisations, in particular, will embrace the changes, but the writer of a 20 or 30-year-old column mightn’t embrace the new work qualities and this is something they and their management will struggle with.

“The reality is there is always going to be a need for quality journalism, especially if you can aggregate the views of people and get an understanding of the general mood around an issue, but media will need to realise it is no longer about sitting in a pulpit passing out your view on a topic.

“You are going to see a transformation of journalism – the same skills will apply in terms of accurate reporting of the facts – but there will be a need for a different mindset. Good journalists, whatever the device or platform their creations are read over, the basis will be the same: if someone can report about a football match and manage to inform and entertain, it won’t matter whether it’s been read on a smartphone or an iPad.”

However, the challenge is monetisation – if most newspaper and magazine content is available online for free why would consumers rush into a shop and hand over money?

The answer appears to be somewhere in the middle – meeting the reader in the way they will consume and stay loyal to the product. Channels like Newsstand on the iPad have been readily embraced by brands like The Guardian and The New York Times, but are they the answer?

“We did a significant piece of work with one of the leading global magazines,” O’Connor explains. “The CEO spoke about a survey of readers and one of the questions was, ‘how do you expect to consume our product?’ Eighty per cent of readers answered that today it will be the physical magazine. They were then asked how they expect to consume the product in three years and more than 30pc said they expect to consume the magazine via digital channels.

“The customers are telling them they like what they have created, but want to be lead into the digital age. The balancing act is moving direction but not losing revenue along the way as they move from physical to digital. Virtually every single thing has to change – from how content is created, how it is priced, marketed and sold.

“This is about technology, process and people – not just sticking a PDF on your website – you have to do it properly,” O’Connor warns.

Channelling change

Video, O’Connor emphasises, is going to be of paramount importance in the years ahead because it will have the power to inform and communicate in a way that is beyond text.

O’Connor points to a 2010 TED presentation by Chris Anderson (or see below) which demonstrated how children in Africa, the US and Asia are becoming popular media figures in their own rights, using smartphones to share dance moves, guitar lessons and more. “A kid in Kenya did his own TED presentation via smartphone. This shows that barriers are being broken down in a way that is faster than many in media can comprehend.

“Linear TV is going to be fundamentally changed and this area could decline faster than newspapers so broadcasters face immense challenges re-orienting their offerings to the constantly connected consumer who wants content on-demand.

“There is still work to be done in creating and aggregating quality content – that is the next chapter in where all of this is going.

“Radio is still strong in Ireland, local radio stations, in particular, are holding up well.

“The challenge will be meeting the consumer by understanding metadata, understanding their past behaviour and interests and weaving it all together.

“There will be casualties – we’re calling this year’s report ‘End of the Digital Beginning’.

“More companies in media get it that people are migrating to digital. There will be fallout, some people won’t adapt fast enough while others will and many will try and keep the two horses going at the same time while migrating to digital channels in a slow, measured way.

“The bigger players in newspapers won’t be shutting down print titles. But, if you can’t downsize costs, if you have a cost base that isn’t flexible enough – expensive offices, for example – revenues will drop and won’t be maintained.

“The trick will be managing people, processes and costs. The challenge will be to maintain something tangible in a world where content is everywhere. A brand like The Financial Times, for example, has succeeded in a creating physical and digital entity that is trustworthy, timely and offers greater insight than before,” O’Connor says.

Digital marketing image via Shutterstock

 

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com