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Critical mass in a fragmenting world: TV networks

Content-driven service delivery is key to successful networks of the future


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Sydney, Australia – 9th June, 2005 – The television industry is undergoing a fundamental transformation according to a report, “ Television Networks in the 21st Century: Critical Mass in a Fragmenting World” launched today by Deloitte’s Technology, Media & Telecommunications Group. It is evolving from being mass-market, single-event, and broadcast-focused, into a sector which is far more complex but potentially more profitable.

David Willington, Head of Media at Deloitte, comments, “The most significant change occurring is the fragmentation of audiences and the consumption of content across an expanding array of media, channels and devices. The combination of these factors is eroding the dominant position of television broadcasters and major networks. In Australia, fragmentation and the take up of new technologies such as alternative distribution channels (satellite, cable and IPTV) is a few years behind markets such as the US and the UK. This gives Australian media operators the opportunities to identify profitable, new business models and adapt them to local markets.”

“The mass audience which was once enjoyed is scattering, as a result of which the ability to charge premiums to advertisers is beginning to evaporate. This trend – even in countries that have undergone fragmentation for years – will continue and its impact will be felt across the entire broadcast industry.”

“In an age of TV-on-demand, broadband access and the ever-increasing array of TV services to choose from, network operators have two problems. To face up to their declining ability to broadcast to mass audiences, with the effect this has on advertising revenues. And to find new ways of establishing closer and more profitable relationships with the people who used to be part of that mass audience.”

In a fragmented market, the way broadcasters have traditionally run their networks will no longer deliver the growth rates investors expect. In its report, Deloitte recommends that instead of relying primarily on advertising revenue and mass-market reach, networks will have to extend their business models to produce greater value along three new dimensions:

  • broadening their reach to new media channels and formats
  • deepening their relationships with customers by offering services, personalised to meet specific demands and needs
  • lengthening their content lifecycles through the creation of physical products. For example, in Europe, DVD sales and rentals in the five major markets reached $9.3 billion during 2004. This is expected to grow to nearly $17 billion in 2009.

“Live major sporting events like the Olympic Games, the Rugby World Cup and the AFL and NRL Grand Finals always attract mass audiences. These will continue to earn broadcasters astounding advertising revenues. But even with these events, audiences are dispersing across a wide variety of media, content is being fragmented and some cases, time-shifted. If broadcasters hope to remain active players in the market in years to come, there needs to be serious consideration of how they will evolve their customer relationships alongside developing technologies and trends,” added Willington.

In order to secure their place in the future of the sector, television networks need to move towards a services model, which delivers content-driven services that are re-packaged for a wide range of devices, media and consumer groups. Such offering will include:

  • on-demand content – Creating a virtual warehouse from which slices of audio and visual content can be sold for a wide range of uses, such as webcasts, radio airplay, mobile phone downloads, and video-on-demand. Professional applications include charging other networks – particularly those overseas – for access to content archives.
  • interactivity – participation, voting, purchasing, news and information, online games, questions and comment submission, and web-based chat.
  • events – generating revenue from tie-in events such as the concerts based around the Australian Idol series.

"Offering a broader range of services is a powerful way in which television networks can nurture customer relationships and stay ahead of changing market needs. It also has potential to provide a reliable stream of subscription revenue and repeat business, which could help offset volatility in other areas of the business. Most importantly, content-orientated service models would allow networks to give consumers the control they demand – they key to customer satisfaction and loyalty in a disaggregated market,” concludes Willington.

For a copy of the report or to schedule a briefing with David Willington, please contact Judith Brown at Deloitte on 02 9322 7637 or 0404 879 800.

About Deloitte’s Technology, Media & Telecommunications (TMT) Group
The TMT Group is composed of service professionals who have a wealth of experience serving technology, media and telecommunications companies throughout the world in areas including cable, communications providers, computers and peripherals, entertainment, media and publishing, networking, semiconductors, software, wireless, and related industries. These specialists understand the challenges that these companies face throughout all stages of their business growth cycle and are committed to helping them succeed. Deloitte is a
leader in providing strategic, financial and operational assistance to its technology, media and telecommunications clients.

About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu (a Swiss Verein), its member firms or their respective subsidiaries and affiliates. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms have any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte,”
“Deloitte & Touche,” “Deloitte Touche Tohmatsu,” or other related names. Services are provided by member firms or their subsidiaries and affiliates and not by the Deloitte Touche Tohmatsu Verein.

NB: See our news releases and research at www.deloitte.com.au

For further information:
Judith Brown
Marketing Communications Manager
Mobile: 0404 879 800
Tel: + 61 (02) 9322 7637
judithbrown@deloitte.com.au

Vessa Playfair
Communications Director
Mobile: 0419 267 676
Tel: + 61 (02) 9322 7576
vplayfair@deloitte.com.au

David Willington
Head of Media Group, Deloitte Australia
Tel: +61 (0) 2 9322 7019
dwillington@deloitte.com.au

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