Guest Commentary: Convergence has its work cut out for it

Mar 5, 2001  •  Post A Comment

With the continuing shakeout of dot-com companies and the current state of the market, where will the road to convergence and online content wind up? Many entertainment, technology and telecommunication executives still believe the road, laden with hairpin turns and potholes, will lead to the winner’s circle.
Most recently, executives and consumers alike have watched as one Internet company after another fell victim to wobbly business models and a lack of solid financial planning. Even those with solid infrastructure and revenue-generating plans have been punished by a market that is acting more like a scorpion than a bull, stinging for even the slightest misstep. The scrapes and bruises suffered by investors and once-mighty Internet companies have generated skeptics of anything followed by dot-com, including some of the industry’s own executives.
In a survey conducted at my firm’s most recent Entertainment & Media Summit, this question was asked of the 500 senior convergence industry executives who had convened in New York: “If you received a job offer from a hot Internet company, what would you do?” Not surprisingly, more than 54 percent said they would consider it but would probably end up staying at their current job. About 12 percent flat out said there was no way they would work for an Internet company. Only 19 percent said they would jump at an Internet job “in a New York minute,” which was down significantly from 42 percent last year.
But this change of heart does not represent a foreclosure on the Internet’s ability to become something more than a place to send and receive e-mail or access information. In fact, the participants in our poll were quite confident about the future of new media and content on the Internet. When asked what types of companies would benefit most in the convergence era, about 39 percent cited content companies, compared with 28 percent for technology companies and 24 percent for telecommunications companies.
New media and content companies are, however, understandably concerned about their future position in the Internet space and the possibilities and ramifications convergence will bring. When asked, “What action has your company taken to enhance intellectual asset security and copyright protection,” the majority (35 percent) said their company has made major investments in new technology infrastructure.
One significant hurdle that does stand in the way of convergence is the consumer who hasn’t typically bought into the idea. A consumer technology survey released by the PricewaterhouseCoopers Entertainment & Media Practice in November reveals that the vast majority of consumers, about 90 percent in the United States, are still using the Internet from home for e-mail and researching information. Very few are turning off the TV and CD player and putting down the latest bestseller to be entertained on their PC.
This trend has continued over the past few years, despite valiant attempts by new media companies to lure consumers into cyberspace under the belief that once they log on they won’t be able to log off. But new media and content companies have not yet found the balance between the content that people want and the ability to access it easily. For new media to achieve the glowing future their providers believe it has, content needs to be compelling, informative and above all entertaining, because consumers will have no problem finding alternatives.
But it is highly possible as this trial-and-error phase comes to an end, and the inevitable market shakeout narrows the competitive field, that the new year will bring some more savvy options from content companies in sync with the technology to exploit it for the best consumer experience. As Russ Pillar, president and CEO of CBS Internet Group, said at our summit, “There are lessons we’re learning in narrowband that we’ll harvest when broadband is more efficient.”
Consumers must also be informed about the technology available and how it can enhance their lives. For instance, in the same survey, we found that consumers were still confused about the benefits of digital TV technology. In the United States, 76 percent of consumers did not understand the concept, and while purchase intentions were increasing, the desire to buy the technology continued to be low overall.
The industry needs to show consumers that the benefits of this technology outweigh the costs. By fully branding the concept of digital TV as well as the technology, consumer confusion will diminish. And through aggressive marketing, which will also increase brand awareness, we believe digital TV will begin to penetrate more households in the United States.
Change opens the door to something different-and usually better. New media and content companies will continue to change until the consumer is satisfied with the evolution and end product. In the meantime, forward-looking business and financial plans and innovative content are an Internet company’s greatest shield from turbulent convergence transition, while well-informed and educated consumers are its greatest ally.