Guest Commentary: Embracing Fragmentation: The Key to the Digital Age

Apr 26, 2009  •  Post A Comment

Many pundits foresee audience fragmentation created by new digital media models as the potential downfall of the film and television industries. They contend the splintering of the audience will make it too difficult to charge appropriate transactional or subscription fees, or to package audiences for advertisers.
Fragmentation may make our jobs as media executives more complex, but I disagree with such ominous predictions. Fragmentation may be not a dirty word, but rather a potential means to salvation with consumers.
Audience fragmentation has developed because consumers are taking advantage of more choices than ever before. Discriminating consumers now can select both the content they watch and the way they receive it. Fragmentation is just a byproduct of giving consumers what they want, when they want it and how they want it.
However, consumers are not all the same.
What do consumers want? Does everything need to be made available for free or are consumers willing to pay? Do consumers want all content available in one place or packaged in special ways to suit their needs?
The Starz family of companies has found success by making a range of content available across a wide spectrum of digital distribution channels, affiliate partnerships and models, including:
Long-form content distribution. Leveraging our proprietary content from Overture Films, Anchor Bay Entertainment, Manga Entertainment and Starz Entertainment, we use numerous business models: transactional electronic sell-through, video-on-demand, pay-per-view, ad-supported VOD and subscription VOD models. These are executed through partnerships with multichannel video providers and Internet-based distributors, as well as through our own wholesale broadband subscription service, Starz Play.
Broadband channels. Developing ad-supported, video-centric Web sites/communities built around our libraries of niche content, (e.g., manga.com for anime). Broadband channels bring short-form video to consumers while providing a supplemental revenue source with advertising targeted to specific key demographics. These sites also enable promotion of our content across other platforms.
Extensions and extractions. Creating clips (extractions) that promote our programs and films and developing/selling casual video games based on our properties (extensions). These initiatives market our programming and add to the bottom line.
Digital originals. Developing, syndicating and licensing content created specifically for online and wireless platforms.
Starz has embraced many opportunities with digital, realizing that its impact has not been detrimental to our core business. Significant research, including a study fielded by independent research firm Synovate on behalf of Starz, indicates that digital platforms complement, rather than detract from, traditional distribution and consumption methods.
If we agree that choice and more targeted products (i.e., fragmentation) is a good thing for the consumer, and that it has not negatively impacted traditional channels (by decreasing viewership), what are we so scared of?
Perhaps we are afraid that new business models will not be as large (or profitable) as the old. Under this line of thinking, we have to reconcile what consumers are demanding with truly profitable models to make the most out of this fragmented environment.
But this fear is ill-conceived. First, traditional models are not going anywhere any time soon. So the idea that digital businesses need to fully replace traditional models is false. Second, once beyond the startup phase, most digital models are similar—if not higher-margin—businesses to their traditional counterparts.
The bottom line is that digital platforms have opened the door for media companies to serve content in a more targeted fashion to larger, more diverse consumer groups based on their preferences. Rights issues and technology limitations are giving us the time to figure out the optimal business models, but in a short time this will all be overcome by consumer demand.
Embracing the reality of fragmentation today and genuinely reaching out to consumers is key to positioning ourselves for future success and, ultimately, an opportunity for salvation in the digital age.
Marc DeBevoise is the lead executive for Starz Digital Media and serves as senior VP, digital media, business development & strategy, Starz Media.


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