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Accenture’s Global Media and Entertainment High Performance Study 2011 Reshaping the business for sustainable digital growth Why a new operating model is needed for high performance in tomorrow’s digital Media and Entertainment industry

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Accenture’s Global Media and Entertainment High Performance Study 2011

Reshaping the business for sustainable digital growthWhy a new operating model is needed for high performance in tomorrow’s digital Media and Entertainment industry

Executive summary

Reshaping the business for sustainable digital growth

All rights reserved © Accenture 2011 1

Fueled by rapidly rising consumption and rebounding capital markets, the past year has seen Media and Entertainment companies worldwide accelerate their change programs across several dimensions, in response to the pervasive impact of digital disruption. At the same time, they have gained renewed confidence as their focus shifts from survival to competition and growth.

However, M&E companies know their industry remains

in a state of flux that will continue for the foreseeable

future. To keep pace amid this ongoing and

sweeping change, while also building sustainable and

profitable businesses for the future, companies need

unprecedented operational agility. Yet many are still

less than halfway along their transformation journey.

2 Accenture’s Global Media and Entertainment High Performance Study 2011

All rights reserved © Accenture 2011 3

Adapting to the “new normal”

As companies press ahead with their

digital transformation initiatives, there

are strong signs that a fully-fledged

“new normal” is now emerging. It is a

world where the formerly distinct roles

of content, services and applications in

the overall consumer experience are

increasingly indivisible. A world driven

by new devices and mass technology.

These dynamics are increasingly

apparent across all segments. But,

given the sharp variations between

different geographies and industry

sectors, it is clear that the overall

industry migration to the new world

will take some time. “Classic media”

will live on while the world of “broad-

band media” fully establishes itself.

For companies, this is not simply a

one-off transition from analog to

digital; it’s a new business model.

The move to delivering personalized

digital services to each consumer

does not mean M&E will stop being a

mass-driven industry. The change in

focus from the mass-market audience

to the audience of one actually

involves a shift from mass media to

mass technology—with the source of

companies’ economies of scale moving

to technology platforms, as a way to

manage the costs and impacts of frag-

mentation and operational complexity.

Harnessing the “3D’s”

On their transformational journeys,

M&E companies need to cross the

frontier from early-stage industry

responses to more sustainable and

profitable business operations in

the new digital ecosystem. To take

this step, companies must consider

harnessing three fundamental drivers

that we have termed the “3D’s”: the

Digital Consumer, Digital Monetization,

and Digital Supply Chain.

Today’s consumers expect to choose

and consume the content they want,

in the way they want, wherever and

whenever they want. This means that

each individual is no longer an

aggregation of a separate reader,

viewer and listener, but a single entity

choosing and consuming content

experiences across multiple platforms.

This individual’s behaviors add up to

the “DNA” of the digital consumer.

The second “D”—Digital Monetiza-

tion—remains a major challenge,

and an area of uncertainty for many

players. What is clear is that M&E

companies will run a diverse portfolio

of revenue models, thereby capturing

multiple revenue streams, but also

obliging themselves to face further

operational complexity.

Maximizing returns

The third “D”—Digital Supply Chain—

underpins and empowers the other

two, thus enabling the M&E company

to achieve its ultimate imperative:

maximizing the return on investment

in content and operations. By support-

ing and enabling multiplatform

Those that fail to reach the ultimate destination of

sustainable profitability are likely to face extinction.

But for those that win this race, the prize is bigger

than ever before.

distribution, the supply chain opens up

new areas of growth, at a time when

consumers are increasingly prepared to

pay for content experiences, and when

online advertising represents a huge

global opportunity.

However, the complexities are equally

unprecedented. Multiplatform opera-

tion is no longer an option, but an

imperative: mobile is seen as having

the biggest growth potential by the

industry as a whole, TV is second,

and tablets are lagging a little way

behind—but are already leading the

way in publishing. Companies must

find an economically viable trade-off

between multiplatform services and

interoperability across devices, while

simultaneously customizing content

for every platform and consumer

experience. This is a tough call.

The collaboration imperative

A function of the increased complexity

is that as each multiplatform content

provider’s supply chain can no longer

operate in isolation, high performers

are rapidly evolving their traditional

positioning—and new collaborative

ecosystems will continue to emerge,

driven by the need to achieve

economies of scale, leverage skills

and compete against new players.

As companies adapt and reshape for

the new reality, implementing a series

of point solutions aimed at specific

operational issues will not be enough

to deliver sustainable high perfor-

mance. What is required is an holistic

approach supported by mastery over

the effective execution of strategy.

The route to sustainable high performance: the 3D Operating Model

Accenture has developed a solution

that will help enable the M&E

company of the future to achieve

sustained success in the digital

“new normal”. The Accenture High

Performance “3D Operating Model”

rethinks the traditional vertical

orientation around channels, and shifts

the polarities to a horizontal focus on

key capabilities in the digital value

chain. This means that each horizontal

layer becomes a competitive asset and

a potential focus for differentiation,

innovation and collaboration.

In our view, this model unleashes

the full commercial potential of a

company’s content assets, while also

providing improved governance over

its value drivers, and supporting the

innovation, operational excellence and

organizational agility needed to adapt

quickly to changes in the competitive

landscape. And—taking account of the

continuing resilience of non-digital

content—it also provides a pragmatic

structure for maximizing digital

revenues while leveraging classic

media even more effectively.

We believe that this model will

characterize the industry’s future

high performers. Please read on to

find out why.

4 Accenture’s Global Media and Entertainment High Performance Study 2011

For the fifth successive year, the

Accenture Global Media and Entertain-

ment High Performance Study has

researched the views of 130 leaders

and decision-makers in the Media and

Entertainment industry worldwide,

spanning broadcasting, publishing,

filmed entertainment, portals,

interactive gaming and music.

The industry breakdown of the

respondents is shown below.

As with previous studies, we have

refined and expanded the research

program in the light of knowledge

built up in previous years, with a

view to deepening the insights gained

across all segments of the industry.

The qualitative study on which this

report is based includes interviews

with 130 C-Level executives—increased

from 102 in the previous year in

order to improve our coverage of

all segments, particularly portals and

publishers.

The respondents are all executive

leaders in six M&E industry sectors.

They are based in 18 countries, with 42

(or 32.3%) of the interviewees located

in Asia Pacific, 50 (38.5%) in the

Americas, and 38 (29.2%) in Europe/

Middle East.

Research methodology and sample

All rights reserved © Accenture 2011 5

Key areas of focus in this year’s inter-

view program included companies’

approach to the three key industry

drivers of the digital consumer, digital

monetization models, and digital supply

chain—together with the impacts of

these factors on digital operating

models. This report presents some of

the key findings from our 2011

study, and goes on to draw out the

principal implications for Media and

Entertainment companies seeking to

achieve high performance in an

increasingly digital environment.

For further information about this

report, please register at

www.accenture.com/MandE_High_

Performance_Study_2011

North America 40 South America 10Europe 38APAC 42

Figure 2: Accenture's Global Media and Entertainment High Performance Study 2011 respondents by industry.

Figure 1: Accenture's Global Media and Entertainment High Performance Study 2011 respondents by country

Publishing BroadcastingEntertainmentMusic, Gaming, Film

PortalsPortals, Social Networking,

Internet Companies,

Advertising

18%22%30%30%

Pervasive digital disruption— and growing market opportunity

In recent years, all segments of Media and

Entertainment have experienced accelerating change

across several dimensions, all rooted in the pervasive

impact of “digital disruption”. This change has seen

consumers migrate rapidly to new modes of digitally-

enabled, multichannel consumption behaviors.

The result is a world in which 35 hours of content

is added to YouTube every minute,1 nearly half of

televisions shipped with screens of 40 inches or larger

have integrated networking,2 and Facebook is used

by 1 in every 13 people on earth.3 Video is the

fastest growing mobile application; by 2015 video

is predicted to account for two thirds of all global

mobile data traffic.4

6 Accenture’s Global Media and Entertainment High Performance Study 2011

Figure 3: Do you see more challenges or more opportunities for your business in the next 12 to 24 months?

1 Morgan Stanley: Ten Questions Internet Execs Should Ask & Answer — November 16, 2010 — Web 2.0 Summit, San Francisco, CA

2 IDC, Worldwide and U.S. Consumer 2011 Top 10 Predictions, January 2011, IDC #226734

3 http://www.digitalbuzzblog.com/facebook-statistics-stats-facts-2011/

4 Cisco Visual Networking Index (VNI) Global Mobile Data Traffic Forecast Update 2011

5 Morgan Stanley: Ten Questions Internet Execs Should Ask & Answer — November 16, 2010 — Web 2.0 Summit, San Francisco, CA

No area of the industry has been

immune from the digital transforma-

tion driven by these new consumer

behaviors. This change encompasses

every aspect of the industry value

chain—content technologies, delivery

channels, access devices, revenue

models, marketing techniques, adver-

tising paradigms, rights acquisitions

and management, cross-sector

competition, market fragmentation,

talent and skills.

Insatiable consumption of content

Media and Entertainment companies

have embraced this multidimensional

change, racing to redesign their

strategies for the digital ecosystem

and deliver the content experiences

that consumers want and will pay for.

These strategies are fueled by rapidly-

expanding global consumption for

media and entertainment content in its

many forms. While the growth curves

and dynamics vary by segment and

geography, this market is not going

to go away any time soon. In our

research, this insatiable consumer

consumption of content is reflected in

confidence voiced by respondents that

they foresee more opportunities than

challenges in the next 12 to 24 months

(see Figure 3).

The positive impact of rising demand

is increased still further by continuing

growth in the traditional drivers

of global spending on media and

entertainment—GDP, population and

disposable wealth. These forces are

seeing content consumption grow as

never before in an expanding array

of markets, and the momentum is

building all the time. The capital

markets appreciate this potential:

in 2004, the top 15 publicly traded

internet companies were worth a

collective US$262 billion; in 2011

the figure was US$667 billion.5

All rights reserved © Accenture 2011 7

Far more

challenges

than

opportunities

More challenges26%

More opportunities48%

Far more

opportunities

than

challenges

More challenges

than opportunities

More opportunities

than challengesAbout the same

4% 22% 40% 8%26%

8 Accenture’s Global Media and Entertainment High Performance Study 2011

Embracing change—amid increasing confidence

Consumers’ continuing voracious

appetite for content experiences

has seen Media and Entertainment

companies reach a level of confidence

higher than in several years—certainly

since before the global economic and

financial crisis.

Showing courage and determination,

companies have worked hard and

kept investing even in the downturn,

pressing ahead with their customer-

centric initiatives, while also improving

their ability to operate more commer-

cial models concurrently and manage

a more complex and sophisticated

supply chain.

Global economic recovery and the

revival in advertising have sustained

the industry’s momentum, and the

future looks significantly brighter than

it did two years ago, encouraging com-

panies to invest in digital capabilities.

As our research shows, 84% of respon-

dent companies increased their levels

of investment in the digital supply

chain in 2010—with almost a third

(31%) increasing it by more than 25%.

As a result of this committed invest-

ment, companies across the industry

have taken some significant steps on

their digital transformation journey,

and believe they are now well-posi-

tioned to compete—although they

accept there is much more change

to come. As Figure 4 shows, 73% of

respondents in our research study think

their operating models are primed for

success to a “large” or “very large”

extent. The minority who are less

confident are dominated by publishers

and broadcasters.

These findings suggest that the indus-

try as a whole is no longer afraid of

the digital future, and that the game

is moving from survival to competition

and growth. Last year, cross-sector

competition was regarded as the top

challenge facing companies in the

coming 12 to 24 months; this year, it is

identifying the monetization models

needed to harness new revenues.

Again, this suggests the mood is shift-

ing from caution to optimism, as the

industry’s growth potential becomes

visible again, and appears higher than

ever before.

“[The key will be] strong content backed by a very

strong customer insight.” Head of Digital Marketing, music company, India

Figure 4: To what extent do you believe your operating model is primed to enable your business to compete successfully?

Do not

know

To a very large extent

To a very

limited

extent

To a limited

extent To a large extent

3%2

Portals 17% Entertainment 21% Broadcasting 26% Publishing 33%

22% 55% 18%

Will be relatively stable

for the next 12–24

monthsContinue to change significantly for the forseeable future

85% 15%

Publishing 97%Entertainment 93%Portals 87% Broadcasting 64%

All rights reserved © Accenture 2011 9

Figure 6: Given your view of future industry change, do you believe that your business will continue to change significantly?

Much more change to come

At the same time, Media and

Entertainment companies fully

recognize that their industry is a

long way from reaching a stabilized

situation. As Figure 5 shows, four out

of five believe that the industry is

still in a state of flux, with significant

further redistribution of revenues yet

to take place across the value chain

over the next two years.

Companies also know from experience

that the pace of change creates major

pitfalls, which have impacted successful

global leaders and newer digital

entrants alike. As reported in the global

news media, UK broadcaster ITV sold

Friends Reunited in 2009 for £25m,

having agreed to pay a total of £175m

for it four years earlier.6 And in

February 2011, News Corp revealed a

US$275 million write-down on its

MySpace acquisition and the related

Web businesses.

Given the continuing pace of change,

companies know they must balance

their growing confidence in their digital

capabilities with rigorous management

of ongoing change and the resulting

risks. The vast majority—including over

90% in publishing and entertainment—

expect that significant change will

continue for the foreseeable future,

meaning they will have to continue

changing and adapting (see Figure 6).

Reshaping for the new environment

So Media and Entertainment companies

are on an ongoing journey as the digital

ecosystem expands. To reach their des-

tination, they will need unprecedented

operational agility that enables rapid

ongoing reshaping of their business in

response to continuing change, the

sheer pace of which means an approach

of “wait and see” is not an option.

Instead, with much of the current

digital industry built on wooden

foundations rather than rock, companies

move now to identify and build a new

basis for sustainable success in the

future.

6 http://news.bbc.co.uk/1/hi/8186840.stm

It will be stable

in 12–24 months

with some revenue

redistribution

across value chain

It is already

fairly stable

It will be stable

in 12–24 months

with current

business models

It is still changing rapidly with significant revenue redistribution across value chain

80% 14% 4% 2

Figure 5: Do you believe the Media and Entertainment Industry is becoming more stable or is continuing to change?

Execution of digital strategies demands a new operating model

To adapt to the new environment, companies across

all Media and Entertainment segments have identified

and launched new strategic programs and ramped up

their investment in digital initiatives and digitally-

enabled services and capabilities.

10 Accenture’s Global Media and Entertainment High Performance Study 2011

All rights reserved © Accenture 2011 11

Some incumbents have implemented

highly successful strategies in the

digital space. High-profile examples

include Disney, whose CEO Bob Iger

was quoted in October 2010 as saying:

“I have tried to keep two obvious

philosophies…First, that our current

business not get in the way of adopt-

ing new technologies. And, second,

that our business belongs on these

new platforms.7” At the same time,

other players have come in as new

digital entrants with successful strate-

gies—witness Netflix’s drive to make its

movie streaming service available on

as wide an array of set-top boxes and

handheld devices as possible.

Only halfway along the journey

However, as we have already highlight-

ed, our research shows that companies

know the industry is still a long way

from reaching a stable state. Digitally-

driven change—and the need for

companies to adapt to it—will continue

for the foreseeable future. In this

context, most companies know they are

still less than halfway along their jour-

ney to a digitally integrated file-based

enterprise. As Figure 7 shows, only 43%

believe they are already over 50% of the

way to full digitization, while 32% are

less than a quarter of the way there.

That said, some companies have already

built end-to-end digital supply chains,

as illustrated in the accompanying

information panel about Warner Bros.

Such pioneers aside, most companies

face a need to execute the rest of this

journey while continuing to respond

to ongoing profound change in the

Figure 7: How far along are you in terms of the migration from an analog, offline company, to an integrated file-based digital enterprise

(e.g. from production to distribution to access management)?

Figure 8: What is the top challenge(s) that your company faces, or expects to face, in the next 12 to 24 months?

7 http://kara.allthingsd.com/20101009/when-you-wish-upon-two-web-stars-ceo-bob-iger-talks-about-the-next-digital-direction-for-disney-2/

Not

started

Analog, offline company Digitization Process Integrated, file-based digital enterprise

<10% 10–25% 26–50% 51–70% >70%

4% 12% 16% 25% 22% 21%

Identifying new

monetization models

39%

Speed and ability to

transform your digital

operating model

23%

Providing a better

digital consumer

experience

22%

Competition from

new players

20%

Cross-sector

competition

15%

Declining

demand

7%

Other

8%

Warner Bros.: digital end-to-end

A good example of digital

supply chains in action is

Accenture’s collaboration

with Warner Bros. to help

transform its core media

production and distribution

capabilities into a single,

totally integrated digital

operation. This project made

Warner Bros. one of the

first studios in the world to

move its entire film and

television production, post-

production and distribution

to an entirely digital end-

to-end-process.

environment, and in the face of a

number of severe challenges that have

yet to be addressed. As Figure 8 shows,

the most pressing of these challenges

in the next 12 to 24 months are

identifying new monetization models

and generating the speed and ability

to transform their operating models to

capitalize on future opportunities.

There is as yet no clear or agreed view

of precisely what these opportunities

will look like or how they will best be

leveraged. What is clear is that the

industry’s world changed dramatically

as a result of digitization, accelerating

the rate of change during the down-

turn, with several factors underpinning

rising demand into the future.

The “new normal” is coming—but will not arrive overnight

Signs of this new world emerging

are all around us. Broadband and

interconnected devices are spreading

exponentially, with global media tablet

shipments alone expected to exceed

44.6 million in 2011, a leap of over

160% from 2010's 16.9 million.8 And

an Accenture survey9 published in

January 2011 projected that consumer

purchase rates for personal computers

and mobile phones (excluding smart-

phones) will decline by 39 percent and

56 percent respectively in 2011 com-

pared with 2010, as consumers switch

their spending to newer alternatives

offering a better content experience.

These alternative devices include not

just tablets but also 3D TVs (sales of

which are expected to rise by 500% in

2011), eBook readers (up 133%) and

12 Accenture’s Global Media and Entertainment High Performance Study 2011

smartphones (increasingly saturated,

but still up 26%). At the same time,

the advent of the multipolar world—

where spending power and talent are

distributed more evenly around the

world—is seeing a billion new and

more mobile consumers hungrily

accessing content via ever more devices.

These advances are early signs that a

fully-established “new normal” is now

emerging: a world driven by new

devices and mass technology, where

the agility to adapt to constant change

while delivering personalized content

experiences will be a prerequisite for

sustained high performance in any

segment of Media and Entertainment.

Personalization of the consumer

experience for millions of individuals

requires companies to become more

agile and efficient in serving the new,

mobile, digital consumer and his or

“[The] most important competitive edge for us must

be the creativity of our products. Gathering customer

intelligence as much as possible is another key to

help define a better strategy.” General Manager, Product Operations Centre, gaming company, China

8 IDC, Worldwide and U.S. Consumer 2011 Top 10 Predictions, January 2011, IDC #226734

9 Accenture’s Consumer Electronics Products and Services Usage Report 2011, available at https://microsite.accenture.

com/landing_pages/EHT/Documents/Accenture_GlobalConsumerTech_2011.pdf

All rights reserved © Accenture 2011 13

Figure 9: What is your company’s share of digital revenue today, and what proportion of your revenue do you expect to achieve from digital

income two years from now?

her social network. This intensifies the

need for a new digital operating model

based on an end-to-end digital value

chain, to enable completely new busi-

ness and monetization models with the

required level of integration between

content, applications, services, devices,

and connecting channels.

However, while the dynamics of this

new world are increasingly apparent,

and while there is no doubt the

momentum behind digitization is

both unstoppable and growing, the

industry’s complete migration to this

new world will take time. As Figure 9

shows, only 22% of companies say

that they currently get more than a

quarter of their revenues from digital

sources. Even in two years’ time, less

than half expect to be in this position.

Not a transition—but a new business model

The implications are clear. As digital

revenues gain momentum over a

period of several years, they will

account for a progressively rising

proportion of companies’ revenues. But

in the meantime, “classic media” will

live on, while the new normal—the

reality of ubiquitous, always-connected

“broadband media”—establishes itself.

This means that what companies are

facing is not simply a transition from

analog to digital, but an imperative

for a new business model.

Until recently, the industry’s concerns

over the difficulty of monetizing digital

content were often summed up as

switching “analog dollars for digital

pennies”, a phrase originally coined—

and later updated—by NBC CEO Jeff

Zucker. Given the fact that “classic”

and “broadband media” will co-exist

<10%

Today

10–25% 26–50%

51–70%

>70%

47% 31% 11% 8%3%

22%

<10%

Two Years From Now

10–25% 26–50% 51–70% >70%

17% 36% 28% 6% 13%

47%

for the foreseeable future, it is now

increasingly clear that this concern

is a distraction. So companies need

to press ahead with an operating

model equipped to serve both classic

media consumption and personalized

broadband consumption at high levels

of efficiency.

This model will require new ways to

achieve economies of scale, as “media”

increasingly equates to “technology”,

and “mass media” comes to equal

“mass technology”. The move to

personalized services does not mean

Media and Entertainment will stop

being a mass-driven industry. Instead,

the reorientation around the audience

of one actually involves a shift “from

mass media to mass technology,”

with the source of economies of scale

moving to technology platforms—

rapidly adopting new themes such as

mobility, cloud or analytics to manage

the costs and impacts of fragmentation

and increased operational complexity.

14 Accenture’s Global Media and Entertainment High Performance Study 2011

Towards a high performance digital operating model

To do this, the high performance Media

and Entertainment business of the

future will remove embedded barriers,

enabling it to do more with less, and

to redefine itself as a leaner, more

agile and more innovative organiza-

tion, ready and equipped to exploit

digital opportunities in an integrated

way across channels. To build such an

operating model, companies need to

challenge the basis for the existing

channel-focused silos within their

business. Legacy structures based

around separate content delivery

channels can hinder key capabilities

for the digital world such as digital

customer centricity, cross-channel

content monetization, and integrated

rights acquisition and management.

Companies are already under pressure

to define clearly how they will trans-

form themselves to harness digital

opportunities. The capital markets are

reducing the future growth premium

allocated to those Media and

Entertainment companies that are

failing to set out a compelling vision

for their own digital transformation.

Successful execution of digital strate-

gies in Media and Entertainment—

and winning over skeptical investors

to believe in those strategies—requires

companies to adopt a new and

different performance anatomy.

Not piecemeal—but holistic

Some Media and Entertainment com-

panies are trying to implement their

digital strategies though a series of

point solutions aimed at specific

operational issues—such as repurposing

selected pieces of print content for

Internet and mobile formats. It is

increasingly clear that this type of

piecemeal approach will not deliver

sustainable high performance in the

long term. Confidence in the viability

of the current operating model does

nothing to ensure its sustainability.

Instead, what is required is a combina-

tion of an holistic approach to set the

context for all actions, with mastery

over effective execution of overall

strategy to sustain momentum and

competitive advantage over time.

So, what factors will shape the design

of the new, sustainable high perfor-

mance operating model? We will now

examine the drivers behind the model—

and go on to show what it will

look like.

“Constant innovation and digital distribution will be

most essential.” Executive Director News, broadcasting company, Malaysia

All rights reserved © Accenture 2011 15

The drivers behind a new high performance Media and Entertainment operating model

To cross the frontier from early-stage industry responses

to more sustainable and profitable business operations

in the digital ecosystem, M&E companies need to

consider creating an operating model specifically

designed and oriented to achieve two things. First, it

must maximize the key “broadband media” revenue

drivers in the digital era efficiently and effectively.

Simultaneously, it must also support traditional

“classic media” for as long as necessary.

16 Accenture’s Global Media and Entertainment High Performance Study 2011

All rights reserved © Accenture 2011 17

As Figure 10 illustrates, we believe that

these imperatives can only be achieved

by an agile enterprise that successfully

harnesses three drivers, which we

have termed the “3D’s”: the Digital

Consumer; Digital Monetization;

and—underpinning them both—

the Digital Supply Chain.

Figure 10: The agile enterprise and 3D drivers

1The Digital Consumer Transformational change in consumers’

behavior and expectations around con-

tent consumption have been gathering

pace for several years. Consumers expect

to choose and consume the content they

want in the way they want, wherever

and whenever they want. As a result,

each individual is no longer an aggrega-

tion of a separate reader, viewer and

listener, but a single entity choosing and

consuming content experiences across

multiple platforms.

In expressing this individuality through

their behavior, digital consumers exhibit

a number of shared characteristics—

which together add up to the “DNA”

of the digital customer. These include

amplified social engagement and inter-

activity, multichannel and multiplatform

usage (including rising mobility), and

demand for real-time interaction and

information.

Consumers are also super-global

and hyper-local in their content

consumption habits—both hungry for

world news and global applications,

and also strongly focused on their local

environment. Yet, despite these shared

characteristics, every digital consumer

remains a unique individual with unique

DNA, creating a far more diverse and

varied consumer landscape than in

the past.

An early stage of the customer-centric journey

The companies interviewed in our study

are fully aware of the need to deliver

the new personalized digital experienc-

es that consumers want—but most are

some way from building the integrated

view of the digital customer needed to

execute this objective. Over half of our

respondents (52%) say the transition

from “mass audiences” to “individual

Digital Consumer

Agile Enterprise

Digital Supply Chain

Digital Monetization

18 Accenture’s Global Media and Entertainment High Performance Study 2011

customers” remains a challenge for

their businesses. And, as Figure 11

shows, only 9% of executives feel their

company has a fully integrated view of

their digital customer—with the vast

majority believing there is room for

improvement in the integration and

consistency of the view of digital

customers across the business.

Asked to name the most complex

issues their business faces in managing

to shift from “mass audiences” to

“individual consumers”, executives cite

a wide range of concerns. Culture and

skills are seen as the most difficult

issue (cited by 22%), closely followed

by operational (21%), technical (21%),

commercial (18%) and organizational

(16%) barriers. The fact that so many

issues are perceived as presenting

relatively equal challenges underlines

the need for a new operating model

to tackle all of them holistically.

Seeking immersive experiences

These findings indicate a pressing

need to improve customer centricity

and understanding to keep up with

changing consumption behaviors. In

particular, the combination of social

networking and mobility—enabled by

better broadband connectivity and

lower cost/higher performance

devices—is fundamentally transforming

the landscape of the consumer experi-

ence. Crucially, consumers no longer

see communications technology as a

tool for one-to-one transactional

conversations with a specific purpose.

Instead they want to immerse them-

selves in an ecosystem of content,

applications and services with a myriad

of uses—including networking, making

friends, gaming, buying goods, and

accessing information and home

entertainment such as video and

music.

For the first time, the digitally-enabled

Media and Entertainment industry

has the capabilities and technologies

required to fulfill these needs, support-

ed by consumers’ own readiness to

buy the devices that make it possible.

Global smartphone shipments are

expected to overtake desktop and

notebook PCs combined in 2012.10 And

between 2000 and 2008, the average

consumer increased his or her spending

on electronics devices by 7 percent a

year—while companies reduced their

IT hardware spending per employee

by 3 percent.11 This increase reflects

consumers’ ongoing appetite for new

consumption experiences, as illustrated

by surging take-up of tablets, eBook

readers and smartphones worldwide.

Figure 11: To what extent do you believe your company has an integrated view of your digital customer?

“[It’s about] innovative customer relationship management. We need to invent something new for our customers, in order to be ahead of the competition.”

Chairman, film company, Germany

Increasing Integrated View

Insufficientfor our needs Fragmented

Consistent but by businessunit only

Somewhat integrated

Fullyintegrated

8% 31% 14% 38% 9%

10 Morgan Stanley: Ten Questions Internet Execs Should Ask & Answer — November 16, 2010 — Web 2.0 Summit,

San Francisco, CA

11 Accenture Institute for High Performance: Can Enterprise IT Survive the Meteor of Consumer Technology? By Robin

Murdoch, Jeanne G. Harris and Glenn Devore, September 2010. Drawn from: Employment Status of the Civilian Non-

Institutional Population, 1940 to date, 2009 edition, Bureau of Labor Statistics, US Department of Labor; Historical

Sales Data Details, Consumer Electronics Association, 2010; and Worldwide IT Spending Historical Databook, IDC, 2010.

All rights reserved © Accenture 2011 19

2Digital Monetization

Asked to identify their most important

sources of revenue growth in the next

12 to 24 months, our respondents

point to new platforms or distribution

channels, followed by new products

and services (see Figure 12). These

sources will form the core focus of

the new sustainable operating model’s

digital monetization strategy.

However, while this focus may be com-

mon across companies, it is important

to stress that there is no single right

answer to business and monetization

models. As Figure 13 shows, M&E

companies in the future will operate a

combination of several monetization

models and revenue streams—“a port-

folio of revenue models”. These will

often include the classic ones, but

the new models will need to be more

than just a re-platforming of existing

models. This diverse blend of concur-

rent revenue streams will add further

complexity to their operations, by

cutting across the traditional focus on

channels.

Figure 12: In terms of opportunities, what is the most important source of revenue growth for your company in the next 12 to 24 months?

Figure 13: Which of the following are the most prevalent business models for your business today, and which will be the emerging ones in

the next two years? (Ranked and top 3 selected)

Maximizing returns on content investment

The ultimate imperative is to maximize

the return on investment in content

and operations—a need made all the

more urgent by the high and often

rising costs of content creation and

acquisition. Key attributes for achieving

this include a strong, focused and

integrated capability in content rights

management, and the ability to target

and repurpose this content in differing

ways and contexts to deliver a compel-

ling experience across platforms. The

complexity is further increased by the

evolution of the concept of content

itself to encompass a combination of

applications, services and content.

New Platforms or Distribution Channels65%

1st Choice 2nd Choice

New Productsand Services42%

New MonetizationModels34%

New Content27%

New Geographies21%

New ConsumerSegments8%

Other5%

49% 17%16% 25% 25%9% 10% 17% 7% 14% 4 4 5%

46%42%

Ad Supported Subscription On Demand Merchandising/

Physical Sales

Licensing Freemium Affiliate Other Brokerage

16%

21%

15% 14%

7% 6% 6%5% 5%4% 4%3% 2% 2% 1% 1%

Today

Nex

t 2 Y

ears

ApproachTraditional Digital Multimedia

None and not planning to launch in next 12 months 20–50% digital/multimedia

with no plans to increase

in next 12 monthsNone but planning to launch in next 12 months

<20% digital/multimedia with no plans

to increase in next 12 months

<20% digital/multimedia with plans

to increase in next 12 months

20–50% digital/multimedia with plans

to increase in next 12 months >50% digital/multimedia

2 4% 9% 34% 30% 17%4%

20 Accenture’s Global Media and Entertainment High Performance Study 2011

Again, most companies have some

way to go to achieve the required

capabilities. Take integrated rights

management, which is a critical

enabler for effective monetization of

digital content. As Figure 14 shows,

only 7% of the companies in our

research think an integrated view of

rights management is not a strategic

imperative. But most of the remaining

93% are still in the early stages of a

deep transformation journey to achieve

this: only 23% of companies say they

already have an integrated view of

rights management across business

units, while 70% acknowledge

that what they do have requires

improvement.

For those companies that get this

right, the prize on offer is increasingly

clear. The advent of the smartphone

and tablet-enabled world means

“paying” for content experiences is no

longer a dirty word. For example,

mobile app revenues are expected to

reach a global total of US$12.3 billion

in 2011, up by 149% on 2010. More

generally, consumers’ hunger for

content experiences is turning the

consumer marketplace into a

“demand-pull” environment (see

information panel), with offerings and

charging models advancing apace:

witness the New York Times’ recent

launch of a paywall for its website,

allowing users to view a maximum of

up to 20 items for free per month, but

charging for more extensive online,

smartphone and iPad content access.

Optimizing advertising models

While content charging models are

increasing, advertising remains key—

with some 46% of respondents believ-

ing that this will continue to be their

most prevalent revenue model. While

advertisers in the digital world need

to be sold to more proactively (see

information panel), analysis by Morgan

Stanley suggests that media time spent

on the Internet is still undervalued

in terms of ad spend, creating a

US$50 billion global opportunity.12

However, harnessing this opportunity

will require companies to understand

and leverage the implications of new

digital advertising models—and the

related performance marketing logics

and techniques that underpin them.

Our findings underline once again that

most companies have a long way to go

to implement the required capabilities.

Taking multimedia advertising as an

example, Figure 15 shows that less

than one in five of our respondents

(17%) say their business now gains

more than 50% of its advertising reve-

nues from digital/multimedia sources.

Almost half of the interviewees say

digital accounts for less than 20% of

their advertising business. However,

companies are keenly aware of the

need for progress, voicing a strong

commitment to increasing the

proportion of their ad revenues

derived from digital.

Figure 14: To what extent do you believe that your company has an integrated view of the Rights Management processes and capabilities

serving all your Business Units?

Figure 15: In your organization, how far advanced is your transition from traditional advertising to digital or multimedia (bundle of off-line

and on-line) advertising?

Not a

strategic

imperativeStrong and established

Rights management processes and capabilities

in place but requiring improvement

No fully consistent model but moving

in the right direction

23% 41% 29% 7%

Publishing 9%Entertainment 24%Portals 16% Broadcasting 34%

12 Morgan Stanley: Ten Questions Internet Execs Should Ask & Answer — November 16, 2010 — Web 2.0 Summit,

San Francisco, CA

All rights reserved © Accenture 2011 21

3The Digital Supply ChainIn the years to come, even the most

traditionally-minded Media and

Entertainment business will have no

choice but to operate via Internet and

mobile as well as physical channels —

and high performers will operate via

a far wider range of platforms.

As a result, every participant in the

industry has an absolute need for an

efficient, integrated and rigorously

managed end-to-end supply chain for

acquiring, managing, repurposing and

delivering personalized digital content

experiences to consumers across

multiple platforms.

Crucially, changing industry and

consumer dynamics mean these

supply chains can no longer operate in

isolation. Our research shows that 70%

of companies believe the digitalization

of the supply chain is significantly

impacting the way they operate—both

internally and with business partners

and collaborators. Given this rising

degree of integration with third

parties, it is very difficult for any single

organization to fulfill the entire need

for specialized capabilities all along the

value chain.

New integrated ecosystems

This imperative means that entire

collaborative value chains and ecosys-

tems will emerge in and across all

segments of M&E. As Figure 16 shows,

most companies are planning to

step up their collaboration with

competitors, driven by a range of

potential benefits including the ability

to achieve economies of scale, leverage

skills more effectively, and compete

against new players. In essence,

fragmentation of markets and demand

is transforming the economies of

scale required to remain profitable and

competitive—creating a need for new

alliances, capabilities, skills and talent.

Consumers and advertisers swap rolesIn the digital world, the traditional

commercial dynamics of consumers

and advertisers have been reversed,

intensifying the need for new

monetization models.

In the analog world, customers

had to be won over to agree to

participate in content experiences

(whether sold or provided free), and

advertisers would readily pay to be

a part of those experiences. But in

the digital world, consumers are

hungry for content experiences,

and have become demand-pull

participants and buyers.

In contrast, advertisers now

demand much greater accountabil-

ity and measurability of outcomes

than in the analog world. As a

result, advertisers are much harder

to win over, and advertising

opportunities need to be sold to

them proactively through an

advertiser-centric approach.

Figure 16: Is collaborating with competitors something you might do, or might do more of, in the next 12 to 24 months?

“For me I feel it has got to be mobile and tablet.

Monetization is key, it is about charging for something

that used to be free.” Sales Operations Director, broadcasting company, US

Publishing 77%Entertainment 48%Portals 65% Broadcasting 64%

Percent that collaborate

Why collaborate?

For all the reasons displayed here To achieve economy of scale To leverage skills

To compete against

new players

Other

37% 30% 17% 15% 1

22 Accenture’s Global Media and Entertainment High Performance Study 2011

As the momentum behind collaboration

grows, new alliances are now emerging

almost every week: recent initiatives

include the "broad strategic partner-

ship" announced between Nokia and

Microsoft; Warner Bros.’ decision to

stream The Dark Knight on Facebook;

and retailer JC Penney’s use of

Facebook as an online sales platform.

Seizing the mobile revenue opportunity…

As new collaborative digital supply

chains emerge, they share a number

of critical success factors. Access to

content is clearly vital, together with

linkage on one side with customer

interactivity, and on the other side

with the understanding, control and

ownership of the customer as a unique

individual consuming content across

different channels and devices.

This requirement is growing with the

escalating penetration of new devices.

As Figure 17 shows, the rapid rise of

smartphones means executives believe

that mobile devices will be their

customers’ preferred platform for

digital content consumption in the

next two years. TV is also expected to

maintain strong relevance thanks to

the spread of Connected TV. Tablets—

still in their early stages of adoption—

will have less relevance in the short

term across M&E as a whole. But

drilling down into the segmental

responses, we find that publishing

companies believe tablets will be their

consumers’ favorite consumption

device within the next 12 to 24

months, cited by 36% of publishing

respondents.

Furthermore, as Figure 18 shows,

mobile is regarded as the digital supply

chain distribution channel with the

greatest potential to drive growth,

again followed by TV. As these findings

show, while mobile is undoubtedly the

main driving force, TV/connected TV

are resilient and will remain relevant,

and tablets are a promise not yet at

scale (except in publishing). The

technology platform suffering the

most is the PC.

Figure 17: Please rank the content consumption “device” you believe your customer will prefer in the next 12 to 24 months.

“The [key will be the] ability to reach our audience

unimpeded by other people's gateways. We want to

ensure that there are no barriers to a unified content

approach.” Managing Editor, TV Platforms, broadcasting company, UK

Mobile/smartphone

35%

TV/connected TV

32%

PC

19%

Tablet/netbook

13%

All rights reserved © Accenture 2011 23

…by managing additional multiplatform complexity

As the dynamics of the multiplatform

environment continue to evolve, the

ability to deliver content experience to

consumers across multiple platforms

remains key. This brings additional

complexities for the content supply

chain, which is critical for creating the

end-to-end visibility on revenue and

costs needed to gauge profitability.

This visibility is needed across all

platforms, and throughout all stages

of the supply chain, including creating

content, buying rights, and reformat-

ting it for different platforms.

When we asked our respondents to

name the most important supply chain

capability for success in a multiplat-

form environment, interoperability

across platforms and devices came top,

narrowly ahead of customized content

for each platform in second place.

Achieving these two conflicting

objectives in a profitable and sustain-

able way demands a trade-off that

further increases the complexity of

multiplatform delivery models. It

also demands multiple new skill sets,

boosting the need for collaboration

and lending greater urgency to the

search for economies of scale.

Figure 19: Which of the above do you believe are the most important supply chain capabilities required to succeed in a multiplatform context?

Figure 18: Which of the above distribution channels offer the highest growth opportunities for your company over the next three years?

Mobile/Wireless54%

1stChoice

2ndChoice

3rdChoice 1%

2%

Traditional TV41%

Online:Social Media37%

Online:Streaming35%

Video over IP,IPTV, OTTV33%

Online:eCommerce29%

Online:Portals22%

Online:Search16%

Print16%

Bricks &MortarRetail10%

Radio8%

2%

2%

25% 23% 6 8% 8% 9% 9% 9%3 3 4410%11% 11% 12% 11%510% 16% 16%14% 13%17% 12% 6 66 5

Interoperability across platforms and devices

36% 32% 17% 13%

Customized content for each platform

Control of

end-user access

Industry standards

and regulations

Other

1%

24 Accenture’s Global Media and Entertainment High Performance Study 2011

The new high performance Media and Entertainment operating model: shifting the polarities from vertical to horizontal

“Innovation really is key, all across the business sectors:

services, marketing, strategies, distribution, channels,

action models. Innovation is essential for success.” Head of Strategic Marketing, broadcasting company, Italy

All rights reserved © Accenture 2011 25

The three drivers we have described—

the digital consumer, digital monetiza-

tion and digital supply chain—require

Media and Entertainment companies to

adopt an entirely new operating model

to enable and sustain high performance

in the industry. The new model will

need to re-think the traditional vertical

orientation around channels, and shift

the polarities to a horizontal focus on

key capabilities in the digital value

chain serving multiple channels.

We have applied our insights into

industry dynamics, operating models

and technology to design a model that

meets these requirements. We have

called it the “3D Operating Model,“ and

its key elements are illustrated above.

In our view, adopting such a model will

become a prerequisite for industry high

performance in the coming years.

Media and Entertainment companies’

traditional vertical focus on delivery

channels and platforms hinders the free

flow of digital content through and

across the organization, and hampers

the optimization of revenues and profits

though multichannel exploitation. In

our view, the shift from vertical silos

to horizontal layers represents the best

option for enabling and empowering

new revenue models without complete

organizational re-platforming, while

still leveraging the best of the tradi-

tional channels.

In the horizontally integrated 3D

Operating Model, each layer plays a

specific role in the digital value chain,

and represents a critical capability and

key value driver in achieving multi-

channel digital consumer-centricity.

While the exact make-up and

requirements for each capability will

vary depending on company-specific

factors—such as the target consumers,

legacy product range, and the nature

and latency of the content moving

through the digital value chain—there

are principles that will help shape

each layer.

Pervasive benefits—supporting strategic execution…

The 3D Operating Model will enable

improved governance over the organi-

zation’s key capabilities and value

drivers—by exposing them more clearly

in the operational layers—and support

a greater focus on innovation in each

layer. It will also provide added flexibili-

ty in seeking out potential economies

of scale and alliances for each distinct

layer, and not necessarily across all of

them at the same time, thus reducing

execution time and complexity.

In fact, if implemented and integrated

effectively, this model has the potential

to increase overall effectiveness and

agility, supported by greater simplifica-

tion and standardization throughout

the business. This in turn will enhance

scale synergies, boost operational

efficiency, and enable smarter and

more joined-up resource allocation

and sharing of assets and knowledge.

Also, by becoming a distinct center of

expertise in its specific capability, each

of the layers will be able to highlight

Figure 20: The High Performance "3D Operating Model" for the Media & Entertainment company of the future

Consumer

Delivery

Channel 1

Consumer

Delivery

Channel 2

Digital

Consumer

Digital

Monetization

Agile

Enterprise

3Ds

Digital

Supply Chain

Consumer

Delivery

Channel 3

Consumer

Delivery

Channel 4

Business Model and Brand Management

Marketing and Customer Interaction

Advertising and Sales

Devices

Platforms

Channels

Content Planning, Production and Control

Content Distribution

Rights Management

Enterprise Management

Inte

rnati

onaliza

tion

Innova

tion

Consumer

26 Accenture’s Global Media and Entertainment High Performance Study 2011

challenges and opportunities in skills

development and exploitation, both

within its own focus area and shared

across the organization.

…to achieve agility…

In turn, this combination of improved

strategic governance and flexibility with

operational efficiency and effectiveness

improves the company’s ability to adapt

quickly and accurately to changes

in the value chain, the competitive

environment, consumer demands or

the company’s positioning. Given the

industry’s expectation of continued and

accelerated change, this agility will be

vital in executing digital strategies

quickly and effectively within a shifting

and evolving digital ecosystem.

…and High Performance

As the 3D Operating Model illustrates,

two overarching capabilities are

also needed to achieve superior

execution and high performance:

firstly continuous innovation, and

secondly internationalization.

1| Continuous innovation

As the transformation to digital gathers

pace, nobody can afford to stand still or

rest on their laurels. So innovation must

become a “managed business process”

in the same way as order processing or

accounts payable. The 3D Operating

Model helps to support and drive inno-

vation because it is designed from first

principles to be agile and continually

results-oriented. Each layer supports

and focuses on innovation that can be

leveraged across the entire company

and throughout the ecosystem.

The horizontal structure means the

model also supports double-sided

innovation—focused on product and

services on one side, and on cost and

efficiency of operations on the other

one. The two are closely linked: ongoing

innovation to reduce operational costs is

vital to support organizational agility

and free up funds for investment in

content and services. Cost innovation

is likely to include outsourcing of

non-core activities to enable a sharper

focus on branding, content services and

consumer experiences.

2 | Internationalization

Digital content distribution enables

global reach and revenues at marginal

incremental costs—so internationaliza-

tion is a route to increased cashflow

and margins. This may involve local

revenue-sharing partnerships, leveraging

the strength of established local brands

and distribution.

As such partnerships underline,

internationalization does not imply

losing local connections. People—

consumers—are local, and emotions

are localized. While exploiting mass

technology enables and requires scale,

the benefits can be leveraged at the

local level. Again, the 3D Operating

Model provides added agility and

competitive advantage by enabling

each layer to be internationalized

independently from the others, thus

enhancing and speeding the execution

of alliances and in-fill acquisitions.

All rights reserved © Accenture 2011 27

|

28 Accenture’s Global Media and Entertainment High Performance Study 2011

Some key strategic and operational questions

In Accenture’s view, the 3D Operating Model—

planned, designed and implemented from an holistic

perspective—represents the appropriate approach for

pragmatic and successful execution of strategy in M&E.

It is inspired by the concept of harnessing the maximum

driving force from the key industry drivers (the “3Ds”),

and aligning and integrating the fundamental

performance capabilities.

All rights reserved © Accenture 2011 29

Figure 21: In the next 12 months, which of the above capabilities do you consider a priority to enable your company to compete successfully

in the digital world?

In this way, the 3D Operating Model

enables concurrent operation of

“classic” and “broadband media”,

thereby reaping the optimal benefits

in terms of future revenues, sustain-

able business models, and increased

innovation and execution agility.

When asked, our respondents confirm

that while there is a clear vision of

which capabilities they need to evolve

to compete successfully in the new

digital world—an innovative business

model, multiplatform distribution, and

efficient content planning, production

and control, to name but a few (see

Figure 21)—there is also awareness

that all of these are required to com-

pete effectively in the new ecosystem.

In Accenture’s view, the 3D Operating

Model that we have outlined will

characterize Media and Entertainment

high performers in the years to come.

But the journey toward this model

raises many strategic and operational

uncertainties and challenges. Here

are some key questions for M&E

executives to consider:

Which capabilities will be most

critical for acquiring a rising share of

revenues in the multiplatform world?

To what extent is your organization

evolving to reflect the huge transfor-

mations that are taking place in the

marketing, advertising and rights

management areas, just to mention

a few?

How is your company preparing

itself operationally and financially

to manage continuous innovation

in products and services?

How will your company reduce

operating costs while improving

decision-making and boosting speed

of response to achieve increased

agility?

Do you believe we are moving

towards a future dominated by

global M&E conglomerates, or will

niche/local players still have a role?

Where will your business fit in?

Call to ActionOur research and industry experience

both indicate clearly that high

performing Media and Entertainment

companies will shift from legacy

vertical, channel-oriented structures

toward the type of horizontally-

layered operating model we have

described in this study.

However, it is equally clear that the

precise implications and challenges

of executing such a model will

vary between different segments

of the industry; between different

geographies, due to variations

in local behaviors, legislation and

infrastructures; and even between

different businesses in the same

market segment.

Effective Payment Models

Not a priority 19%Low priority 30%An important priority 27%Top priority 23%

Optimizing Enterprise Management (shared services, cloud)

13%25%42%20%

Dynamic Brand Management

10%25%42%24%

Maximizing Rights Exploitation

17%17%33%33%

Multimedia Advertising

28% 43% 23% 6%

Ownership of the Consumer and Superior Interaction

38% 41% 12% 8%

Digital Performance Marketing

25% 54% 15% 6%

Efficient Content Planning, Production and Control

45% 39% 10% 5%

Mastering Multiplatform Digital Distribution

52% 35% 8% 5%

Innovative Business Model

48% 42% 9% 2

32 | 2010 Mobile World Congress Next Page

Copyright © 2011 Accenture

All rights reserved.

Accenture, its logo, and

High Performance Delivered

are trademarks of Accenture.

This document is an informed point

of view based on research, opinion

and experience, and should not be

considered as professional advice

with respect to your business.

About AccentureAccenture is a global management

consulting, technology services and

outsourcing company, with more

than 215,000 people serving clients in

more than 120 countries. Combining

unparalleled experience, comprehen-

sive capabilities across all industries

and business functions, and extensive

research on the world’s most success-

ful companies, Accenture collaborates

with clients to help them become

high-performance businesses and

governments. The company generated

net revenues of US$21.6 billion for

the fiscal year ended Aug. 31, 2010.

Its home page is www.accenture.com.

About the Media & Entertainment GroupAchieving excellence in engaging and

interacting with consumers is the

content industry's new battleground.

While Media and Entertainment

companies have made significant steps

to reinvent themselves from a technical

perspective, they are facing new

challenges around their operating

models. Our M&E practice helps clients

determine the right digital business

model and optimize future revenue

growth through a multiplatform

approach. Its home page is

www.accenture.com/mediaandenter-

tainment.

For more information on this study

and what Accenture can do to help

you reach high performance in your

business, please contact the authors

and contributors:

Marco Vernocchi Global Managing Director

Accenture Media & Entertainment

Robert E. Sell Managing Director

Accenture Communications & High Tech

North America

Alwin Magimay Managing Director

Accenture Media & Entertainment

APAC

Carlo Iacoboni Senior Manager

Accenture Media & Entertainment