NEW YORK – A new report from consulting monolith Deloitte & Touche says the business model of existing traditional broadcast TV networks is now obsolete and if drastic changes aren’t made – and soon – they will die.
“The global broadcast television industry is undergoing fundamental, unstoppable change that is rendering the network model obsolete, says the report by Deloitte’s Technology, Media & Telecommunications (TMT) industry group.
Called “Television Networks in the 21st Century: Critical mass in a fragmenting world,” it argues that the model of a few dominant network channels – funded by advertising – has long been disappearing and may soon be gone for good.
However, these changes also create new opportunities – for networks that can evolve into a multi-dimensional, highly adaptable, customer-focused model. They also are expected to result in a variety of innovative products and services for consumers.
"Today’s consumers are seeking content across an expanding array of transmission media, channels, interactive platforms and devices," said Tony Kern, deputy managing principal for the U.S. TMT group.
"As a result, consumers – and their pocketbooks – will be increasingly spread across a wider range of options. Audiences will splinter into many smaller pieces, even in countries that have undergone fragmentation for years. Networks will no longer attract mass audiences, and therefore they won’t be able to charge premiums to advertisers. Their legacy business model will no longer be viable.
"However, there is also good news," added Kern. "Demand for content is exploding in all forms of media and this creates significant opportunities. Cable subscription revenue has tripled since 1997, and DVD revenues have skyrocketed by a factor of 15. New mediums – such as Internet Protocol Television (IPTV) – have the potential to drive revenues even higher."
The report predicts that successful television networks will adapt to this new world by minimizing the fragmentation of their audiences and generating income from entirely new activities. They will:
* Offer content and programming across a variety of media channels and formats
* Re-package and market content – not just as products but also services
* Significantly extend the content’s lifespan, by offering more digital content that can be quickly and easily packaged, and sold or rented across a wide range of media – including physical packages such as DVD, VHS and memory cards and electronic downloads via wired and wireless networks.
Some of the future products and services that may be available to consumers include:
* On-demand content: A warehouse of audio and video content for a wide range of uses, such as webcasts, radio airplay, mobile phone downloads, and video on demand.
* Interactivity: Participation, voting, purchasing, news and information, on-line games, questions and comment submission, and web-based chat.
* Events: Tie-in events such as the concerts based around the Pop Idol and American Idol series.
In testing, the BBC found that offering digital content on demand for seven days after the initial broadcast of a show increased audience size by 50%.
"These new products and services will enhance the television networks’ relationships with consumers, while at the same time providing a reliable stream of subscription revenue and repeat business." added Kern.
“Some companies have begun to move down this path. For others, it is a journey that needs to commence immediately.”
