1. WHAT HAS CHANGED FROM LAST YEAR ?
What has changed from last year ?
megatrends
Are the megatrends detected last year still applicable for our cur-
rent environment? We believe the majority of them are still valid
with some of them probably reducing a bit the level of severity and
relevance. In order to simplify this report and keep it as “to the point” as possible we will only discuss changes
on those megatrends that have (or might have) a higher impact to our industry. These megatrends are:
REDEFINITION AND CREATION OF BUSINESS MODELS
A year ago we concluded that business models, especially those ones trying to incorporate the digital world
into them, were still under development. Companies (i.e. publishers) were not sure on why/how/when they
should jump and embrace digital as part of their solutions. This year we are at the inflection point already in
which companies have a better understanding on what to do and how to do it. The same companies that a year
ago were afraid to accept the fast development of digital media are now pioneering revenue models in which
digital media plays a very active (and strategic) role.
70% traditional media Companies more and more are embracing new media.
70% traditional media
10% experimental new media Companies more and more are embracing new media.
Some of the findings are:
10% experimental new media Some of the findings are:
f Out of the total marketing budgets around 70% of the
f Out of the total marketing traditional media.
budgets are dedicated to budgets around 70% of the
budgets are dedicated to traditional media. role
Within this segment print plays a significant
f Within this segment print plays a significant role to
The next 20% of marketing budgets are dedicated
f The next 20% of marketing budgets are dedicated to
proven new media. (i.e. traditional internet advertising)
proven new media. (i.e. traditional internet advertising)
Companies already recognize them as successful
Companies already recognize them asexpertise quickly
marketing channels and need to gain successful
f marketing channels and need to gain expertise quickly
The remaining 10% of the budgets are dedicated
f The remaining 10% ofnew budgets are dedicated we
to explore innovative the media channels. In here
to explore innovative new media channels. In here we
find all those channels that have failed to prove the
20% proven new media find all those channelsfar, but have a big potential due
ROI to companies so that have failed to prove the
20% proven new media ROI to popularity and innovation theybig potential due
to the companies so far, but have a bring.
to the popularity and innovation they bring.
NETWORKED SERVICE ECONOMY
Networked service economy
This megatrend refers to the search companies are doing to find different
This megatrendarefers to the search companies are doingthatfind different
ways to serve customer with products and/or services to are comple-
ways to serve aones they are already providing. The driver that are this trend
mentary to the customer with products and/or services behind comple-
mentary to the ones they are already providing. The driver behind this trend
is the need to capture a higher proportion of the value within the industry.
is the need to capture a higher proportion of the value within the industry.
Reality is that due to the outlook of decreasing margins and tough demand
Reality is that duethe the outlook ofterm future, companies need to demand
expectations for to near and mid decreasing margins and tough find how
expectationsthings out. At the end paper is acompanies need to find how
to balance for the near and mid term future, commodity and companies
to balance and less attributesend differentiate commodity and companies
have less things out. At the to paper is a themselves, and additional
have less and services gives companies the themselves, to do this.
value added less attributes to differentiate opportunity and additional val-
ue added services gives companies the opportunity to do this.
Four different criteria have been found key in the process of selecting products, on that order:
Four different criteria have been found key in the process of selecting products, on that order:
1 2 When customers can´t find a differentiation in functionality between two products, they
Functionallity Reliability When customers can´t find a differentiation in functionality betweenreliable then custom-
look at which company is more reliable. If all companies are equally two products, they
1 2
Functionallity Reliability lookwillwhichfor convenience. Ifreliable. If all doesn´t addare equally reliable on top of their
ers at look company is more a company companies any convenience then custom-
ers will look for convenience.will turn to pricing to make any conveniencecustomers their
competitors then customers If a company doesn´t add a choice. When on top of force
3 4 competitorsto go customerslast criteria is when to make are reduced, and is this stage the
companies then on to this will turn to pricing margins a choice. When customers force
Price Convenience companies to go on to this last criteria is when margins are reduced, and is this stage the
3 4 one companies need to avoid.
Price Convenience one companies need to avoid.
Networked service economies are better in finding and adding additional functionality to
Networked service economies are better in finding and adding additional functionality to
the product or service a company offers making them more likely to avoid pricing as a differentiator.
the product or service a company offers making them more likely to avoid pricing as a differentiator.
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2. Digitization trends
Although no significant change has emerged from a year ago in terms of the direc-
tion digitization and hardware development are taking, it is important to discuss the
changes on the speed of such developments and on the speed at which our industry is embracing such
changes and innovations.
The main elements on digitization trends have to do with:
1. e-Readers and tablet computers:
The impact e-Readers and tablet computers are having on our industry is not just related to the completely
different ways users are interacting with content, but also in the way and easiness to access that content. E-
Readers and tablets technology made the transfer of content extremely easy, making it appealing for users
to adopt it faster than expected. In addition to this, this easiness to share content (similar to what happened
in the music industry) had a deep impact on the revenue models of publishers. Long tail writers that had a
harder time convincing publishing houses can nowadays skip a lot of intermediaries and are able to publish
without too many issues. At the end smaller authors can publish whatever they want, well known authors
cannot charge as much as they charged before for their work… in other words, the playfield is leveling up.
A similar phenomenon can be seen with tablet computers. These devices changed the way people consume content
making it more personal… Content is more intimate, since it must literally be touched in order to be consumed
2. Free technology and content
Somewhat related to the previous trend and to the fact that new devices are making the access
of information extremely easy, this is also triggering the exchange and accessibility of tons of
free content. Free content can be legal but also refers to all content being exchanged illegally.
Piracy is having a big impact not only on revenue loss for the different industries affected by it,
but is also causing delay on the surge of legitimate business models. Research done by PPA
reveals that on average every time a digital edition of a magazine is legally paid for or accessed, there are a
further 44 copies of pirated magazines being illegally downloaded. (To read the full article go to PPA website
www.ppa.co.uk)
3. Personalization
Digitization is playing an important role on how personalized
content and communications are getting done nowadays.
Digitization is happening not only on professional circles but
also on personal circles as well. The merge of personal with
professional is opening the door to so many possibilities to
personalize what you see and read on digital media chan-
nels. On the other hand companies are now realizing that in
order to have personalized approaches on their sales and
marketing approaches they need an enormous amount of
data and resources; resources that some companies don´t
have. Therefore personalization is still an initiative that hasn´t
been widely adopted as normal practice yet despite the clear
benefits of using it.
Mobility
Mobility is becoming more and more important for our societies. Since the start of laptops some time ago to
the rise of mp3 players (like iPods), Smartphones, e-readers to the most recent surge of tablet computers, the
amount of activities we do “on the go” is increasing rapidly. Mobility is becoming part of the elements we as
consumers demand from a variety of products and services nowadays.
According to several researches done by CompTIA, mobile device shipments eclipsed PC shipments for the
first time during 2011. Tablet shipments are expected to exceed 100 million units in 2012, up 50 percent year-
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3. over-year. Since 2009, mobile Internet usage has doubled every year. Annual mobile app downloads are pro-
jected to grow more than 10 times from 2010 to 2015 – from 10.7 billion to 183 billion. Eighty-five percent of
executives work remotely at least occasionally; 53 percent work remotely frequently.
Media convergence
Media convergence can be understood as the mix between computing, communications and content. In other
words, and as defined by Henry Jenkins, media convergence is the flow of content across multimedia plat-
forms, the cooperation between multimedia industries, and the migratory behavior of media audiences.
Television and internet are merging together more an more nowadays, through your television set you can do
much more things and consume content on a more interactive manner when compared to a couple of years
ago. On the other side, video streaming is making users utilize computers as a replacement for TV, this es-
pecially driven by the amount of video content available on the Internet and the ability video streaming gives
consumers to decide what and when to see. This trend is not stopping there, now with the emergence of tablet
computers even things like news are being dealt by social media platforms like twitter in a way that does not
quite replace newspapers, but brings additional value to readers.
Media convergence will bring unimaginable opportunities to companies that understand the value and poten-
tial of this development. What we are seeing now is just the tip of the iceberg and with every new technological
development, more opportunities are created for smart companies to exploit. But we are still not there yet.
Even consumers are expressing some level of resistance to convergence. A clear example of this resistance
can be seen in the development of digital magazines. Before we started the end use study this year we had
the impression that digital magazines that were offering much more interactivity through video streaming, au-
dio and interactive content were better positioned to capture the attention of consumers than those that were
basically replicating their printed versions through PDF files digitally. This was actually not the case and con-
sumers are not better served with fancy applications for their mobiles or tablet computers…. Some customers
are happier with a simple PDF version of their favorite publications. Some of the reasons behind this strange
development might be the feeling of having something that has a start and an end.
Information overload
The exposure we have to digital media has increased exponentially since its ori-
gin, especially through social media. This is creating a feeling of overexposure.
There is much more information out there, and our ability to cope with it is being
challenged. It is not strange to hear that people are now taking a step back and
thinking twice on how much time they are spending consuming digital informa-
tion. Some of us are having the feeling of suffering some sort of information
overload.
This information overload has triggered the idea of seeing the evolution of social media as a growing bubble
(like the internet bubble of the late 90´s and early 2000) that has the risk of bursting down. Despite the amazing
growth social medias have had in the past years, this might have come to an inflection point already. Major so-
cial media firms that have gone public are suffering from lack of performance in the eyes of the investors, who
were expecting explosive growth rates that were not reached. Facebook stocks have gone down 26% since it
started trading back in May 2012, Groupon down 66% since their IPO back in November 2011, Pandora also
showing a decline of 43% and Zynga down 69% from their IPO´s in June and December 2011 accordingly.
This brings us consider a hype in the digital media development. We believe people are overestimating the
impact of digital media in the short term. Digital media is growing and growing fast, but the main challenges
our industry is facing right now have little to do with it, but more with the economic situation and intrinsic chal-
lenges of our own particular industry segments. Without a doubt digital media will have a tremendous impact
on our industry, and we might fail to see the degree and severity of the challenge that lies ahead of us.
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