The first two parts of this report suggested that the essential task of the content industries, and particularly film, was to find new ways to engage consumers.
They suggested that changes in consumer demand and developments in technology and social networking both necessitated a change of approach, and created many of the tools that made that change possible.
This series has suggested that there are three related but distinct sides to any strategy for new audience-centred business models: reach, engagement and experience.
In the first two parts, the focus was on reach and engagement, looking at efforts to increase audience numbers and to build new, often interactive, relationships with consumers. Those two issues are, of course, extremely important and will be the centre of much of the work of SampoMedia in the coming years.
The third part of the equation, however, considers how audiences ‘experience’ content. In other words, it moves the question away from how consumers find, use and interact with content and instead asks why.
1. THE EXPERIENCE ECONOMY
Some economists believe that these are now essential questions for 21st century businesses. They believe that the agriculture, industrial and service economies of the past are having to exist alongside a new ‘experience economy.’
Certainly, the emergence of new digital formats and platforms has given rise to new forms of experience that are highly significant for filmed entertainment.
SampoMedia will devote much of its energy to looking at new consumption patterns, including ‘binge watching’, ‘gameification’ and ‘multitasking’. These are new means to access and interact with content, enabled by the Internet, social media and other hardware and software developments.
There is little question that new forms of viewing film and other media are emerging but there remains much missing work on the impact of these trends on production and industrial business models.
The Gothenburg lecture, however, concentrated on the big-screen social experience of film. The cinematic experience is sometimes portrayed as the traditional medium, threatened by an on-demand, anytime-anywhere consumer culture.
And yet exhibition is close to completing a long transition to digital cinema, the significance of which is only just being recognised. The marriage of digital distribution, greater choice, responsive programming, new forms of content and a social space offers exciting opportunities.
Hollywood, which drove the digital switch, is marching on with its own agenda and enjoying more efficient access to global markets. Blockbuster and 3D economics are driving production: in 2001, just seven $100+ films were made but in 2011 it was 24.
Other art forms have also begun to understand the potential, with a strong market growing for ‘event cinema’, particularly live opera, theatre and music. Independent cinema has, with some exceptions, not yet reaped the benefits.
The argument for fresh thinking about the big-screen experience is best made ironically by the success of film outside the usual theatrical circuit. Secret Cinema‘s ability to win huge audiences at premium prices for classic cinema, such as The Third Man (see picture top) and Laurence Of Arabia is amongst the most impressive case studies.
Pop-up cinemas, specialist festivals and films at music festivals have all created experiences which have been able to inspire and excite audiences.
Exhibitors, of course, have been through major changes to the consumer experience before, emerging from the doldrums of the 1980s with upgraded buildings and multiplexes. Cinema, like all forms of entertainment and art, needs to evolve to survive.
A new experience economy, however, may offer new opportunities, not just for exhibition but for producers and film-makers who understand the way that their work could be seen. It will be driven by new technologies, cheaper distribution and through the efficiency of social and mobile networks in gathering a crowd.
Greater attention to the audience experience may secure the growth of a cinema culture, bringing together all parts of the value chain and related investment in education. At the heart of these changes is a different form of informed relationship with consumers.
These are areas where SampoMedia is accumulating considerable data, which we will be sharing at events and through reports over the coming months.
CONCLUSIONS: The emergence of an experience economy, unlike that of on-demand world, promises film an opportunity to embrace change without undermining its core business model. The creation of a cinema culture that benefits all, however, requires the collection and dissemination of knowledge about experience along the value chain.
2. DRILL BITS AND HOLES
Consumer behaviour in the film industry is too often reduced to a game of numbers. The most important measure has been how much a film was able to generate in its opening weekend.
While performance data is important, it also has its limitations.
Box office information, for example, is valuable in terms of future sales in home entertainment and helps distributors and exhibitors develop strategies.
But it is retrospective data, revealing how a particular film did at a particular time, which may have been influenced by a wide variety of factors, from the weather to rival titles on the same weekend.
Its value for film-makers and producers is limited. Given the time it takes to develop a film, data tracking from one year might be largely irrelevant two, three or five years later. It is a fair rule of thumb that if you can see a bandwagon as a producer, it has already gone.
What producers need to know is not what a particular audience saw at any particular moment in time. They need information on which they can build in future projects, such as demographics, locations, consumer habits, etc.
In most industries, a product is shaped by, and ofte tailored to demand, in a systematic way and there is much attention paid understanding of the motivations behind buying decisions.
In a digital age, monitoring demand has become a much more sophisticated business. Real-time measurement of consumer sentiment through web and social media analytics, for example, is now standard in industries, such as music and television.
The marketing industry, it is often said, is now shifting from ‘eyeballs to engagement’, meaning that it is not just about casting the net wide and hoping to find sufficient numbers of interested people but about targeting a known audience. The emphasis now is on understanding not just what a business is selling but what consumers believe they are buying.
SampoMedia’s presentation looked at various businesses to consider what people were actually buying and used some examples (see illustration, right). Film is perhaps among the industries with the greatest need for this analysis.
What we sell to the consumer is ostensibly mundane: a ticket, a seat, the right to watch a movie for a limited period of time. The theatrical business model is highly dependent on what it sells apart from the film itself, most obviously food and drink.
Home entertainment has been about the sale of a disc containing data, or about broadcaster programming and scheduling.
On-demand services have changed the rules of the game but what the upfront product is sold on the basis of access to a large volume of content.
Different parts of the film industry value chain often see these different products in competitive terms, hence the heated debate about release windows. The arguments often miss the core truth that film is competing for a share of the one fixed element in a changing world – the 24-hour day.
SampoMedia suggested that winning time was increasingly dependent on providing the consumer with compelling experiences. The company again has access to much research and data offering significant clues to consumer demand.
CONCLUSION: Until we know the motivations for audience behaviour, it becomes difficult to devise effective selling strategies At the moment, data is used for short-term reasons by one end of the value chain but very little filters back to inform those producing content.
3. OWNERSHIP
The traditional industry was based on a scarcity model that historically worked fairly well. Cinemas showed a limited number of films based on whether it wanted, or was able to secure, a physical 35mm print; television was programmed to allow access at a particular time; and DVD was either rented to allow limited use or sold giving permanent access.
But on-demand services change that relationship, putting programming and viewing time and place in the hands of the consumer.
From Cloud developments, that allow instant access to remotely stored content on any device, to ubiquitous streaming services, the dirction of travel is pointing away from ownership, and towards access. These market realities are a problem for entertainment industries whose prosperity is built on scarcity, as discussed in the first part of this series.
These are economic questions predicated on consumer experience. Today’s active audience wants entertainment on their own terms and it is difficult to find models that accommodate fragmented demand.
The high sound quality of CD has struggled as a proportion of its market has opted for the flexibility and mobility of the (inferior quality) MP3, new VOD services, or even the collectability and attractive packaging of vinyl.
DVD (and indeed download to own) suggests that quality and ownership is struggling against the authenticity and superior experience of film and the advance of ‘all-you-can-eat’ subscription VOD services.
The business models of the independent film industry has generally been predicated on scarcity and ownership, and there are legitimate concerns about how you can build production businesses on the back of on-demand services, not least because a film can become so lost in the vast wealth of choice, and the overpowering marketing muscle of the majors.
The lecture suggested, however, that these fragmented means to reach an audience also represented an opportunity, allowing new ways to access an audience, using cross-media tools and social media.
The value of the IP of a film can be extended by making secondary products, such as games, apps, books, etc. The lecture offered examples of how revenues might be gained by exploiting value in the film-making and production process that are generally discarded.
One area of value that is still largely ignored in film, but which is increasingly important in other businesses, is ‘metadata.’ Often called ‘data about data’, it can be a confusing term, often misapplied.
For the purposes of the discussion here, we are essentially talking about all the information about a thing, apart from the thing itself. In other words, in the process of making films, and its movement along the value chan to the audience, we create lots of information, which may be valuable. (For a fuller list, click the slide here)
Many areas of metadata could become building blocks of revenue-generating services and as a means of finding and interacting with audiences.
CONCLUSION: The film concept of value can be narrow, particularly in production where there is so little interaction with the end consumer. The fragmentation of viewing habits is a geniune danger to traditional scarcity models but it might also represent an opportunity to create new kinds of product and new audience relationships. The important thing is to not to discard value.
OVERALL CONCLUSIONS
The Gothenburg lecture was asked to look at how producers could increase their revenues in a fast-changing business environment.
The answer to that question – at least if we are talking about sustainable business models – leads to bigger questions.
What the lecture suggested is that the best hope for a thriving independent film industry is to use the tools of the digital economy to create direct connections between creative talent and consumers.
In the current value chain for independent film, there are neither the mechanisms, nor necessarily the incentives to engage audiences. Indie production models are about selling rights to exploit their work, not about exploitation itself.
In much of the world, revenues (which are really debt repayments), are based on the willingness of sales companies to pay and on public funding.
There is rarely a systematic flow of information about performance that can help a producer make better or more informed decisions, or much direct interaction with the consumer. The current industrial process sucks out knowledge and value that could, and should, be recycled to allow film to evolve.
The lecture argues for a flow of data and knowledge, supported by industry and policy-makers. It is knowledge that will become the bridge between the wealth of creative talent and a receptive audience groupings, that can be understood and aggregated.
SampoMedia’s message offers a passionate and yet practical vision of a future in which creativity can flower and businesses thrive. The technology, the data and the networks are no longer the real obstacle – it is the imagination, the will and the courage to embrace change that really matters.
A single version of this lecture will be downloadable as a PDF next week. If you want SampoMedia to present the research, details and case studies at your event, email us.
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