Lose The Empire, Gain The World?
The rise of international markets and the global reach of the Internet and broadband connectivity are forcing US content creators and distributors to confront several difficult challenges.
The BBC World Service radio broadcasts have a knack for making almost any issue appear to take on great gravitas, no matter how arcane. I recently caught a snippet of a broadcast – a serious and impassioned debate on whether it was still appropriate for the coveted Officer of the Order of the British Empire honour to still include the word ‘Empire’. As a media analyst, I’ve also watched as the US entertainment industry has learned to cope with a globalisation of its product and over my career have watched as US executives have struggled to learn to use the term ‘international markets’ instead of the traditional ‘foreign markets’. It turns out words do matter.
Two recent developments served to emphasise just how international the business of media and entertainment has become in the 21st century. The first occurred when I was researching the composition of Google’s YouTube audience for an analysis and discovered a factoid on the company’s web site that noted 70% of YouTube’s traffic was from outside the US. The second came from news that Disney/Marvel’s movie The Avengers had been released in several major international markets more than a week before its US premiere and after 12 days had generated US$600m, of which two-thirds was from outside North America (US domestic box-office tallies actually include Canada).
The rise of the international motion picture theatrical market has transformed the way the studios approach releases of their ‘tent pole’ pictures. Part of the reason for the staggered premieres is that the stars of the movie now routinely jet from market to market on global press junkets. Another beneficiary has been the local theatregoer. There was a time when the prints that were shipped to international exhibitors (usually three-to-six months after US release) were mostly reconditioned prints salvaged from US theatres after their domestic runs.
From the US entertainment industry’s perspective, the international markets are the future and there is no turning back. The US market has almost fully matured. Some 97% of US households have television sets. Of those, 90% subscribe to some form of multi-channel programming service. Over 90% have DVD players. Nearly 80% have a broadband connection and of mobile phone owners over 50% have smartphones. Over 43% of Americans have a Facebook page. The bottom line: the future of US media and entertainment (M&E), if it wants to grow, must come from international markets.
In addition to traditional leaders in the US M&E, the six major motion picture and television studios, the new players are the app and operating system platforms (Apple, Google and to a lesser extent Microsoft) and the newly emergent ‘second screens’ composed of smartphones and tablets (the latter dominated by Apple). For all of these companies, while the US helps kick-start new releases with a large and reliable domestic base that creates instant economies of scale, future growth is all about consumption outside the US.
The rise of the international markets and the global reach of the Internet and broadband connectivity are going to force the US content creators and distributors to confront several difficult challenges. The first, which is already occurring, is that the concept of carefully controlled sequential movie ‘windows’ (theatrical, home video, pay TV and free TV) are going to have to become somewhat standardised around the world. Now that a movie or TV series can be delivered as a digital download or stream anywhere in the world, on demand, a new set of business rules, digital rights management and pricing schemes will have to emerge that may have little to do with national borders and even national legislation.
The second issue is equally as vexing but equally important to address: the need to find a way of monetisation global web traffic with advertising. Google’s YouTube challenge is just the largest example. While there are a handful of global companies that have global brands (e.g., Apple, Microsoft, Coke, Pepsi, Procter & Gamble and some car manufacturers) even they market their products in a market- and language-specific manner. Yet it is utterly essential to the future of the free web-distributed content business to find a way of connecting a potential viewer—no matter where they live in the world—with the appropriate advertising message suitable to that country and even the local market where the viewer resides. This is going to require an unprecedented level of coordination and cooperation between the global advertising agencies, local and regional advertisers and the companies that are distributing the content.
Just as geostationary satellites and a global network of underwater fibre-optic cables knit the world together in a way that made access to news, information and entertainment that ultimately resulted in the end of the Cold War and fall of many dictatorships around the world, the next step—globalisation of M&E distribution and advertising monetisation—could tie countries together in economic ways never before contemplated.