How Value Shifts in Digital Business Models

Consumption of digital content is now mainstream among younger segments, and older audiences are catching up at an astounding rate. With their “always on” devices, consumers are just clicks away from a virtually limitless selection of music, videos, games, shopping, news and more. This move to digital has created challenges for Media & Entertainment companies, primarily caused by three key drivers: value shifts, substitution and weaker online revenue models.


Value shifts

As the options for consuming media have continued to grow and connected multimedia devices have been introduced, the overall experience has become more and more important. Consumers are making choices based on simplicity of use, integration and convenience. To meet consumers’ growing needs, a new set of industry participants stepped in to deliver novel and superior experiences. In fact, the pace of innovation has been dizzying. However, it generally has not been driven by traditional media participants. Device manufacturers, software providers and distributors/aggregators have led in consumer experience innovations – and consumers have gladly responded by allocating a greater portion of their budgets to offerings that enhance their experience. As a result, the balance of power and resulting value have shifted and, in many cases, software and device manufacturers, as well as distributors/aggregators are capturing greater revenue share.



Value shifts have been occurring across M&E, with the music industry
serving as a prime example. The industry’s traditional players are
expected to lose more than 40 percent of value between 2003 and 2012 due
largely to digital migration. At the same time, new players in the
broader music ecosystem have captured value by focusing on the consumer
experience. The music industry lost 30% of its value between 2003 and
2008. However, if you define the industry more broadly and include the
new players, the industry actually grew by 3 percent year-over-year over
the same timeframe.

To read the full study and learn more about how the consumer’s increasing appetite for digital content is impacting today’s Entertainment & Media companies, read the full report Beyond Content: Capitalizing on new revenue models and be sure to check out the interactive version.

Coming soon from Harvard Business Review: Not for Free – Revenue Strategies for a New World


Chief Strategist at IBM

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