'Last night's Itchy & Scratchy was, without a doubt, the worst episode ever! Rest assured that I was on the Internet within minutes, registering my disgust throughout the world.' - Comic Book Guy
Hollywood may seem an unlikely place for analytics to have a starring role, but according to IBMers Richard Maraschi and Kevin Drost � consultants both within the media and entertainment practice of IBM Global Business Services - they're more than ready for their close up.
Hollywood is not immune to disruption
With good reason. Hollywood studios have been buffeted by the same disruptive forces currently transforming every other industry on the planet. Much like retailers must now pay more attention to consumers changing needs and increased influence through social channels, empowered media consumers are exercising a similar influence over their media and movie choices. The result? A dramatic erosion of the famously iron-clad control that Hollywood exercised over its processes and its product.
- Increased Connectivity: Through 3 billion entertainment devices like the iPad, consumers now have near limitless access to entertainment products and the ability to share them instantly with the world. Watch a movie on the Netflix iPad app and it's shared automatically with your friends on Facebook.
- Increased Influence: Word of mouth and social channels are supplanting, if not replacing, traditional marketing as the core driver of discovery and discussion. Nearly 45% of consumers consult friends on potential purchases before making a decision on what to buy and what to watch.
- Increased Choice: New platforms and an ocean of both new and long-tail content give consumers endless viewing options. Half of the bandwidth in North America is consumed by content streaming. Nearly 60 percent of digital news consumers view content through an aggregator.
These developments are causing significant headaches in Hollywood, where film studios and media companies can no longer count on audiences flocking to their latest blockbuster because it's all that's playing. Nor can they count on their traditional revenue streams. This year, 15 million fewer movie tickets were sold than in 2009. In the same period, revenue from DVD sales fell by 44 percent. Pay TV providers saw their combined audience fall by 400,00 in the second quarter of this year alone.
Today's media consumer demands relevant, personalized content that's accessible on any device, at any time, offered with a range of price points. That's provided consumers are willing to pay at all. Content piracy is also a growing concern, particularly for sports programmers, whose "of the moment" product has no shelf life. These trends have repercussions on the way Hollywood goes about its business.
Enter business analytics
Maraschi and Drost outlined three specific areas of their business where media companies can - and are � improving their outcomes.
The first is content acquisition and production. Studios spend vast sums of money investing in new content, whether it's through original programming or purchasing it from other companies. But very few understand the public demand for that content; fewer still are able to predict it. As a result, producers struggle to answer big questions: Of the 7,000 films screened at Sundance, which have story lines that will be relevant to our viewers? Of the 150 treatments we read each day, which ones will get the green light?
Analytics can help studios find, finance and produce the right content for the right audience at the right cost. Through demand forecasting, studios can better predict the marketability and playability of an unreleased film. They can prioritize their acquisitions and forecast the profitability of each acquisition. Even one of these activities can bring much-needed clarity to the production process and help studios be better equipped to make those multi-million dollar decisions.
The second is Marketing. For a typical film, traditional marketing tactics � print, TV, radio � typically cost between $30 and $60 million. Blockbusters typically cost more to market than make. Movie and media marketers need greater certainty that their campaigns will generate ROI in excess of their costs many times over. They also know that word of mouth trumps the biggest ad buy once the movie hits the screens. As a result, they must optimize their marketing spend in the critical windows before their content is released. Analytics can help movie producers better understand their audience and understand what it wants.
Releasing trailers, clips and previews on social sites such as Facebook provides internet-scale feedback on features in production in near-real time, while there's still time to make changes. Analyzing news feeds and industry publications can help them forecast a movie's ROI by market and channel and build a predictive model to optimize their marketing plan. Increased insight into real-time chatter helps them adjust their marketing spend in real time.
The third area is Sales and Distribution. Consumers have multiple channels at their command to access content. Most major film studios have thousands of movies in their libraries. But what is the most profitable channel for each film? How long after a movie's left the theaters should the DVD come out? Which network gets first pick when a movie is ready for broadcast on TV? Again, the intersection of consumer segment, channel and media product creates thousands of possible answers.
Again, however, analytics can help. Studios and media companies are now exploring the possibilities provided by Release Window Optimization, which helps them determine consumer behavior and price elasticity. It helps them project window sequencing and returns based on predictive events and data thresholds. And when possible, it helps them optimize the timing of a release into each channel.
Structured and unstructured data
To do all of this, media companies can also make use of both structured and unstructured data. Finance data mixed with consumer sentiment. Customer data mixed with Facebook and blogger buzz. Through advanced analytic tools such as Hadoop, predictive analytics and social media analyis from IBM, Smarter Hollywood can move as quickly, as effectively and as smartly as the smartest retailer.
The approach for a Smarter Hollywood will be achieved by integrating descriptive, predictive, and prescriptive analytics. Descriptive data � reports on product performance, sales and customer demographics will continue to play a role. Predictive analytics driven by social chatter and external data will help Hollywood make smarter decisions about where to invest and the returns they can expect. Prescriptive analytics � the new, third element � will move the entire industry toward a more cost-effective and profitable approach that makes the best use of an ever-shifting data landscape to better serve the new, empowered media consumer.
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