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How to Remain King of the World amidst Titanic Disruptions

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There has been a lot of conversation recently on the future of the media industry, specifically drawing comparisons between TV and film and the shrinking music industry.  It’s been over 10 years since Napster came on the scene to disrupt traditional music business models, sparking a wave of debate on the right mix of “free” vs “paid” content going forward with digital that has yet to be fully settled.

 Recording Industry Association of America

I recently had the privilege of assembling an all-star group of media executives in Beverly Hills to discuss the challenges they face in distributing, monetizing and delivering their video content.  We had representatives from the entire value chain, spanning content creators (major studios such as HBO, A&E, Warner Bros, Sony Pictures), distributors (Turner Broadcasting, Sprint, Akamai) and underlying technology players (Cisco Systems, Technicolor).  To bring an additional perspective to the conversation, I invited Lightspeed portfolio companies BloomReach, EdgeSpring, MapR, Nutanix, PernixData and Virtual Instruments who are focused on helping companies store, manage, analyze, and surface next-generation data and content.

The most pressing question on everyone’s mind was what business model would prevail for future video content.  In the shift to digital music, several models emerged, with the jury still out on the clear winner.  People were quick to draw parallel comparisons for video:

  Music Video
A la carte iTunes Video on Demand
Advertising supported Vevo, Pandora YouTube; Hulu
Subscription Spotify, Rhapsody Netflix, HBO Go
Live events Concerts Movie Theaters

The group consensus was quite clear — media companies would need to embrace a mix of distribution channels and business models to remain relevant, a testament to customer choice driving all models in parallel.  In the inevitable shift from analog dollars to digital dimes, successful companies would separate themselves from the pack through clever licensing agreements that maximized the varying margin structures of each model.  In aggregate, the various revenue streams would continue to support the creation and distribution of high production value content.

Interestingly enough, a key theme resonant throughout the evening was the eventual consolidation of the industry.  Many predicted that skyrocketing costs would force studios to join forces in an effort to streamline production and eliminate redundant overhead.  For my part, I kept imagining Warner Bros, with its Hobbit franchise, teaming up with the Sony Pictures Bond franchise to create a secret agent Hobbit out to save middle-earth….“Baggins, Bilbo Baggins.”  It’s safe to say I picked the right career path when I went into tech instead of Hollywood.

Technology was also seen as enabler of future success.  Live concerts (a high margin model) use pyrotechnics, elaborate stage setups, and bone jarring sound systems to court fans who may otherwise consume the same music through subscription (low margin) or illegal download (no margin).  Likewise 3D, IMAX, and emerging 4k resolution technologies are seen as ways boost movie theater sales in a very competitive home theater environment.

The group was particularly interested in discussing emerging technologies as a possible competitive differentiation, particularly in the context of data and analytics.  BloomReach could be used to monetize long-tail content thought clever SEO, Edgespring could surface cross-channel insights into consumer behavior, while solutions such as MapR, Nutanix, PernixData and Virtual Instruments could be used to cost-effectively store and manage the vast quantities of digital data and content being generated daily.

The combined perspectives of IT executives, startups, and VCs made for an enjoyable evening of discussion and networking.  Many thanks to Greenspring Associates for helping organize the event.

If you are an IT executive interested in emerging technology, we’d love to hear from you.  The Lightspeed Ventures CIO Forum provides a platform for forward thinking executives to discuss innovation, share best practices, and network with VCs and industry leading startups.

Follow us on Twitter @lightspeedvp.


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