“There are millions of dollars to be made 99 cents at a time.”
Recap of comments made by a panel of experts on digital disruption, from the Sports, Entertainment and Media Business Conference organized by SEMA, an organization that helps graduate students at UT explore career options in sports, entertainment, and arts management. Panelists wanted to speak freely without attribution, so they are not quoted directly.
Other panels from the conference are here:
Dennis Self is the SVP, Chief Information Officer (CIO) for Electronic Arts. Previously, he served as the lead for EA’s Europe IT and Asia IT teams from 2005-2007. Prior to joining Electronic Arts, Dennis held various positions at HP, and worked as an IT strategy consultant for Andersen Consulting, A.T. Kearney and Deloitte Consulting. Dennis holds a Bachelors of Science degree from Old Dominion University and an MBA from the University of Chicago. He lives in the San Francisco Bay Area.
Allen Hooser has been with the Sports Illustrated Golf Group for three years. In this role, he is responsible for creating multi-media marketing programs across Time Inc.’s sports properties including: Sports Illustrated, GOLF Magazine, SI.com, FanNation.com, Golf.com as well as experiential customer events. Allen works with various top brands and agencies in the Southwest United States on accounts including: American Airlines, Pepsi, MasterCard, ExxonMobil, Redhook Ale, United States Air Force, Pennzoil/Shell, Chili’s and more. Prior to joining the SI Golf Group, Allen was project manager for new business at Match.com in Dallas and responsible for launching the new Chemistry.com program and the Dr. Phil application. He also spent five years at Dell, Inc. in the U.S. consumer division where he managed the online advertising programs and website.
Jason Brenek serves as senior vice president, Worldwide Digital Cinema and Cinema Programming, for Walt Disney Studios Motion Pictures. In his role, he is responsible for developing and overseeing Cinema Programming (any non-movie content, including 3-D or live events, delivered to theatres enabled by Digital Cinema), setting Disney’s Worldwide Digital Cinema strategy and negotiating and closing Digital Cinema deployment deals around the world. Brenek also works closely with all areas of production and distribution to ensure smooth transitions from 35mm to digital exhibition of motion pictures that fall under The Walt Disney Studios.
Tom Higley is the President and CEO of iggli, inc., an invitation-based social application that uses friend-to-friend communication to help sports teams, artists, promoters, venues, and ticket companies generate event awareness and increase ticket sales.iggli’s customers, including AEG Live, StubHub, Nederlander Concerts, the NBA and many others, use the service to provide fans with a powerful and convenient way to invite friends to ticketed events and buy tickets together.
Chris Dacey with the Houston Rockets. Dacey enters his fourth season as the organization’s Vice President & Chief Strategy Officer. He oversees all aspects of business strategy, market research, team marketing, brand development, corporate partnerships and game presentation. Dacey also serves on the Senior Management Team for the Rockets and Toyota Center.
Moderator is Jeffrey Schneider. Schneider is the Senior Vice President, Business Affairs and Deputy General Counsel for Lifetime Entertainment and the Lifetime Television Networks. In his role, he oversees all business affairs and entertainment-related legal policy for Lifetime’s programming, including scripted series, alternative/ reality series, made-for-television movies, marketing initiatives and digital product. He works closely with CEO & President, Andrea Wong, as well as Executive Vice President of Programming JoAnn Alfano and Executive Vice President of Business, Operations and H.R. Pat Langer. Among his achievements, he negotiated the deals to bring the program Project Runway to Lifetime and helped plan the establishment of Lifetime Studios, Lifetime’s in-house production unit. He is based in Los Angeles.
Digital Disruption Discussion Notes:
What are some of the digital disruption issues your companies are facing?
- We want a strong Web presence without cannibalizing the magazine. We need to feed the beast who is the avid sports fan. People cannot get enough information about sports. The question is how do we deliver information that is of value. Some have gotten into the online space reluctantly, and that doesn’t work. The Kindle is just another opportunity for people to consume our product; the Kindle isn’t there yet, but next generations will get there. The newspaper business got it wrong and their struggle will continue. The Wall Street Journal’s attempt to bill for content will be the biggest case study ever, and we will all be watching to see how that works.
- We are replacing the old reel-to-reel film delivery systems and replacing it with digital systems in theaters that offer all the benefits of digital, interactivity, etc. We are subsidizing the cost of that because it saves us money over time. One of the way it does that is by reducing the cost of distribution. It also enables new forms of entertainment, sports content, stage plays, etc. This is happening. These systems are very expensive to install, but it is happening over time.
- The social media aspect is changing how we deliver content. The way that people connect with media, and between themselves and their friends for example. We will foster friend-to-friend invitations that allow people to talk about events, let people engage with Facebook, Twitter, e-mail, and text to promote further ticket sales.
- The disruption would be happening regardless of economic conditions. Facebook, Yahoo, etc. are now considered the new platforms for games, instead of just X-Box, etc. We are innovating in products, with micro-transactions, to download premium features, different kinds of guns, etc. This may be the new revenue model for gaming. Radically different ways to deliver gaming to consumers.
- In sports, we are selling a live event, so our digital media has to facilitate that. We produce clips for players to evaluate their performance after a game. We always think about, are the fans asking for this? Who is your customer, what is their age, their purchasing preference, etc. We are selling tickets and getting impressions on our site in order to sell more tickets.
Are consumers expecting this for free, and is there any way to go back and monetize digital media?
- People will pay for it, but it has to be easy to download and exchange between platforms. There are millions of dollars to be made 99 cents at a time. But they won’t pay money if they can get in through the back door and get the same thing in another way. If you give them unique products they will spend money 99 cents at a time.
- Whether people expect content for free or expect a low price, the average price per entertainment hour is going down. The price points are dropping for what consumers will pay, because they are used to getting so much for free. The cost of production isn’t dropping at the same rate and we are getting squeezed in the middle.
- Content is cheaper to create, store and distribute, and yet our attention is finite. We can listen to one movie at a time, one song at a time. So our ability to consume entertainment remains the same. But there are areas where there is some scarcity, such as live events that you have to experience at the moment in order to truly enjoy it. But generally, we have a super abundance of supply and a finite demand.
- Our biggest challenge years ago in TV was not to lose audience to other channels, but rather losing audience to other media, games, etc. And it is nearly impossible to control the number of sites where video content is available for download. That is a huge challenge to our price model.
- The key concept is micro. Micro programming, micro attention, micro revenue model, micro cost, micro products. It is a 99 cent song, not a $60 game. Music, gaming, newspapers, etc. It has all been chopped up in a million different segments. The demand is bigger than ever, but consumers want it broken into a bunch of little segments.
- Consumers still want macro entertainment, but they want to pay the same as for micro entertainment. If everything on TV is cheap reality shows, then you no longer want to watch TV.
- When a fan is at a game, how much digital distraction do you want to offer? Do you want a fan looking at the game on the cell phone or on the court?
What about digital rights management?
- There are technologies that allow you to control to a certain extent the amount of times that content can be shared or viewed. Some would call this Digital Restriction Management. We tried this on a game and had massive backlash from consumers and piracy actually went up, because consumers said, if you are going to restrict how many times I can access this game I’ll just go around you completely. So we are now working on building communities of consumers, and trying to sell micro transactions for premium product. In this world, credit card fraud is a major issue for companies.
- In movies it is disrupting our traditional models of distribution. You buy a ticket, you rent a movie, these are all forms of rights management. The problem with DRM is that we tried to impose these rules on consumers in a blanket way, and they felt too constrained. We need to bring consumers into the DRM solution. To be more flexible to match consumer desires.
- Consumers began to feel that the business model of delivering content was restricting their access to what they deserve. Music for example, they didn’t want to buy a whole album. They want it faster and easier to get. They want content aggregated and made easier to access than even what you can find for free. The Kindle isn’t an electronic book, it is a precursor to an ability to purchase everything you might want right there in your hands.
- You have to offer the convenience of buying the content easier than the hassle of finding it for free. Price it right.
Are windows collapsing to the point where we will get immediate access to movies, etc.
- It is changing rapidly. At our company we are looking at one distribution czar for all of the various distribution channels. To rethink how we bring our products to market. At the end of the day we make very high cost entertainment, so it is difficult to compress down to a 99 cent purchase model.
- It is already happening with Mark Cuban’s HDNet. It is very niche programming, but some summer somebody will premiere something for download. You have to do it with the right movie or property, but someone will take the risk.
It is hard to take risks in this economy. How does this impact your digital distribution strategy?
- We have to be smarter. It is all about mass customization. We have to know more about our consumers. What is your second favorite team, for example.
- We are stepping out of distribution. Gaming platforms are a distribution channel, and that is not our core competency. We have a game engine, it is easy to scale, and then we let the various distributors take it from there. Mobile phones, for example, are just a distribution channel, and that is not what we do, we let them do it. And we would do that regardless of the economy.
- We have shut down titles, particularly when there is less differentiation between products. Instead of a home run you are looking for more singles and doubles, doing more with less, and still hitting our numbers for the shareholders. Looking for little goals to hit the big fiscal goal at the end.
- The path of raising capital is more difficult than it ever was. The exit paths are much more difficult to come by. The lack of those exits has reduced the availability of capital for startup growth.
What is the future of digital content distribution?
- We are highly reliant on each younger generation. We grab them not only as consumers but as workforce. I’m the IT guy, so I see the technologies. It is called Enterprise 2.0 in our world. This is not just a trend, it is part of the industry going forward.
- We haven’t yet figured out how social networking is benefiting our marketing efforts. The Twitter-Effect, etc. What rings the cash register?
- People are going to be in touch with what they want when they want it. Sports fans have said I want my teams news when I want it, and I definitely don’t want to see competitive teams’ information on my page.
- The folks on the consuming side are also producing. Facebook has created this massive aggregation model in which producers and consumers are merging.
What are the conflicts between content producers across the various platforms?
- You can take a game, port local music into the game, and then you may want to add a video clip of that for YouTube or your iPhone. I don’t know what becomes of this trend, but we see it everyday. All the various content types and distribution types merging.
What advice do you have for people who want to break into this industry?
- Sports is no longer a technology laggard. We are looking at dynamic pricing, how to leverage technology. If your passion in sports there are opportunities, but be prepared to battle these issues we’ve discussed today.
- The gaming industry was produced by people who did not want to go to college. They wanted to play and build games. And they made a success and cashed out. That created a mind-set in our industry that is a “big hit” industry, and there isn’t a focus on your college degree. It is getting more sophisticated, but you have to make a big impression based on what you can do. We are thinking about new kinds of customers, product mix, etc. You’ve got to have the passion for it.
- If you can figure a way to stay here at UT, stay here for the next 2-3 years. (Laughter.) It isn’t about your resume, it is about who you know. Build your network, understand team building and how to work with others. That is a skill set we don’t practice enough.
- Think about what area of business you want to work in. Figure out where you want to be in five years, and talk to as many people as you can who have taken that path. The big companies are starting to emerge from the fog, and there will be opportunities for those who want to break into the industry.
- For potential entrepreneurs, begin to figure out how you are going to deliver value. Then take that pitch to a wide range of experts. Get feedback, both positive and negative. Extend your network, and use the feedback to refine what you want to build.