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The report "Monetizing digital media: creating value consumers will buy" released by Ernst & Young highlights how media and entertainment (M&E) companies will increase future revenue and profitability from digital media distribution by creating premium bundles of differentiated products and services. It also compares global penetration rates of free online content with the tendency to engage in online commerce and examines where online paid content strategies succeed, according to PRNewsWire.
Media and entertainment companies will use digital content to add value to consumers and improve revenue and profitability, in four key areas:
Format and additional content: content and information can be delivered to consumers in specific formats that are most conducive to their needs and the devices on which they consume content. Consumers will also find value in additional bonus or exclusive content.
Timing: Content consumption has been steadily shifting from a fixed-time model to one in which consumers can enjoy what they want, when they want. M&E companies can profitably monetize their products and services by accommodating this desire. For example, content can be offered on an exclusive basis, e.g. premium customers can view a TV show or movie prior to its release to the general public.
Availability and interoperability: consumers want to access their media and entertainment from anywhere on multiple devices. M&E companies will enable multiple-device distribution and allow consumers the ability own and access content stored in a "digital locker."
Sharing: the concept of sharing is changing dramatically. Free content can become premium content if consumers have the ability to share it with their social networks or can recommend, comment or customize it. In this way, providers can turn what has traditionally been a liability into an asset.
Where consumers pay for
The report highlights that consumers are willing to pay for games, TV shows and music and less likely for news unless it's a specialized business newspaper. Here as well is shown that vertical news publishings can have revenue models based upon its focus, relevancy and quality.
PRNewswire reports on the virtual goods markets:
In the US, the virtual goods market reached US$1.6b in 2010. Which, the social gaming market contributed US$835m. Another rapidly developing market, China, has estimated 105 million gaming users. Virtual goods sales in 2009 were estimated at US$2.2b. However, micropayments processing costs are still too high, with cost approximately US$0.20 per transaction, which is prohibitively high for a payment of US$1 or less. Nonetheless, market leading vendors are capitalizing on the opportunity, resulting in a more competitive market for micropayment processing.
According to John Nendick, Ernst & Young's Global Media and Entertainment Leader:
"Now that the majority of consumers have learned to seamlessly integrate free digital media and entertainment content into their lives, companies have the opportunity to better monetize this habit by developing multiple paid content strategies that focus on consumer value.
Consumers in certain parts of the world will pay more for content and services they value. In creating "a la carte" content, M&E companies will generate more microtransactions, which in turn will increase micropayments and monetization."
Paid versus free content
When it comes to penetration rates of free online content:
* The US has an average penetration
of free online activities of 57%;
* South Korea showing the greatest penetration of free online activities at 70% and
* Japan the least at 43%.
When the willingness of consumers to engage in online transactions was examined a different picture arose. The average penetration levels of ecommerce and online transactions ranged from a high of 59% in Japan to a low of 7% in Russia, with the US placing third highest at 49%. Thus, the countries that ranked highest in free online content were generally less likely to engage in online commerce.
divergence becomes most apparent when overall penetration is compared to
* In the US, Internet users spent an average of US$8.80 on digital music products last year, with 34% of the population using the Internet to access digital music, both paid and free.
* Japan has a high per user spend (US$10.12) with a relatively low penetration (25%), indicating the Japanese are paying for their music content more than in any other country.
* China has an extremely high penetration (83%) with a very low per user spend (US$.20), indicating the Chinese are getting the overwhelming majority of their online music for "free."