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WORKING WEEKEND: Attention must be paid … to the customer

21 Dec, 2001 By: Bruce Apar

It says here that "the bulk of revenues for the U.S. video-on-demand (VOD) market will come from the pay-per-view (PPV) audience instead of from the video rental or box office audiences." That's according to Jupiter Media Metrix in a report whose highlights, as essayed in a news release, sound as murky as the water made famous by the Exxon Valdez.

Jupiter analyst Lydia Lozoides is quoted as saying, "The industry heralded VOD as the entertainment technology that would unseat the VCR -- that's unrealistic." My question is, what industry said that? The analyst further talks of shifting the PPV audience to VOD and generating incremental revenues. My question is, what is the actual difference between the PPV and VOD audience? My question is, generating revenues incremental to what? Incremental to current home video revenues? Incremental to current PPV revenues? If the latter, what constitutes incremental revenues as opposed to good, old-fashioned market growth?

Then there's the most murky comment of all: "Studios, operators, cable networks and the rental market must prepare to counter the effects, both positive and negative, of VOD on their businesses. Failure to do this will result in another blow to the advancement of interactive television."

Now you know why some consultants get the big bucks: because whether or not they know what they're talking about, it's arguable whether anyone else will understand it. Very possibly it's my own density, but no matter how many times I read those two sentences back to back, they don't add up. If existing channels can't counter VOD's effects, would not it be a blow to them and a benefit to interactive television? Aw, heck, what do I know -- I'm just a consumer.

That brings me to an intriguing Executive Summary I just read from management consultants PricewaterhouseCoopers. Produced by its Entertainment & Media practice, it is titled, "Vying for Attention: The Future of Competing in Entertainment and Media – Our Industry Perspective 2001-2005." (For information on the full length report, visit www.pwcglobal.com.)

There's a section on "Top Ten Ways to Survive in the Attention Economy." Number one, echoing remarks you can read from Video Store editor-in-chief Kurt Indvik in the Dec. 21 Buzz, is "Connect with Your Customers and Cultivate Relationships." The catchphrase these days, of course, is Customer Relationship Management (CRM), which PWC defines as "one way to connect with customers as unique individuals." Of direct relevance to retailers is the suggestion "to mine consumer data, appeal to niches and continuously refine your marketing approach, balancing the investment against the lifetime value of acquired relationships."

Number Two is "Find New Revenue Streams -- NOW!" According to PWC, "a multichannel strategy gathers attention by being in all the places your customers are likely to be." Provocatively, but realistically, it adds that "the ‘all content is free' movement will continue to generate challenges. Your business models must turn adversity into advantage."

We need look no further for the most topical example of that advice than how the major record labels are launching their own online music subscription services, spurred by the watershed technology known as Napster.

"Set Your Customers and Your Brands Free" is Number Three. "The game is no longer about stimulating a mass market, but about custom buying experiences." There also should be an attempt "to conduct transaction experiences in a minimum of steps with a maximum of security." Finally, No. 3, PWC advises, "Companies will tailor offerings to smaller segments which may be less profitable; profits will come from an aggregation of small segments."

More on the PricewaterhouseCoopers report next time. Happy Holidays to all.

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