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Report: Digital Leaders Taking More Revenue Risks

28 Jan, 2014 By: Chris Tribbey

A new report from professional services firm Ernst & Young finds that digital leaders in the entertainment industry are willing to take more risks than non-entertainment executives, and deal with short-term revenue losses in the hopes of long-term digital growth.

Howard Bass, partner with Ernst & Young, said the report — which surveyed senior executives across more than 500 companies, and included interviews with Amazon’s Jeff Bezos and Digital Entertainment Content Ecosystem (DECE) president Mitch Singer — shows every entertainment company is “laser focused” on digital, non-traditional companies are moving more aggressively into the digital entertainment space, and digital leaders at entertainment companies are more likely to push for real-time consumer data.

Nearly two-thirds of digital executives said they’ll cut legacy media investments in favor of digital (compared to only 48% of non-media and entertainment companies), and 70% said they would accept a short-term loss on a new digital venture, compared to 47% of non-media and entertainment companies.

“The continuous nature of technology-enabled innovation makes this a kind of never-ending journey,” said Pat Hyek, global technology industry leader for Ernst & Young. “No single new product or service will ever be ‘the answer.’ Winners will be those who build organizational systems, processes and cultures that always drive innovation building on today’s successes.”

Seventy-seven percent of digital executives said they want consumer data in real time, and the report points to more than one example where companies have had consumer data pay off. Netflix funded two seasons of its exclusive “House of Cards,” after seeing subscribers watching content with actor Kevin Spacey or director David Fincher. Foursquare has five million people sharing their location every day, and that equals better-targeted ads.

“While technology is enabling a lot of innovation in media and entertainment, we’ve found that the most successful examples in both business-to-business and direct-to-consumer are being driven by customers, their changing behaviors and how they’re adopting both the technology and the technology-enabled innovations,” said John Nendick, global media and entertainment leader for Ernst & Young. “Customers have unprecedented control over content consumption — how, when and where.”

The report notes that 57% of digital leaders count listening to and analyzing customer interactions as a top strategic priority, and digital executives are also more apt to listen and respond to customers via mobile devices and online.

But “big data” — a term that’s been gaining more and more attention in the past year — is still often not within easy reach for most companies, or at least not able to be used in a way that’s profitable and relevant for digital entertainment companies. Nearly 50% of those surveyed said they found getting reliable data to be a challenge, and only 19% said they’re integrating customer data across all distribution channels.

But what may not be working for some companies is clearly working for others. One case study in the Ernst & Young report points to the success Pandora has had with data, gathering 30 billion pieces of feedback from listeners that has resulted in measurable success in targeted advertising.

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