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CEDIA Keynote: Monumental Shifts In Entertainment Industry Will Feed CE Business

CEDIA keynoter John Penney of 20th Century Fox sees an opportunity for integrators as TV industry melds advertising and subscription-based business models as cord cutting abounds.

September 9, 2018

Jason Knott · September 6, 2018

The invasion of the IT industry into the entertainment industry is rapidly shifting the media environment, and it creates a substantial opportunity for custom integrators to capture cord-cutters.

That was the over-riding message from John Penney, executive vice president of consumer development & strategic partnerships at 20th Century Fox, who spoke as the opening keynote speaker at CEDIA Expo 2018 in San Diego.

According to data presented by Penney, Google, Facebook, Amazon, and Netflix are effectively reducing the traditional advertising-based business model of the television entertainment industry.

The IT giants are using a combination of subscription-based monetization techniques along with data collection to force longstanding media giants like Disney, Fox and Time Warner to adapt in the face dwindling revenues.

Indeed, in just 11 years, Netflix already has a market capitalization higher than Disney, while Amazon and Google flirt with $1 trillion valuations. It also has more subscribers (50.85 million) than cable TV companies (48.61 million).

The end result is that big media companies like Disney (which will soon own Fox) and Time Warner are moving to deliver content directly to consumers, bypassing cable and even satellite delivery mechanisms in favor of a subscription business similar to Netflix’s, or via the traditional advertising-based revenue.

(Interestingly, Penney says the advertising-based model will never disappear simply because there are so many poorer American households that do not have the funds to purchase subscriptions. He cited data that 60 percent of Americans do not have $500 in savings.)

Direct Content Delivery Captures Data on Consumers

“Consumer data is the new oil and energy source for content monetization. Subscription-based business models are the Holy Grail… not advertising.”

— John Penney, 20th Century Fox

Providing content directly to the consumer allows content providers to obtain direct data feedback about their customers, which helps them create more popular content and also a larger and more predictable revenue stream.  

Netflix already does this… the company knows exactly which shows a subscriber watches and offers up similar content for their enjoyment. Likewise, Facebook and Google tailor ads and other content to their users based on usage patterns.

“Consumer data is the new oil and energy source for content monetization,” says Penney. “Subscription-based business models are the Holy Grail… not advertising.”

What Should CE Pros Do?

So what does it mean for integrators? These media companies are fighting for a slice of consumers’ time between mobile phone usage (an average of 3.3 hours per day) and TV watching (an average of 7 hours per day).

To win that fight, the entertainment companies need to have more devices deployed in the home, which is where integrators come in.

Consumers want an “easier user experience, not just quality” says Penney. That means smaller mobile screens, but media companies believe a large TV will still be the central viewing point in a home, though most other rooms will utilize mobile devices.

Penney says big-screen TVs will continue to be vital components to create the impact that Hollywood filmmakers desire to be re-created. 

He suggested CE pros can help by simplifying the complicated interfaces of multiple subscription services and add-on hardware boxes.

The average U.S. household that earns more than $75,000 per year will have six entertainment subscription services by 2020, including Netflix, Hulu, Amazon Prime, Google Play and Disney/Fox (Penney let the cat out of the bag and revealed that his employer—Disney/Fox—will soon have its own subscription service).

For integrators, the situation also means plenty of infrastructure and programming work in the short term, while continuing to push for higher quality video resolution and improved audio fidelity. 

As the new content delivery business matures, perhaps one of the media providers will develop a better quality version of their streaming service that includes multi-channel audio. 

Penney's advice was to look for ways to get subscriptions from our customers.  

Interesting idea, perhaps we should charge a subscription for the system control programming and reprogramming for all the new ancillary electronics that we will be installing and uninstalling as the content provider wars continue.

Jim Burns contributed to this story. 

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