Wake up: Content industry needs a reboot: Page 2 of 2

Lessons from the past

Why is this history lesson important? Because it is a relevant one for Malaysians to understand if we want to develop a vibrant and exciting content industry.
 
If we look at the television and film industry, the business model is changing quite rapidly and may not exist in its current form within the next 10 years … or perhaps even five years.
 
It is time for Malaysia to take that leap and stay ahead of this paradigm shift, or sit and wait and become a follower.
 
The traditional business model for TV broadcasters is of three varieties: 

• Private stations earning revenue from advertising;

• Public broadcasters being subsidised via government funds and licensing fees; and

• Satellite and cable companies earning revenue through subscription fees.

All three business models are no longer sustainable in the broadband and smart device age. Advertisers have seen eyeballs, particularly in the Gen-Y group, switching from TV to their mobile and wireless devices.
 
Once that happened, advertisers followed suit – so much so that budgets for TV advertising have been slashed by over 50% in the past three years, whereas the online space has seen a threefold increase in advertising spend.
 
Broadcasters now have to contend with smaller revenue to be able to spend on programming, leading to budget cuts across the board in TV.
 
For public broadcasters the situation has worsened as governments facing rising costs and economic slowdowns look to cut subsidies and sell off public assets like broadcasting.
 
The satellite and cable operators are seeing higher churn rates as consumers start to object to having to pay increasing subscription fees when there are far cheaper alternatives via the Internet.
 
All these changes are also affected by the fact that consumer viewing habits are changing. No longer do we want our content pushed to us, but in this hectic, fast-paced world, we demand to have our content when and where we want it, at our convenience.
 
We don’t need a VCR (videocassette recorder) to record our favourite shows. The consumer can make or customise his or own content. The YouTube generation allows us to pick the latest programmes and clips. Numerous sites online allow us to download the latest series at minimal cost and watch it when we want.

The best award-winning shows are now from Netflix, Showtime and HBO Online. Video streaming means we can watch live events on our smart device without rushing to a TV set with a cable connection.
 
For producers and content developers, the world is now your market; your showcase or distribution channel can now be YouTube.
 
The traditional model of developing something that you hope would be picked up or commissioned by RTM or Media Prima is no longer sustainable, as their budgets are getting smaller each year and may no longer exist in five years. Recently, we saw Media Prima offering severance to hundreds of staff to cut costs.
 
With smaller budgets on traditional platforms, quality of content gets lowered – and the more quality gets lowered, the more people will switch off their TVs.
 
For satellite/ cable broadcasters, the situation is double-edged – competition for exclusivity has risen, and thus when they start paying more for exclusive content, they have to raise their subscription rates. The more rates rise, the more consumers switch off.
 
And now with the telcos moving into the broadcasting space by providing a triple-play experience at a lower rate than subscription TV, the consumer has a far greater choice of options at a far lower price point.
 
The great advantage of a broadband link into the home is that from one WiFi point, multiple devices can access multiple choices of content. No longer do you have to have multiple boxes attached to a different TV to satisfy every member of the family, but at one price, every smart device in a home can access the Net and everyone can get a dose of their favourite content at any time.
 
Telekom Malaysia is now the new broadcasting king of the hill, without actually producing any content. It provides the platform and the rest is up to the content developer.
 
Right now, content developers in Malaysia fall into two camps. The first is the vocal majority who still rely on the traditional business model, and who are seeing their budgets being cut and costs rising.
 
Unfortunately, they operate in an environment where broadcasters are fighting a losing battle to retain eyeballs and advertising money.
 
The second camp is the new group of developers who have been bought up on smart devices and the Internet, who themselves do not watch much television. They understand how viewing habits have changed and how the Internet has become the platform of choice for all forms of content.
 
It is time for Malaysia’s creative industry to realise this new reality and make the necessary changes.
 
Nick Collins, currently managing partner of a small international consulting firm, has over 25 years’ experience working in strategic posts for a number of media-based firms and agencies from the UK, Singapore and Malaysia. He was also one of the pioneer members of the Creative Multimedia unit of the MSC back in 1999.
 
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