Monetising digital media – Beginning of a new era

Not too long ago, digital was merely an appendage to most traditional media companies. But over the last few years, seismic shifts in user behavior has ensured that digital has become fulcrum of all media organizations around the globe.

Digital media industry has been consistently growing at a rate which is higher than that of other media industries, in India as well as globally. It is expected to continue doing so in foreseeable future as well (11% CAGR CY18-20 for overall Media & Entertainment industry vs. 22% CAGR for digital in India as per EY-FICCI Report).

So far, Digital media has been largely selling the attention of its users to advertisers. In recent months, with too many things vying for users’ attention, increasing cost of creating richer content forms (video vs. text) and with increasing concerns around user privacy (especially post the Facebook – Cambridge Analytica saga), it is becoming increasingly important for digital publishers to experiment and monetize in new and innovative ways. So, what does the future look like for digital media monetization?

Advertisements are perhaps not going to go away anytime soon and may remain a strong backbone for many publishers. While the efficacy of traditional ads formats (i.e. CPM / CPC based banners) will continue to go down due to combination of factors (wider availability and use of ad blockers, increasing ability of users to selectively ignore such content and penalizing by search engines for sites that overdo serving ads), native advertising / branded content will perhaps continue to reward users who do it right. One of our Digital properties, Firstpost, has seen successes in such initiatives, which are win-wins for publishers, audience as well as advertiser brands. As digital media becomes more immersive with shift to video and then to AR / VR, there will be opportunity to integrate subtle product placements for monetization as well (e.g. a visit to a Subway / Pizza Hut woven into a web series rather than a fictional Central Perk in Friends).  

Subscription models are being emphatically championed by many digital publishers as they bring higher predictability in revenues, freeing the digital media owners from the caprices of advertisers. It also creates a more direct relationship between the publisher and consumer. As cost of creating rich format content (e.g. video) are higher than traditional text content, subscription rates can help user recoup costs in an age of falling advertising rates. Subscriptions will also suit publishers who have a focused audience for which the specialized content brings value making these users open their purse strings. Digital media leaders can take heart from the successes of New York Times, whose subscription revenues surpassed $1 Billion in 2017.

But subscription models need to be done right, especially in India, where there is more resistance to paying for content.  While globally, subscribed user base for music services like Spotify is 40%+, it varies from sub-1% to 2% across in India. Even global behemoth Netflix has not been able to crack the code to rapid growth in India: some of it perhaps down to the industry structure in India, where cable TV subscriptions are cheaper as compared to Netflix, in contrast to the Western markets where cable bundles are much more expensive than OTT streaming services, thus accelerating cord cutting there. In India, subscriptions need to move away from being positioned as all-or-nothing, and rather experiment with metering or tiering and then try to force the conversion. Even the strongest content line up with ‘must watch shows’ may run up against the work-around of sharing subscriptions among friends.

With increasingly powerful machine learning tools at disposal, digital media organizations should look to customized content for each user and nudge the users at appropriate points to convert to paid users. One can bank on strong content to have a premium positioning and not drop prices to chase volume. But for most, models that fine tune pricing by offering various cuts / bundles (e.g. Sports / Premium English content on Hotstar), access window (real time vs. delayed e.g. Game of Thrones on Hotstar), experience (e.g. ad free, faster refresh rates on Moneyconttrol Plus) and by platforms / features (TV vs. tablet vs. phone vs. others or ability to offline or higher streaming quality) will further optimize revenues for digital media.

As content owners try to bulk up their libraries and try to create their own OTT services to launch their exclusive services (e.g. Disney with Marvel and Fox, if its acquisition is successful), there may be a consumer backlash against subscription, which become perhaps just too many restrictive walled gardens. To avoid subscription fatigue (where there are too many subscriptions to manage and pay for), another way could be for multiple publishers to bundle their services together in one subscription. Telco driven bundles are already been witnessed in India, where telcos like Jio playing the role of aggregators and allowing their subscribers access to content (e.g. IPL on Hotstar) which would have otherwise needed a separate subscription. A scramble by telcos to be strong players in content ecosystem has been seen globally, with the AT&T – Time Warner (owner of HBO) deal and Comcast’s bid for Fox’s assets coming to mind.

Subscription models that straddle online and offline are another area that can generate value for digital players and subscribers alike. Amazon Prime has been a success in India, because it comes not just with entertainment offerings spanning music, movies and TV shows, but also benefits of free shipping. WSJ and Columbia Journalism Review, among others, are looking at invitations to special events and panel discussions for paid subscribers. Exclusive access to events, networking opportunities, et al will add extra value for digital subscriptions.

Merchandizing revenues from properties created online can be another monetization stream that has great potential which is perhaps yet to be fully explored: creating the 1st Mickey Mouse equivalent for digital will ensure a steady stream of multiple revenue streams for its creators, just as Chota Bheem has done for Green Gold Animation. Syndication to traditional media e.g. TV or even print (e.g. comic strips) for digital / online content can be another avenue for monetization.

Selling digital products is another monetization stream which has been used effectively by online games (for unlocking special levels, tools, weapons, et al) and can be replicated by other digital content publishers e.g. for sports and digital reality shows. As e-sports becomes a large audience puller and money spinner (making Amazon’s acquisition of Twitch look like a bargain in hindsight), digital purchases that can unlock special camera angles or allow asking questions during a live stream may be lapped up by the loyal users.

As digital and offline worlds blur, affiliate revenues can be earned in significant ways by integrating the option to directly purchase items showcased in a show. Charmboard is a destination that already does it in India. Further, with VR-based shows, it will become an even stronger opportunity. AI technologies can analyze and identify items (electronics, dresses, etc.) in the frames and offer a seamless shopping experience for the same.

Other methods have the potential to serve as fine complements or whole revenue models for not just specific publishers but also individual digital content creators. On platforms that allow individuals to self-publish / self-stream, individual tipping is coming up. This is especially true for impulsive media interactions e.g. live performances streamed digitally. This is enabled by increasing support for micro-transactions. Use of a virtual tip jar is often the biggest source of earnings for online celebrities in China. YouTube is also dipping its toes into opening new revenue streams for digital content creators with Channel Memberships, where viewers pay a monthly recurring fee of $4.99 to get unique badges, new emoji, members-only posts in the Community tab, and access to unique custom perks offered by creators, such as exclusive livestreams, extra videos, or shout-outs.

Crowdfunding, which has launched success stories like Pebble smartwatch in hardware, can be also a way to bring perhaps a story from another media (e.g. pages of books) to digital. Initial Coin Offerings, a controversial way to raise funds can enable monetization for projects. Smart-contracts on emerging blockchain platforms can ensure all content owners and other stakeholders to be compensated fairly for their efforts. Decentralized blockchain-based systems will also help users finely control what bits of their personal data is accessible for which digital publisher and thus, engage differently with different publishers. Publishers will in term may have to start offering price tiers for access, depending on what each user is willing to disclose (and thus be targeted with ads and offers) or bear (pay). But blockchain-based technologies can also lead to disintermediation of certain entities e.g. music labels, as discovery and promotion of artistes happen in more direct to consumer ways on digital.

To summarize, digital revenues are expected to continue growing with new opportunities for monetization opening up. These will be driven by combination of technology (AR / VR for content formats, machine learning for better targeting users), business models (new ad formats & subscription models, tipping, virtual goods, ICOs, etc.) and evolution of target audience. Digital media and entertainment industry will become an even more integral part of mergers and integrations occurring in other spaces e.g. ISPs and telcos. Things are merely getting started in the monetization journey, as it turns from a country road driving to an autobahn cruise. 

(Written with contributions from Siddhartha Banerjee and Minii Thapar)