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Economics of distribution in M&E has dramatically changed: John Rose

Q&A with senior partner, The Boston Consulting Group

Economics of distribution in M&E has dramatically changed: John Rose

Arnab Dutta New Delhi
As digital media is gaining acceptance among consumers globally and in India, its importance in media and entertainment (M&E) is increasing. JOHN ROSE, managing director and senior partner of the New York-based The Boston Consulting Group, talks to Arnab Dutta about broadband disruption and allied subjects. Edited excerpts:

What are the most significant changes you observe in M&E?

It is undergoing a transformation as the digital medium is in full bloom. The economics of distribution has changed dramatically. For all major traditional businesses like the print media companies, music or video content creators, huge investments are required to bring in the required change. Also, the investments they had made in setting up infrastructure become less fruitful. As the product changes form, from physical to digital, the relevance of set-ups for publishing and people in logistics change.
 
Broadband internet has disrupted the way companies in M&E used to run. In the old world, publishers with a set-up for distribution were in command; now, distribution is an unrelated thing. Sectors are going through structural change; innovation and value creation are becoming more important. 

How do all these affect revenue of the companies?

The importance of various firms have changed, depending on their role in the supply chain. For example, those like Netflix which were not relevant maybe a decade ago are now worth more than most video content creating companies. If you are Spotify or Netflix, your business is growing. If a radio station operator, it’s shrinking. 

Traditional media companies are getting much less from the total revenue pie of the digital medium. In the physical world, a direct relation exists between advertisers and content creators. In the new world, where supply-side providers, demand-side providers and exchanges play intermediaries, the share of advertisement revenue goes down further for traditional players. Social media has taken some share. Firms like Twitter and Facebook are competing with news media. 

Where does India stand in digital transformation?

As India is seeing an explosion in availability of smartphones and rolling out of high speed internet broadband, the adoption of digital content will continue to be smartphone-centric. So, India will be a mobile-first market; personal computers, tablets or television sets will be in the backseat. But, an embedded approach towards management and protection of intellectual property is lacking. Unfortunately, less original content is created here, compared to the size and scale of the market. As concerns about protection of content prevail among companies globally, much less international content reaches here. 

Isn’t the movie industry most affected due to lack of intellectual property law?

India has one of the most vibrant of movie industries but export from that industry is very much less. In the evolved markets, film revenue comes from a number of avenues. Indian producers are primarily dependent on collection from theatres. It is necessary to have a stringent law and its implementation. In the US, it took years to change the mindsets of consumers. Constant effort and execution of the law made that possible.

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First Published: Nov 01 2016 | 10:35 PM IST

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