The overall number of entertainment & media (E&M) insolvencies has now reached record levels from the early days of the credit crunch, according to new research. Autumn 2009 marked a milestone of 1000 insolvencies in the UK entertainment and media sector since June 2007, according to PricewaterhouseCoopers LLP (PwC) business recovery analysis. But publishing failures […]
The overall number of entertainment & media (E&M) insolvencies has now reached record levels from the early days of the credit crunch, according to new research. Autumn 2009 marked a milestone of 1000 insolvencies in the UK entertainment and media sector since June 2007, according to PricewaterhouseCoopers LLP (PwC) business recovery analysis.
But publishing failures alone jumped nearly 25 percent this year (January to October inclusively) on 2008 despite a recovery for other sectors such as advertising. In fact publishing failures account for a third of all E&M insolvencies.
16/12/2009
The highest proportion of publishing insolvencies was in books, software, and journals & periodicals. This market is being hurt by several concurrent developments. The migration of readers from print to digital media has adversely affected print advertising. Even when the economy was expanding, print advertising in consumer magazines averaged low-single-digit increases.
Other publishing areas struggling are the business to business market, as reflected in the journal & periodicals insolvencies (20 percent of all publishing insolvencies).
David Lancefield, media partner, PricewaterhouseCoopers LLP, said: “The sheer number of administrations in the entertainment and media sector, particularly publishing, demonstrates the double whammy of a cyclical downturn and a structural transition to online.
“As a result survivors are searching for a new, sustainable business model. Media companies are experimenting with new charging models for online content, particularly the use of new subscription models and micropayments.”
Time your microcharging move
The industry is grappling with how much the consumer is willing to pay for content online and how to package content across multiple devices. Coming out of the recession consumer convenience and value for money need to be at the heart of any content strategy.
David Lancefield, media partner, PricewaterhouseCoopers LLP, explained: “Who commits first is an important element of the micropayment game. To be the only provider charging could lose an audience but it is equally as damaging to be left on the shelf.”
Rescue package or catch 22?
Peter Simon, director in PricewaterhouseCoopers LLP financial services practice, said: “Media companies should learn lessons from others industries more experienced in the payments sector – in many cases, launching new payment systems is not the same as making money.
“In practice, it brings a whole deal of complexity that many media companies will not have had to deal with before. The solution must be simple and consumer friendly, therefore limiting risk, however a simple click here to pay with a credit card will not likely offer the customer an engaging experience.”
The IT infrastructure supporting these sites also needs to be rigorous reviewed. Any server or site engineering problems could seriously damage a brand and with so much choice consumer churn will be very high.
Once the provider understands the relevant behaviour for their target consumer segment there are some basic choices to make, from subscriptions, to pre-pay, to providing loyalty points and rewards.
Peter Simon, director in PricewaterhouseCoopers LLP financial services practice, concluded: “Dynamic pricing may be vital to making microcharging work, but it is also clear that any payment solution can create very complex ecosystems (with several partner, joint venture and supplier relationships.)
“Even seemingly simple decisions such as fixed or variable fee setting, geographic scope, mobile solutions or customer loyalty offers can create significant cash flow issues. The upside of getting this strategy right can be the creation of a product with significant commercial, customer, brand and intellectual property value for the business.”
“While a micropayments solution could create significant value to media companies, they should not underestimate the complexity of implementing a paid- content system.”
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