Patrick Forth, global leader of The Boston Consulting Group’s technology, media and telecommunications practice and a member of the corporate development strategy and operations practices, has offices in Sydney and London. “But I am on the ride all the time, from China to the US to everywhere,” he said, on his recent visit to India to meet his clients. In an interview, he spoke about technology disrupting media businesses and measures the firms in the sector could take to stay afloat.
What are the changes in media firms owing to technology and consumer behaviour?
No industry has been impacted by digital disruption more than the media industry. Consumer behaviour around the world is changing dramatically. The print media industry is very concerned because around the world print readership is declining. But it’s true that around the world our consumption of media is increasing because we have so much more available technology. People have smart devices and high bandwidth connectivity, so you can watch a 4K video on the bus on your way home which you couldn’t do before. Of course, you could still watch media in your lounge on your big flat screen but you can snack bite on social media while you are in a traffic jam or in the lift.
So, media consumption is growing. Customers expect to hear the news when it breaks, whether that’s on Twitter or on a masthead. They expect to see the news and the social comment around it straightaway. Consumer expectations have risen enormously.
So if we don’t change our business models in the media industry, we have got a big problem because there are disruptors coming in all the time… whether it’s social media or instant messaging, or even traditional media that is getting it right in terms of mobile-first offers. Technology is turning our industry pretty much upside down.
What’s the impact on traditional media as social, mobile and video channels mature?
Traditional media, if it doesn’t respond, will clearly be challenged and may even die. If you look to the US, many print media companies have already died. So the challenge for media companies is to change the business models to understand what consumer needs are and to react and respond to that. Now those who react and respond well will have a great future. There are companies like Recruit in Japan, which have successfully transformed from print to digital. There are many print media companies which have turned old classifieds ads into online verticals like real estate, jobs and automotive sales. Others are experimenting with mobile-first business models and ancillary businesses like conferences, loyalty and e-commerce. So there are many ways in which a media company can respond.
What are some of the smart media companies doing in mobile?
The first thing best companies are doing in mobile is designing mobile-first customer experiences. In mobile-first, the word “first” is very important because what many media companies design for is print and then say we better put that on our mobile website. That is not mobile-first. If you really design mobile-first, then there is no 11 o’clock cut-off because it is a 24-hour cycle where news is continually refreshed. That is a big change and not many print media companies have moved there yet. Then there’s the user experience of the mobile version—how easy is it to navigate, to export an article to a social media site or to save that article. Or how easy is it to contribute to social media responses on that article in real time. That’s what I mean by mobile-first.
That is not all. It is a different way of writing for editors and journalists. It’s a different cost base in terms of what’s needed to support that because lots of mobile businesses are very low-cost. They don’t have the infrastructure of large print presses you have in the print media industry. So it’s a different mindset.
There is also obviously video. Video consumption has grown astronomically. So journalists need to respond to this. So how do you gather that video, where do you put that on the mobile site, how do you then put adverts in. So the incorporation of video in that business model is also very important.
What is your advice to traditional media firms?
The first one is to manage the existing business for profitability. There is a lot of value embedded in print media companies by just doing today’s business better—better advertising solutions, more efficient corporate systems. That gives them more profits and, may be, more time to think about where this is going. So, job No.1: make today’s business better. Job No.2: think about how to move to that digital business model—mobile-first, innovative, different cost based, highly responsive, driven by data and analytics. And may be No.3 is to think about the portfolio in the business. Are there other businesses you could be winning—online classifieds, travel, healthcare, education? So those are the three challenges, make today’s businesses work, transform today’s business and think about building a new business. It is a challenging but a very rich agenda for media company executives.
Monetizing digital media is still an issue.
It depends. If you look at things like real estate, jobs and cars, those businesses are highly profitable. If you look at Recruit of Japan, it is highly profitable. Many digital businesses are profitable. I think what you are talking about is the digital mastheads. That is a little different. In many countries, we have become used to getting news for free. So we expect it online for free now. In many countries around the world, people have put up paywalls; it’s a very hard thing to do. But monetization is certainly growing. You have to be very careful about the trade-off between subscription revenue and advertising revenue. What you were implying is that digital advertising yields are much lower than they are in print. It is just a different business. You need to think about how to respond to that. But digital profitability is clearly increasing. It is a tough transition. But it’s doable.
In the past, Nikkei acquired The Financial Times and Jeff Bezos acquired Washington Post. Do we see more such deals?
There will be a lot more deals in the media industry for sure. The logic for doing them is different. So Nikkei and the FT, I think, was about building a global business news franchise. That’s a specific segment. It is very amenable to a global value proposition because in this world of global business, Americans are interested in what happens in Japan, China and India and vice-versa. So that’s the logic on that one.
Bezos buying Washington Post, you can speculate to what his logic was. I don’t think it is the biggest jewel in the Amazon crown, but may be it has its uses. Then there is some consolidation still taking place. I am sure there will be some in emerging markets. Here in India also there will be some consolidation. There are companies getting into new areas—digital , video, mobile, production. So you will continue to see a lot of M&A activity.