Analyst Whacks Entertainment Industry - Publishers Need to Pay Attention

The short term view is that digital distribution hurts content businesses - including music, video, and THE NEWS. Users gain content free.

The global, long term view is that digital distribution expands the customer base. Normally, North America is one third of the global GNP. On the Internet, North America logs 20% of the unique users - dropping rapidly as China, India, and other third world countries gain access - particularly through cell phones. The US accounts for 5% of the global population. 

View	The New York Times' international bid, in print and online

Content providers need to think globally. This includes selling advertising to monetize the 80% of views that come from offshore sources. Today, global viewers dilute the ROI for national advertisers. Global users gain the news free; while hurting the reputation of publishers as an effective advertising medium. The resulting effective CPM is a fraction of legacy rates. 

Growing the reader base is good for the global economy. It's a trend that cannot be stopped. What needs to change is how we sell advertising. Stay tuned...

Lehman jumps on Silicon Valley bandwagon: “Content may no longer be king in the entertainment business”

from VentureBeat by Eric Eldon

Here in Silicon Valley, it has become a sport to beat up on traditional media companies for doing things like enforcing content copyrights. The argument you hear in these parts goes something like this: The way of the future is for content to be completely free, so media companies have to adapt to that or die. End of story. Meanwhile, Wall Street analysts are increasingly thinking the same thing.

The latest: Today, an analyst at investment bank Lehman Brothers, Anthony DiClemente, says that “Content may no longer be king in the content business.” Digital content distribution, audience fragmentation and file-sharing are likely to irrevocably eat away at movie and television company profits.

Just like people stopped buying CDs and newspapers earlier this decade, so too will they stop buying DVDs — a not-new idea that seems to just be hitting public markets via DiClemente. Instead, as he and many others posit, everyone will soon get their videos on Google’s YouTube or on any number of smaller video sites, as well as through file-sharing services and on Apple’s iTunes.

Of course, YouTube and iTunes aren’t the only huge new means of distribution out there. Others include social networks like Facebook, News Corps’s MySpace and others — not to mention mobile distribution services like online video site mywaves.

Meanwhile, YouTube has yet to nail its own revenue model, iTunes’ revenue is under attack from old media companies that want larger portions of its revenue — and the social networks are widely believed to not be worth the billions of dollars they’re valued at. What about old media-owned video sites, like Hulu, which goes as far as to offer entire movies online for free? It doesn’t seem it will ever be a multi-billion dollar business, according to one recent piece of analysis.

So, in sum, nobody these days has figured out how to make anywhere near the amount of money that has formerly been made from content...

Analyst Whacks Entertainment Industry: Major Cannibalization Set To Begin… Now

from paidContent.org by Joseph Weisenthal

Here's a bracing tonic to cure that post-holiday hangover: Lehman analyst Anthony DiClemente kicked off the fresh week with a big, across-the-board downgrade of the entertainment industry. His message: digital media is proving too disruptive to the film and TV industries. The companies he called out specifically were Disney (NYSE: DIS), Time Warner (NYSE: TWX), Viacom (NYSE: VIA), News Corp (NYSE: NWS). and CBS (NYSE: CBS). This is kind of old news (see the stocks of all these companies), so the interesting question is timing. Why now? DiClimente's view is that the cannibalization of physical media, DVDs particularly, has so far been limited, but that this is set to rapidly accelerate.

Accelerating the decline of the DVD are a slew of new digital distribution models that are starting to crack the mainstream: "To date, we have argued that until a capable video distribution player device finds a user-friendly means of transferring Internet-based movies and TV shows to the living room HDTV screen (i.e., widespread take-up of Apple (NSDQ: AAPL) TV penetration, Slingbox, Tivo, Xbox, or PS3 as potential device platforms), the traditional home video model remains "safe." But given 1) recent declines in standard-definition DVD sales reported by the big box retailers, 2) new strategies from Apple that may emphasize lower-priced movie options including the more popular iTunes rentals; 3) a recent strategy from Sony (NYSE: SNE) that underscores the value of distribution as opposed to content; and 4) given the increasing likelihood of PC/TV integration, this "status quo" argument is bound to failure, and no longer tenable, in our view. We humbly believe the "long tail" argument of why packaged media "will last longer than you think" is also untenable, as investors who have touted the structural benefits of the newspaper, radio/TV station, and broadcast TV businesses have all recently observed."...