05.01.2005 02:38 PM
Report says TV network model obsolete

The global broadcast television industry is undergoing fundamental, unstoppable change that is rendering the network model obsolete, says a new report by Deloitte’s Technology, Media & Telecommunications (TMT) industry group.

The report, “Television Networks in the 21st Century: Critical Mass in a Fragmenting World,” argues that the model of a few dominant network channels — funded by advertising — has long been disappearing and may soon be gone for good.

However, these changes also create new opportunities — for networks that can evolve into a multi-dimensional, highly adaptable, customer-focused model. They also are expected to result in a variety of innovative products and services for consumers.

Tony Kern, deputy managing principal, U.S. TMT group, said consumers are seeking content across an expanding array of transmission media, channels, interactive platforms and devices. As a result, consumers — and their pocketbooks — will be increasingly spread across a wider range of options. Audiences will splinter into many smaller pieces, even in countries that have undergone fragmentation for years. Networks will no longer attract mass audiences, and therefore they won’t be able to charge premiums to advertisers. Their legacy business model will no longer be viable.

However, there is good news. Demand for content is exploding in all forms of media, and this creates significant opportunities. Cable subscription revenue has tripled since 1997, and DVD revenues have skyrocketed by a factor of 15. New mediums — such as Internet Protocol Television (IPTV) — have the potential to drive revenues even higher.

The report predicts that successful television networks will adapt to this new world by minimizing the fragmentation of their audiences and generating income from entirely new activities. They will offer content and programming across a variety of media channels and formats; re-package and market content and services; and significantly extend the content’s lifespan, by offering more digital content that can be quickly and easily packaged, and sold or rented across a wide range of media.

A copy of the report is available at www.deloitte.com/research/tmt/.

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