IBM Report Indicates Hundreds of Billions Up for Grabs in Media and Entertainment Industry

IBM Releases Recommendations for the Industry on How to Navigate the Media Divide

ARMONK, NY - 26 Feb 2007: IBM (NYSE: IBM) Global Business Services unveiled its new report, “Navigating the Media Divide: Innovating and Enabling New Business Models,” which offers a list of actions that companies can take to navigate the conflict threatening traditional content owners and media distributors. IBM calls this conflict the “Media Divide.”

To examine the inherent tension between new and traditional media and explore future industry scenarios, IBM conducted a comprehensive study that included interviews with leaders of media companies and an in-depth analysis of the factors that are shaping the industry outlook. The IBM report shows that new forms of media will grow at 23 percent compound annual rate in the next four years, nearly five times that of traditional media businesses. The report also estimates that the music industry lost between $90-160 Billion in its transition to digital and finds that future implications are even greater for television and film if companies do not systematically navigate the media divide.

“The current clash between traditional and new media has reached a fevered pitch. Industry incumbents are responding -- but perhaps not quickly or completely enough,” said Steven Abraham, Global Industry Leader, IBM Media & Entertainment. “Now is the time to determine changes in business models, innovate and re-evaluate partnerships. Content owners and media distributors must take action before it’s too late.”

IBM sees a clear delineation between the old and new worlds of media. In the traditional world, content produced by professionals and distributed through proprietary platforms still dominates. But in the new world, content is often user-created and accessed through open platforms. These polarized tendencies mark the clear and present conflict between incumbents and new entrants. A second conflict is emerging among existing players -- between traditional content owners (studios, game publishers and music labels) and media distributors (television affiliates, retailers, motion picture exhibitors, cable and satellite providers). This media divide is pitting partner against partner in a struggle for growth.

As a result, IBM is releasing ten specific recommendations that are designed to help companies address the immediate challenge of reinvention for the new media world. But they are also meant to help navigate the media divide that could send them in a totally different direction from where their traditional partners are headed. The recommendations guide entertainment companies on (1) Innovation for Consumers (2) Innovation with Business Models and (3) Flexible Business Infrastructure. An extensive guide and the ten specific recommendations for navigating the media divide can be found at: www-935.ibm.com/services/us/index.wss/ibvstudy/gbs/a1026258?cntxt=a1000401

The study consisted of primary research and analysis as well as supplementary secondary research. IBM conducted one-hour interviews with more than 75 senior media executives, industry analysts, economists and technology visionaries and also worked with the Economist Intelligence Unit to survey another 125 executives from media, Internet portal and telecommunications companies.

About IBM

With 80 years of leadership in helping businesses innovate, IBM is the world’s largest information technology and services company. IBM’s Global Business Services division provides thought leadership, consulting, systems integration and outsourcing to the world’s leading companies. IBM has a strong global focus on the media and entertainment industry across all of its services and products, serving all the major industry segments -- entertainment, publishing, information providers, media networks and advertising. IBM’s Institute for Business Value supports Global Business Services by developing fact-based strategic insights for senior business executives around critical industry-specific and cross-industry issues, part of an ongoing commitment to provide analysis and viewpoints that help our clients realize business value. For more information on IBM, please visit: http://www.ibm.com

Contact Information

Clay Helm

IBM Media Relations, Media & Entertainment

IBM

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