Accenture Survey Finds Broad Agreement Within Media and Entertainment Industry on Direction of Digital Market

NEW YORK; May 2008 – Media and entertainment companies are in broad agreement on the way the digital market is evolving, where the opportunities lie and what will drive revenues over the next five years, according to findings of an Accenture (NYSE: ACN) survey released today.

Accenture’s 2008 Global Media Content Survey — the company’s third annual survey of more than 100 senior executives in the media and entertainment industry -- examined the growth strategies of companies across the landscape of advertising, film, music, publishing, radio, the Internet, videogames and television.

The survey revealed that there appears to be strong consensus as to what will drive future growth. The vast majority of respondents (70 percent) indicated they derive some revenue today (albeit less than 10 percent) from new alternate forms of media – such as downloading or watching TV programs “on demand,” digital advertising or user-generated content – or can’t determine how much of their revenue comes from these new sources. Based on the participating companies, that small percentage of revenue actually represents tremendous growth and substantial revenue streams are being derived today from these new forms of media.

Four of the main sources of revenue growth cited by respondents in this year’s survey are the same as those identified in last year’s survey, which indicates growing consensus about the potential of new platforms. These four sources of revenue growth — predicted to be the dominant business model five years from now — are multi-platform distribution, short form video, social media / user-generated content, and advertising.

* Multi-platform distribution. When asked to identify the largest drivers of revenue growth over the next five years, two-thirds (66 percent) of respondents cited new platforms or new ways of delivering content — significantly more than the number who cited new content types (24 percent) or new geographies (10 percent). And nearly two-thirds (63 percent) of respondents said they will pursue a “multi-screen” distribution strategy, which includes television, online and mobile delivery.

* Short-form video. When asked which content type will generate the greatest growth, the greatest number of respondents — 38 percent —cited short-form video, with online portal/publishing second (23 percent) and video games third (18 percent).

* Social media and user-generated content are high-growth opportunities. Two-thirds (68 percent) of respondents identified social media and user-generated content as a high-growth opportunity, and more than half (56 percent) said they are already involved in social media in some capacity.

* Advertising. When asked to identify what they believe will be the number one business model in five years, nearly two-thirds (62) percent of respondents selected advertising-supported business models, compared with 25 percent who cited subscription-based services and 11 percent who cited pay-per-play services.

“It is great news that media organizations are developing a consistent strategic view of the key growth areas, but execution is slow,” said Gavin Mann, digital media lead for Accenture’s Media & Entertainment practice. “There clearly remains a huge effort to put in place the necessary capabilities, and it is apparent that the size of the task is still not fully understood. I am not claiming it is easy to turn around some of the world’s greatest media organizations, but I do believe it is essential if they are to remain great.”

While half (50 percent) of the executives interviewed said they know which capabilities they need to take advantage of in this new digital market, Accenture believes that many have a false sense of their current capabilities. Sixty-six percent of the respondents have less than 40 percent of required capabilities, a number that is unchanged since last year’s survey, indicating that companies need to implement new digital technologies or be left behind.

For example, nearly 80 percent of executives said that their organizations have a consistent view of intellectual property rights (i.e., have the same understanding of the rights associated with a specific intellectual property across their entire business). In Accenture’s experience, considerably fewer organizations actually have the flexibility necessary to capitalize on fast-developing opportunities.

“We interviewed executives at the very top of their organizations, and at this level it might appear that they share a consistent and flexible view of intellectual property,” Mann said. “However, in many cases we believe this will actually require inordinate manual efforts, or work-arounds, throughout the organization each time a new distribution channel is launched. Such a cost structure is not sustainable over the long run.”

Among the survey’s other key findings:

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Digital advertising will drive a large portion of future revenues. Almost every media company is trying to adapt to the reality of digital advertising as a major source of revenue. Fifty-two percent of respondents said they see digital advertising eclipsing traditional advertising within five years, and 62 percent said they believe that content will be supported by a variety of digital advertising methods, including branded content, search, sponsorships, performance and a mix of all of these within the next five years.

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The Web 2.0 phenomenon is here to stay. Two-thirds (66 percent) of respondents said there is no likelihood of the Web 2.0 “bubble” bursting during the next 24 months, and 71 percent said they do not see any risk in allowing their brands to be associated with social media.

* Uncertainty as to when the mobile market will take off. When asked when they believe the nascent mobile market will become a mass market, respondents were split, with slightly more than half (55 percent) saying within three years, while slightly less than half (45 percent) said they believe it will take longer.

* There are several barriers to the mobile market. Consumer readiness continues to be singled out as a barrier to the mass uptake of the mobile market, cited by half (51 percent) of the executives surveyed. Respondents also cited other barriers, including companies’ ability -- or lack thereof -- to provide a consistent user experience (cited by 42 percent of respondents), as well as a lack of readiness among both content owners and mobile operators/networks (cited by 37 percent).

More information on Accenture’s Global Media Content Survey can be found at www.accenture.com/2008contentstudy.

Methodology

As part of its third annual Global Media Content Survey, Accenture surveyed more than 100 senior leaders and decision-makers in the media and entertainment industry -- spanning television, videogames, film, music, radio, publishing, interactive entertainment and advertising -- in North America and Europe. The goal of the survey — which was based on in-depth telephone and face-to-face interviews with select executives in the United States, the United Kingdom, France, Germany, Austria, Belgium, Switzerland, Italy and Brazil — was to identify where industry executives believe the greatest opportunities and challenges will come from over the next five years.