The Battle for Premium Content Andrew Snead - Senior Partner, Americas Sam Evans - Partner Daniele Pe - Associate Partner One World Trade Center - NYC - October 2018 DELTA PARTNERS CEO SUMMIT 2018 PARTNERS DELTA THETHE DELTADELTA PERSPECTIVEPERSPECTIVE DELTA PARTNERS CEO SUMMIT 2018 The Battle for Premium Content - Reviewing the CEO Summit One World Trade Center - NYC, NY - October 5th, 2018 Authors: Andrew Snead - Senior Partner, Americas Sam Evans - Partner Daniele Pe - Associate Partner Delta Partners’ annual CEO Summit actors have entered the stage has established a reputation for forcing traditional companies to bringing together leaders from adapt their role and participation, across the telecoms, media and both trying to harness and/or technology ecosystem to debate respond to new technology and key strategic questions facing their shifts in consumption behaviour. organisations and the industry. The implications are multiple, including radically new business For 2018, the focal theme was models (e.g. direct-to-consumer), ‘the battle for premium content’ escalating premium content costs in response to the major disruption and bold M&A moves. playing out across an increasingly diverse ecosystem of traditional Beyond traditional telecom and and non-traditional players. New media players, the event was 3 DELTA PARTNERS CEO SUMMIT 2018 attended by global tech companies (Amazon and • Small can be big. Building targeted content Facebook) and major sport franchises (Manchester propositions (and related offers, such as City, the NBA and Miami Dolphins). merchandise) around fandoms can be valuable Several pivotal questions were debated throughout • Emotional attachment over the day: engagement. The future winners will be those who can build and monetise genuine emotional • What is the relevance of premium content within attachment and passion the intensifying battle for consumer engagement? • The latent potential of sports. There is • How can content creators and distributors cut significant upside potential in sports franchises. through the noise and distraction of the Internet Maturing of direct-to-consumer coupled with to deliver appealing experiences? tech evolution, such as VR, are possible triggers • Beyond live rights, how can sports organisations that can unlock fan monetisation create value from content? • The 90-minute game could evolve. The • What strategic posture should telecoms operators continued reduction in attention span combined adopt (in relation to video) and should they invest with interest in alternative viewing experiences in premium content? potentially puts the traditional 90-minute soccer match at risk as the sole offering • Why have telecoms operators failed in their attempts to create compelling mobile video • Experience trumps content ownership. experiences? It’s not about content ownership being right or wrong, it’s about creating compelling, • How does the current regulatory framework need personalized experiences. to adapt to meet the needs and implications of an increasingly complex digital economy? • The industrial-age regulatory framework has run out of steam. A new digital-centric From the discussions, it is evident that the ‘battle for regulatory framework is required and, in keeping premium content’ remains comparatively embryonic with the times, needs to be suitably agile – content producers are still adapting to mobile distribution, the true long-term content ambition of The remainder of this document provides a summary social media platforms is unclear, telecom operators of the discussion and key debates. are still deciding whether to build, partner or buy, and sports organisations are only now starting to think about how to leverage the Internet and direct- to-consumer models to monetise content. Equally, investors seem uncertain on how to reward or penalize the various moves taking place. Such dynamics are playing out in a largely 2D world. The maturing and adoption of augmented and virtual reality coupled with advancement in artificial intelligence will undoubtedly heighten the stakes and attention. The key takeaways: • Live over non-live. Content is a major engagement driver but does not necessarily need to be premium. ‘Live’ is far more engaging than non-live 4 DELTA PARTNERS CEO SUMMIT 2018 Tom Wheeler, Former US FCC Chairman Regulatory framework: the industrial age is dead so why do we continue with an industrial age regulatory framework? Tom Wheeler, ex-Federal Communications Commission Chairman, reflected on the growth of the digital economy and the rise of companies such as Google, Facebook and Apple who have become immensely powerful, not only financially, but socially and politically. Digital platforms have become a ubiquitous part of our culture, with far-reaching implications. While most of us benefit from the variety of digital services on offer as we order taxis or pizzas, it is becoming increasingly evident that some digital platforms have aided election interference, propagated disinformation and misused our personal data. So what? Tom outlined the need for a regulatory framework that is fit for our time. The existing framework, he argued, was designed for an industrial age that no longer exists. Instead, we need a regulatory framework that not only addresses the opportunities, challenges and implications of an increasingly complex digital economy but one that mirrors the working practices such digital players have helped create – i.e. agile, flexible and adaptive. Discussion focused on the fundamental question of whether digital companies need to be regulated and whether such regulation would kill the “permissionless innovation” that many, such as Eric Schmidt, have suggested is critical to their very being. Tom highlighted the benefits such innovation has afforded us, yet at the same time, resulted in “permissionless invasion and interference”. In his view, the regulation of digital corporates needs to yield to a common, legally binding set of policies that govern the provision of digital services based on a set of core beliefs: privacy; marketplace competition; and operational openness. Discussion centered on the topic of personal data and how the ownership and exchange of such data should be both managed and regulated. Much discussion followed but the fundamental question that remained was how to adapt an industrial age, 20th century regulatory paradigm for a 21st century digital reality and how to reinstate stability and security for both consumers and corporates. The notion Tom left the participants with was that the answer would likely be more appropriate and fit-for-purpose if the leaders of such digital organizations proactively step up to help architect it. 5 DELTA PARTNERS CEO SUMMIT 2018 The new engagement: emotional attachment Across the TMT industry, the increasing number of Is engagement enough – hasn’t the industry participants in the final ‘T’ – technology -, game shifted to creating emotional coupled with growing speed of change, is driving attachment and passion? fragmentation and noise. We have a seemingly endless choice of applications and services competing However, engagement alone is insufficient. To truly for our attention and mindshare throughout the day cut through the noise and distraction of the Internet, (and night). and capture meaningful mindshare, the key objective must be the creation of emotional attachment and As such, operators, traditional content players, social ‘passion’. Video content can do this by building an media and technology platforms are all vying for emotional connection, a sense of community or even ‘engagement’ - enticing customers via habit-forming tribalism in some cases. For instance, Manchester City products with the objective capturing mindshare has around 30-40 million Indonesian fans, of which a in a meaningful way and, as a result, cross-sell and few million “live and breathe” the football club. Star upsell product and services or drive ad revenue by Wars has created a fandom of millions of dedicated harnessing customer data analytics. followers globally that worship the franchise. They dress up for movies, spend thousands of dollars The Summit participants agreed that video content on gadgets, attend the multitude of conventions is arguably the veritable driver of engagement. It not organized every year and have even created “Star only has the ability to attract subscribers to a specific Wars day” (May 4th). service but can increase the time customers spend interacting with that service, boost the richness of Glenn Lurie, CEO of Synchronoss, moderated a the interaction and drive retention. panel featuring Tony Goncalves, CEO of Otter, and Ricky Van Veen, Facebook’s Head of Global Creative Exhibit 1: drivers of engagement 6 DELTA PARTNERS CEO SUMMIT 2018 Strategy, which highlighted how success in the battle community boards) can result in attracting over 300 for engagement today means rethinking the meaning million active users monthly. of the traditional engagement drivers - eyeballs and time - and expanding the concept to truly drive new levels of customer interactions. That’s when ‘passion’ How can the engagement window be and ‘emotional attachment’ start materializing. extended beyond the show time? Enlarging the window of engagement beyond a Is blockbuster content the only way? 90-minute soccer match or the 30-minute show is Can targeted fandoms be a path to paramount to building customer attachment while meaningful value creation? increasing the return on investment for content cost. Facebook is