DIGITAL DISRUPTION IS TRANSFORMING BROADCASTING,€¦ · reinvent content creation and production capabilities to get ahead of the massive shifts happening across the industry and

2 REIMAGINING ORIGINAL CONTENT PRODUCTION | COPYRIGHT © 2017 ACCENTURE. ALL RIGHTS RESERVED.

DIGITAL DISRUPTION IS TRANSFORMING BROADCASTING, challenging established value chains, rewriting the rules of competition, and recalibrating traditional measures of success. Content is at the center of this change. And value in the industry now depends on who best leverages it to attract and monetize an audience.

BUT, AMID THIS DISRUPTION, TRADITIONAL BROADCASTERS HOLD AN ACE UP THEIR SLEEVES. Their ability to create and produce original content at scale is a key source of competitive advantage, with which they can 'jump the S-curve', releasing trapped value while maintaining and evolving their core business (SEE FIGURE 1). Those who make a strategic shift to content production can generate additional revenue from international licensing deals and global/local syndication. Those are critical advantages in a time of slowing advertising revenues and rising costs of premium content.


Broadcasters must do more than simply defend the status quo. They must also innovate to fuel new growth and competitiveness. They must transform the core elements of their in-house content factories. They must strategically reinvent content creation and production capabilities to get ahead of the massive shifts happening across the industry and find new sources of growth. They must redefine traditional operating models, break down the silos within their organizations, and adopt new approaches to skills and workforces. And they must embrace digital technologies to drive new value and optimize investment strategies.

NEWBUSINESS

TRADITIONAL BUSINESS

A

B D

C

ADrive optimization across the in house capabilities to free up resources and fuel growth

TRANSFORM THE CORE

CRespond to headwinds in legacy business by leveraging on content production advantage to build new grow models around content

SCALETHE NEW D

Get the timing right to minimize risk

WISEPIVOT

BInvest in strategic in house production capabilities to release trapped value to sustain growth and content differentiation

GROW THE CORE

FIGURE 1 | S-curve of broadcasters transformation Source: Accenture analysis, 2017


ATRANSFORM THE COREDrive optimization across the in-house capabilities to free up resources and fuel growth

BGROW THE COREInvest in strategic in-house production capabilities to release trapped value to sustain growth and content differentiation

CSCALE THE NEWRespond to headwinds in legacy business by leveraging on content production advantage to build new grow models around content

DWISE PIVOTGet the timing right to minimize risk

THE NEW CONTENT ECONOMY


Broadcasting today faces a challenge. The new content economy is increasing demand for content, just as the complexity of managing it is rising. Four emerging changes are forcing broadcasters to rethink their traditional strategies and in-house production capabilities (SEE FIGURE 2).

FIGURE 2 | Challenges for traditional broadcasters in the new content economy

DISRUPTING THE TRADITIONALapproach to growth


The appeal of premium content is obvious. It can increase subscriber numbers, drive up revenues and offer a way to introduce related services. Digital platforms like Google, Facebook and Amazon have joined industry incumbents in using it to build engagement.

They know that good content drives traffic to their assets. And that a valuable inventory builds customer loyalty and “lock in.” Such engagement is essential for all video players. It enables them to sustain their digital ad-based business models while also reducing marginalization of their brand in digital.

Engagement’s becoming the new measure to track the ROI of content investment. Traditional pay-TV players like Sky use KPI such as passion score to track the level of customer engagement and direct their decisions about content spending and their investments in original productions. Moreover, original and premium content is also a key driver in building a customer base that can be monetized more widely. For example, Amazon is estimated to have spent more than $3 billion in 2016 on music and video content, aiming to boost renewals of its Prime subscriptions. The potential benefits are clear: in the 12 months leading up to October 2016, each US Prime member spent roughly $2,500 through Amazon. In the same period, non-members spent just $544.

CONTENT PRIMACY FOR CUSTOMER ENGAGEMENT

1

0

1

2

3

4

5

2012

4.1

Netflix startsproducing originals

CAGR 12-16

Content cost per subscriber/ month

USA pay TV

Netflix

1.7

2013

2.2

2014

2.7

2015

3.5

2016

4.0 4.0 3.9 4.3

34.73 38.75 42.77 46.86 50.17

4.9

Nextflix content spending in billions of dollars

+31%

+10%

+1%


NEW MASTERS OF ORIGINAL CONTENT AND PREMIUM RIGHTS Global demand for original content is booming. And as digital disruptors have impacted value chains, industry players have made bold plays in vertical integration and content control. These shifts are evident in Amazon’s and Facebook’s recent moves to acquire premium sports rights and in their growing investment in original content. Similar forces were at play in AT&T’s acquisition of Time Warner, and Sky’s move into mobile connectivity.

The boom has been fueled by digital disruptors, both in their role as content buyers and in the ease with which they bring content creators and consumers together. These disruptors have several advantages over traditional TV players. Their ability to acquire content across global markets means they can easily bundle smaller markets together with existing deals in larger mature territories. The more markets available, the more subscribers over which to amortize content costs, and the more attractive the economics become. For example, Netflix has increased its investment in content by more than 20 percent in the last five years, without increasing its overall spending per customer (SEE FIGURE 3).

FIGURE 3 | Netflix content spending and average cost per customer comparison with pay TV Source: SNL Kagan — (US data) and Netflix corporate data

2


What’s more, because their platforms serve multiple business models, disruptors can more easily release funds to invest in original content and compete for premium rights. Our analysis shows how disruptor internet software and services businesses have between 20 and 25 percent free cash flow (SEE FIGURE 4). That’s far more than traditional industry players (5 to 10 percent) and especially broadcasters (10 to 15 percent). This creates a new mastery of premium content, with digital video services, such as Netflix and Amazon, triumphing for the first time at the 2017 Academy Awards, winning four Oscars.

FIGURE 4 | Disruptors’ free cash flow far outstrips incumbents Source: Accenture analysis, 2017

0-5%

0%Wireless Telecom services

329,607

Internet and directmarketing retail

144,818

Broadcasting41,728

Cable andsatelite

80,403

Movies andentertainment

84,950

Internet softwareand services

117,910

DiversifiedTelecom services

669,524

5%

10%

15%

20%

30%

25%

10,000 20,000

Bubble size = Revenue of companies considered in the industry, $M

FREE CASH FLOWS ($M)

FCF/

REV

ENU

ES (%

)

30,000 40,000 50,000 60,000


HARNESSING TECHNOLOGY IN CONSTANT FLUX ACROSS THE CONTENT VALUE CHAINAdvances in technology are coming faster than ever. The digitization of distribution networks and production processes, together with the continuous evolution of formats, is driving profound change in all elements of broadcasting technology. And this is completely transforming the way in-house content is produced and managed. News and sports have both seen how fast and wide-ranging the impact of technology innovation can be. But entertainment is set to change just as radically. In particular, there are four major trends on the horizon: A. INSIGHT-POWERED PLANNING AND SUPPLY CHAIN MANAGEMENT In the new content economy, production must quickly adapt to continuous change while keeping costs and resource use under control. Planning tools are becoming more sophisticated, and advanced analytics and machine learning can now be used to optimize both human and technical resources. Moreover, advanced forecasting is increasingly able to identify the best production scenarios for an in-house production factory, whether that’s reducing spending, optimizing artistic resources, or maximizing the number of productions executed in parallel. For example, Globo relies on strong production analytics and forecasting tools, coupled with a systematic planning approach, aimed at minimizing the spare capacity of its 1600K m2 Production Studios and providing a wide range of original content. RAI, the Italian public broadcaster, is adopting digital planning and staffing tools to adapt production resources and staffing based on editorial needs and constant changes in demand.

3


B. IP AND DIGITAL PRODUCTION Real-time IP remote production is becoming a reality. Control rooms can relate to studios in remote sites. Physical assets and resources can be optimized, enabling flexibility and innovation. Digital workflows and studio automation have already been widely adopted in news production. The same will happen in entertainment, where they’ll bring agility, eliminate slow and manual processes, and improve scalability by serving content needs across multiple platforms. Post production, in particular, is showing how cloud-based video editing tools can boost innovation. These tools enable a liquid workforce to work anywhere and at any time, using any video resolution from standard definition to high-end 8K, with user-friendly interfaces that facilitate interaction and collaboration. The BBC has invested heavily in its new Studio Works Television Centre in the heart of London to offer among the most cutting-edge and flexible production facilities and assets in the UK. The studio aims to put production at the heart of the BBC’s operations and boasts a range of new technologies, with major investments made in equipment from 4K studio cameras, resilient live broadcast lines through to the latest in gallery control desks. C. INTELLIGENT CONTENT SUPPLY CHAIN The boom in content production, and the multiplication of different distribution channels, is increasing the volume of content that broadcasters must manage—and the speed at which they must do so. Technologies like artificial intelligence (AI) and platform-based solutions for managing intelligent content supply chains are now being used to better manage costs and improve speed. That’s happening across the supply chain, from document workflows to metadata and from quality checking to ingestion and delivery. Yet many broadcasters are still struggling to eliminate the inefficiencies of tape-based production, partly because of worries about impeding the creative process. These fears are unfounded, since tape actually hinders both innovation and the attraction of new digital-focused talent. D. FAST INNOVATION LEADS THE WAY Standards continue to change at a blistering pace. This is impacting the way content is produced, edited and curated across the entire value chain. It requires an ability to rapidly produce content while supporting new standards (mobile, UHD, etc.) and consumption platforms (360-degree video, virtual reality (VR), etc.). Productions must be able to realize multi-product and multi-device content using multiple technologies. There are huge untapped innovations to exploit. Just imagine the impact of VR, 360-degree video and drone-mounted cameras on the viewing experience of a sports game or entertainment event, for example.

Digital technology and automation shift the window of what’s possible in content production. They also generate significant savings through smaller production teams and simpler post-production processes. The key impact, for example, of newsroom automation can reduce the need for employed production resources by about 50 percent and reduce editing shifts by up to 100 percent.


DISRUPTING THE TRADITIONAL APPROACH TO GROWTHThese shifts have changed the landscape for broadcasters’ funding models. Increased competition has driven up the price of the best content, putting margins under pressure. And traditional revenues from advertising and syndica-tion are falling amid increasing audience fragmentation across digital channels.

Broadcasters who have adopted a content strategy have prospered. Our analysis found that those broadcasters who earn 20 percent or more of revenue from content production and licensing have outperformed their peers who rely on advertising income alone, achieving higher levels of capital efficiency and larger operating margins (SEE FIGURE 5).

FIGURE 5 | Broadcasters’ Performance Analysis Source: S&P Capital IQ, Accenture Analysis

Revenue CAGR

High Content Low / No Content

2.1%

-5%10%

4%

67%33%

0.9325%

-1.1%

-79%FLAT

-21%

77%23%

0.8322%EBITDA Avg

Capital Efficiency Avg

Enterprise Value CAGR

Future Value CAGR

Current Value CAGR

Average CV

Average FV

4


Broadcasters with high content revenue streams receive higher investor expectations about their future value, averaging 33 percent future value in the past 6 years, compared to 23 percent for companies with low content revenue.

FIGURE 6 | Broadcasters’ Enterprise Value Analysis Source: Accenture analysis.

Current Value

Future Value

0%

20%

2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016

40%

60%

80%

100%

78% 76% 52% 54% 75% 69% 87% 84% 52% 66% 94% 77%

22% 24% 48% 46% 25% 31% 13% 16% 48% 34% 6% 23%

HIGH REVENUE CONTENT COMPANIES

LOW REVENUE CONTENT COMPANIES


ORIGINAL CONTENT PRODUCTION REMAINS A KEY COMPETITIVE ADVANTAGE FOR BROADCASTERSThe new content economy brings new opportunities to monetize content and experiences and to develop proprietary IP around them.

With ingenuity, broadcasters will be able to acquire and create content more cost effectively. Instead of competing to acquire a large portfolio, they are well positioned to invest in original content and maximize its distribution across numerous platforms and beyond the boundaries of their local markets.

But doing so in a sustainable and cost-effective way requires that they adopt new content lead strategies and protect the creative and production skills that have often been abandoned in recent decades in favor of what were perceived to be less risky rights acquisition strategies.

FIGURE 7 | Broadcasters’ competitive advantages in the new content economy Source: Accenture analysis.

Is this value locked inside your business? How do you use in-house production to enable the core while building foundation for the new?

Creative and production capabilities, editorial, voice and tone

Content performance and optimization

Ability to work with multiple distribution channels

Continued brand strength that resonate across audience segments

CONTENT LEAD STRATEGIESRECALIBRATING INVESTMENTS TOWARD INTERNAL PRODUCTION In-house production teams often face a challenge in attracting the investment they need to provide the mix of artistic and operational capabilities that can realize the best ideas while optimizing costs.

Traditional broadcasters have in recent years focused on cost reduction. Those companies divest many of the in-house capabilities that can produce differentiating new content. Putting these capabilities back in place is challenging.

Content and editorial teams have viewed internal production teams as less flexible, less innovative and less capable of addressing production needs than externally commissioned producers. Those companies have instead focused on rights acquisition and external production, and have failed to make strategic investments in their internal capabilities.

But newly empowered in-house production teams are now emerging, able to sketch a strong editorial line and brand identity while driving new revenues and growth beyond the core business. These teams are moving away from pure execution strategies, with little or no artistic input, and are bringing different objectives, different investment profiles and a renewed focus on growth. In-house production is thus becoming more strongly embedded in the content supply chain, and more capable of bringing value, differentiation and a strong editorial tone to content creation.



New and existing approaches to in-house production can be viewed on a spectrum, from a pure focus on execution and optimization at one end, to a hyper-focus on original content and growth at the other (SEE FIGURE 8). This can be illustrated by three different models.

1 | SERVICE PROVIDER This model is focused on pure execution and optimization. In-house production aims to realize the editorial team’s design and guarantee the booking of internal resources. It lets broadcasters rationalize their internal investment and leverage the external ecosystem to differentiate their content, creating with time a lack of internal premium and core skills. The BBC has, in the past, adopted this model by cutting internal capabilities and outsourcing elements of its outside broadcasting, costume capabilities and post production. Yet that comes with a risk: internal production capacity is commoditized, and its ability to contribute to content differentiation is limited.

FIGURE 8 | Strategies for in-house content production Source: Accenture analysis.

BroadcasterStrategicPriorities

EXECUTION AND OPTIMIZATION

GROWTH AND DIFFERENTIATION

In-houseContentProductionMission

Key Characteristics

CONTENTPARTNER

SERVICEPROVIDER

PRODUCTIONSTUDIOS

Protect market positioning, offering a wide content portfolio, often commissioned or acquired

Differentiate the TV offering through original and self-produced content, to be monetized on all consumption platforms (own and 3rd party)

Complement traditional revenue sources, ideating and realizing original content and formats, also for external buyers (mainly entertainment)

Execute the production solution designed by the editorial team

Focus on short term planning and resource booking

Allocate resources based on requests and not necessarily on the fit with editorial needs and artistic impact

Identify the best production solution to differentiate the content and fit editorial ideas and budget

Evolve the production resources and capabilities in line with content strategies

Participate actively in the long term planning and product design phase, adapting in house capabilities

Integrate creative and production resources to design the best solution to fit with the artistic idea and the commissioner needs. Not necessarily manage the execution internally

Manage flexible resources in line with demand trends

Typically collaborate with the editorial team from the ideas scouting and design to position the execution as lever to differentiate the product

Own internally the produc-tion capabilities required to design unique and differentiating solutions, while using flexible models for production operations

1 2 3


2 | CONTENT PARTNER In this model, production aims to collaborate with the editorial team to define a project and oversee it across the lifecycle (SEE FIGURE 8). Production and editorial teams constantly discuss creative and artistic execution of the project in line with the budget needs. This lets a broadcaster react quickly to both market change and user feedback, and drives the ideation and production of unique and original content to generate new revenue streams for multiple platforms and international distribution.

Reinvigorated investment in in-house content has led to the creation of new content kingdoms beyond Hollywood. Increasingly Brazil and India are becoming content hubs, with a wealth of content being created for consumption locally and around the world. Globo and Televisa are good examples of broadcasters who are focused on original content production and that have emerged as “export giants.” These broadcasters are emerging as real challengers to the Netflix expansion strategy and are eager to capitalize on the huge demand for high-end Latino drama by investing in their production capabilities. In Europe, where most of the production capacity was retained in-house by public and commercial broadcasters, we are seeing the leading players such as RAI, the Italian public broadcaster, redefining their strategies to make it instrumental to their transformation to a modern media company. Finally in the USA, after years where broadcasters’ content strategies had been mainly focused on rights acqui-sition and external production, the big broadcasters such as Turner came back to empower their internal capabilities as a strategic asset to gain competitiveness.

3 | PRODUCTION STUDIOS In this model typically only a limited set of production aspects are managed completely internally. The execution of production can often be outsourced to partners to adapt to demand trends and operate according a flexible cost structure. The internal production has the role to collaborate with the creative team to identify the best production solution to fit with the creative idea and over-see the execution by selecting the best partners. Some broadcasters, particularly in Europe, see it as a less risky option than trying to compete with direct-to- consumer platforms for customer engagement and digital revenue. A broadcaster setting up an OTT platform has no guarantee it will attract sufficient viewers to pay off the sizable up-front investment in technology. A broadcaster focusing on content production, however, will spread its investment across different strands of content and will have increasing numbers of platforms as prospective buyers.

The trend was first evident in the UK with the launch of ITV Studios (SEE PAGE 17) and, more recently, BBC studios. The latter operates as a wholly-owned commercial subsidiary of the BBC, and aims to produce content for third-party media companies as well as the BBC itself. Other European broadcasters, such as RTL, ProSieben and Vivendi/Canal Plus are also seeking to build international production capacity.


Those three models position in different ways the in-house content production across the content value chain and, moreover, generate strong implications in the relationship models with the content and editorial teams.

FIGURE 9 | In-house production positioning across the value chain Source: Accenture analysis.

BROADCASTER’S CONTENT PRODUCTION VALUE CHAIN

STRATEGIC PLANNING

TV N

ETW

OR

K /

BR

AN

DD

efin

e sc

hedu

ling

need

s

ProgramSchedulingPlanning

ProductionOperationsPlanning

ExecutionDesign

ContentDesign

ProductionExecutionIdeation Delivery

EDITORIAL TEAMDefines the schedule and develops the content idea identifying the production requirements to be requested to production

Focus On Resources Booking and Short Term PlanningWorks realizing the production models defined by editor, with limited levers to optimize ideating

SERVICE PROVIDERProvides production factors to realize the production designed by the editor

EDITORIAL TEAMDevelops the content idea and asks for advice from production for the best execution modality

Focus On Production Model Design and Budget ManagementOversees all the key competencies to manage the relationship with the editor relevant to both the artistic/production side as well as managerial and budget sides

CONTENT PARTNERDefines the production and artistic project and oversees it throughout all the production lifecycles

Integration Between Creative Project and Artistic-Production SolutionFocus on execution design as an essential part of the product and reduction of execution phases oversight

PRODUCTION STUDIOS

Integrates creative and production components to stimulate new formats ideation and the definition of improved artistic/production model for the product

BROADCASTER'S CONTENT PRODUCTION VALUE CHAIN


Towards the end of the last decade, UK-based broadcaster ITV was heavily reliant on advertising income. That made them vulnerable to the 2008 financial crisis and the subsequent collapse in advertising revenues (which contributed to a 7.3 percent fall in their revenue the following year). But it prompted a change in strategy for the company. They looked to rebalance revenues and reduce reliance on UK advertising income. So, over the ensuing years, they made a consider-able investment in their production arm—ITV Studios—acquiring eleven production companies in the process. This content-led recovery plan was centered on assembling a large portfolio of successful series and formats with wide appeal, and licensing them across multiple platforms in the UK and abroad. Thanks to the international success of shows like Hell’s Kitchen and I’m a Celebrity, ITV sold 36 formats around the world last year. The company’s net advertising revenue now makes up just 54 percent of its total revenue. And its production capacity has doubled since 2010.

ITV’S CONTENT-LED RECOVERY PLAN

FIGURE 10 | ITV revenues pre and post ITV Studios creation, min £ Source: Accenture analysis.

2006

1.181

ITV Revenues ITV Studios Revenues

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2.082 2.0291.879

2.064 2.140 2.1962.389

2.590

2.972 3.054

% ITV Studios

% Adv, Online, Pay & Interactive

27% 31% 32% 27% 29% 32% 36% 36% 42% 46%29%

73% 69% 68% 73% 71% 68% 64% 64% 58% 54%71%

ITVSTUDIOS

CAGR ‘10 –’16: +6.8%


Moving away from the pure execution role of “service provider” is emerging as a key priority for traditional broadcasters. This makes them more able to bring value, differentiation and a strong editorial tone to content creation.

Positioning in-house content production as either a content partner or production studios requires a strategic rethink about internal capabilities and success factors (SEE FIGURE 11 AND 12). It means actively pursuing a deep and transformative change. It means connecting the dots across the organization to align creative, production and digital capabilities. It means simplifying and innovating operations, technology and strategy.

THE JOURNEY

TO WINTHE NEW CONTENT ECONOMY

FIGURE 11 | Transformation in the new content economy Source: Accenture analysis.

KEY SUCCESS FACTORS OF PRODUCTION POSITIONED AS CONTENT PARTNER

COLLABORATIVE

HYPER-EFFICIENTAND VALUE FOCUSED

DEMAND-DRIVEN AND CREATIVE-LED

PROPOSITIONAL

INNOVATIVE

TECH-PROLIFIC

Collaborate to design solutions to realize creative ideas in new ways

Adopt production models that guarantee delivery excellence and cost optimization

Work in line with demand, developing the best solutions to differentiate the product

Focus on meeting existing and activating new content commissioners’ needs

Fuel innovation across technology, capabilities and production delivery

Use technology as a strategic lever to drive efficiency and innovation

Key success factors to transform the in-house content production


FIGURE 12 | A winning formula to transform in-house content production Source: Accenture analysis.

Leading players and industry experts highlight how to transform the core components of production

IN-HOUSE PRODUCTION MISSIONTurner Studios

PRODUCTION CAPABILITIES AND ASSETSRai

RELATIONSHIP MODEL WITH THE CONTENT UNITSTurner Studios

PRODUCTION SUPPLY CHAIN MANAGEMENTRede Globo

PERFORMANCE MANAGEMENTAccenture

“The transformation started redefining the role of production to position it as an asset for the editorial team that we manage according to their creative control, while maximizing their budget.”

“A new era of production driven by new technologies adoption can completely change the way we produce content in the near future.”

“A complete change to the interaction models with brands and channels to manage a creative and budget conversation that values at best their idea but also optimizes the usage of resources.”

“Proper planning and alignment with the content team request to optimize usage and sizing of production capabilities.‘’

“Crucial to optimizing production is defining how to measure success and position the factory as an asset to enable broadcasters’ results, empowering all the stakeholders on production success and competitiveness.”

In this rotation to the new, there are five core elements to consider. These are the steps that leading industry players are using to take advantage of new revenue opportunities and drive future growth.


1 | PUT CONTENT PRODUCTION AT THE HEART OF FUTURE GROWTH Embedding an in-house content factory’s mission within a broadcaster’s strategic objectives is crucial in driving the deep transformations needed in the new content economy. It makes production a natural priority for the C-suite and internal commissioners alike. That brings the investment production needs to support its evolution, as well as the benefit of a positive impact on workforce motivation and a culture change that can break down internal silos and foster collaboration and synergies across end-to-end production cycles. But achieving these benefits means shifting in-house production away from a traditional resource provider role towards a content partner or production studios model.

2 | REINVENT RELATIONSHIPS WITH THE CONTENT TEAM—CO-CREATE AND CO-PRODUCE If investment in content is to really pay off, broadcasters need to completely rethink their current way of working. They must challenge existing operating models and move from vertical structures to horizontal, converged organizations. That way, they can optimize creative and production resources—and the collaboration between them.

So, they must leave behind “supply and demand” models in which production simply receives a list of requirements for execution. If it’s left to the content team alone to define a production, and size resources and book time accordingly, they’ll lack a direct interest in managing the cost—especially when it’s not part of their budget. Nor will resources be properly adapted for late or complex requests. The resulting cost and inflexibility risks unfairly branding internal production teams as lacking innovation, or seeming expensive in comparison with the wider market.Resolving these issues means breaking down internal silos, especially where editorial and production teams have different priorities or even compete against each other. It means embracing new production processes that instill a “collaboration from day one” attitude. It means increasing interactions while shortening production cycles. And it means getting the right skills and creative management in place.

Collaboration can realize savings of anything between 10 and 15 percent on overall production costs. But it requires content and production teams working in partner-ship, on both the artistic and budgeting aspects of a production. And the skills required to do both are different: artistic realization focuses on the best way to fulfill a creative idea and align it with a brand’s editorial tone and strategy, whereas budgeting focuses on the operations and logistics of producing the idea, booking the resources and building a production project within financial limitations. So new roles may be required—Operations Managers responsible for editorial relationships and managing the budget, planning and production resources allocation, and Creative Partners responsible for designing the best production solution.


3 | INDUSTRIALIZE THE SUPPLY CHAIN WITH THE PERFECT MIX OF SCIENCE AND ART Content production is quite unlike supply chains in other industries. It contains creative and artistic elements which must be preserved and stimulated. Yet the production process as a whole must still be optimized. And seasonal swings in demand create endemic misalignments between what is needed and what is available from internal production facilities. Huge sums are thus spent on additional external capacity in the peaks of high season, while in-house assets are left underused during the lows of the off-season.

An efficient production capacity is one that is aligned with demand, and which has a planning process that minimizes the structural delta and operational inefficiency created by booking unused or unnecessary resources (SEE FIGURE 13). This means resolving both the overbooking of resources, where staff and facilities are completely booked (even if not fully used), and underutilization through a high use of external capacity. These issues occur when editorial and production teams are poorly synchronized. But they are also directly correlated to performance management, budget control and the ownership of costs.

Inefficiencies arising from the seasonality of audiences are no longer inevitable. Advanced production planning capabilities can increase flexibility (for example, by moving facilities to address simultaneous productions in peak periods) and identify alternative operational planning scenarios (for example, in the made-to-stock production of content). This offers a means of continuous optimization for both a single production and the overall production factory.

FIGURE 13 | Production factory supply chain management Source: Accenture analysis.

Resources and OB Vansover/under utilizationcompared to demand

Inefficient utilization of internal resources and use of external capacity for peaks and planning delays PRODUCTION

FACTORYCAPACITY

StructuralDelta

OperationalInefficiency

CAPACITYDEDICATEDTO THE PRODUCTIONPROCESS

CAPACITYNEEDEDFOR THE PRODUCTIONPROCESS

SERVICE PROVIDER

CONTENT PARTNER PRODUCTION STUDIOS

Brand/editorial team in charge only for creative budgetLimited incentives for editorial teams to optimize level of usage of internal production resources and proper booking and planning

Brand/editorial team in charge for the full product budget (creative and production costs)Editorial team using external commissions to optimize the product costs with impacts on in-house production saturation

An efficient production management requires the planning process oversight to guarantee a steady structure saturation and constant alignment between internal capacity and demand.

Production unit copes with market variability and organized with light structure and outsourcing to manage peaks.

ExternalCapacity

StructuralDeltaCapacity Dedicated toProduction Process

PRO

DU

CTI

ON

CA

PAC

ITY

TIME

ExternalCapacity

InternalCapacitySaturated byMinimizingStructuralDeltaPR

OD

UC

TIO

N C

APA

CIT

Y

TIME

ExternalCapacity

InternalCapacity to ManageRecurringProductionsPR

OD

UC

TIO

N C

APA

CIT

Y

TIME

ExternalCapacity

Structural DeltaOperatinginefficiencyCapacity Dedicated toProduction Process

PRO

DU

CTI

ON

CA

PAC

ITY

TIME

Production costs optimization leveraging external companies

NewContract

NewContract

NewContract

Potential impacts on internal resources usage

Operating Efficiency

Operating Inefficiency Delta External

Capacity


The content partner model of in-house production is one way of supporting this. Through greater collaboration, it enables constant alignment to reduce peaks and overstocking. It creates an incentive for production to optimize overall asset use, innovate and find more efficient ways to execute their activities. It ensures a long-term alignment between investment plans and capacity plans. And it makes better use of “make or buy” decisions and staffing of resources, driven less by the need to optimize usage and more by the potential impact on the production.

On the other hand, the production studios model tends to balance in-house capacity at the level required for recurrent needs and then leverage external capacity through the ecosystem to manage the peaks. For example, ITV and the BBC are rationalizing their studio capacities to guarantee production continuity while using external flexibility to manage the variable demand of third-party commissions.

FIGURE 14 | Efficiency of in-house production models Source: Accenture analysis.


4 | ROTATE TO THE NEW PRODUCTION CAPABILITIES AND ASSETSContent production is a capital-intensive business in which studios and talent must collaborate to produce the magic. Investing in the right capabilities is the key to ensuring a production’s success, as well as differentiation in the market. There are four steps to consider:

1. Empower core capabilities and leverage the ecosystem to fuel continuous innovationView in-house production capabilities not as standalone components but as assets to execute a content strategy. Adapt investments in strategic capabilities accordingly. Develop internal capabilities that can make the content unique—post production is one area that can have a significant impact on the quality and artistic merit of a production. Empowering in-house creative capabilities at the same time can generate incremental business results.

However, this must be done alongside collaboration with the wider ecosystem. For example, the rapid evolution of formats and languages may call for joint teams to experiment with new methods of production, with a view to quickly adopting the successes internally as needed.

2. Attract and retain a workforce fit for the new content economyCreative talent is often rare and expensive. Fostering a culture of creative entrepreneurship is key. And success depends on a careful balance of creativity and focused business skills to maintain commercial viability. Companies must establish an operating model which develops this culture and, within it, the right talent, skills and processes to ensure a competitive edge in content creation. Access to specialized talent on-demand (the “liquid workforce”) enables a company to “virtualize” a workforce through crowdsourcing. These liquid workforces should be seen as a value multiplier, rather than simply as a lower-cost workforce substitute.


3. Enable a product-driven technology evolutionThe technology focus of broadcasters must evolve away from simple efficiency and obsolescence management. A more strategic focus, driven by the needs of the production and the content, is required. This will enable continuous innovation in production facilities, with investments in advanced planning and forecasting tools. Not only can new technology optimize production costs, but it can also let a broadcaster produce higher-quality content in new and innovative ways.

4. Redesign production campuses and resourcesInvestments in studios and outside broadcasting capabilities should also be driven by the needs of production and not just by obsolescence management. To foster collaboration between teams, and make a step change in production quality, the production campus should be redesigned so that it can quickly adopt new technology (and replace it just as easily). It must also be designed to stimulate innovation and facilitate collaboration between production and editorial teams. The precise focus, and the level of investment, will depend on whether a company is looking for a content partner or production studios model for its in-house capabilities. Those who adopt the latter will, for example, focus on flexibility and scalability to compete on the wider production services market (as seen in ITV’s recent announcement of studio capacity rationalization in London).

FIGURE 15 | Creating a workforce for the new content economy Source: Accenture analysis.

PRODUCTION WORKFORCEROTATION PILLARS

Create competency hubs to stimulate continuous innovation and reinforce differentiation

Collaborate with a network of partners and liquid workforce to develop new competencies and innovate production models

Constantly engage the workforce and create a new organizational culture

Rethink the value of production to bring value and fit the content strategy

Talents and skills aligned with content strategy

Right mix of make or buy

Evolve roles and capabilities in line with business and editorial needs

Rethink ways of working and interacting with the editor

Nominate and empower change champions across all production life cycle

Engage everyone around transformation priorities

CHANGEACCELERATORS

RightTalents

New Methods& Roles

TransformationChampions

MindsetChange

EcosystemCollaboration

CompetenceHub

MODERN PRODUCTION

CAMPUSES

NEW TALENTS

C-LEVELSPONSORSHIP

EDITORALTEAMS

WORKFORCEROTATION


5 | MEASURE THE SUCCESSOne vital aspect of avoiding the underutilization of internal resources is having an effective performance management system. Such a system needs to clearly define the measures of content production success. This is undeniably a challenge for any broadcaster. They must keep costs under control to ensure a return on the investment. And, just as importantly, they must improve the use of resources (whether that’s the studios, the editing/cutting facilities, the executive producers, the ENG/EFP crews, or anything else). Many broadcasters have discovered that traditional key performance indicators (KPIs) are no longer effective at measuring performance in the new content economy.

Without a strong focus on costs, transfer prices for internal resources and assets are highly likely to exceed market value. In addition, incentives to executive producers are typically linked to the total cost of the content, and offer no rewards for using internal capacity. Both these conditions can result in the excessive acquisition of external services—even when there is spare internal capacity available.

The appropriate level of resources required for content production is not easy to define. During the budgeting phase, not all the characteristics of the end product will be clearly identified. Traditional performance management tends to focus exclusively on the difference between actual and budgeted costs. And this may result in planned needs that are structurally higher than actual needs. In fact, producers are required to budget costs by project and tend to overestimate during the budgeting phase in order to create an unstated contingency. In addition, internal production costs are frequently not allocated to a project (in an attempt to make in-house production seem more attractive) and are managed separately. This creates no incentive for editorial teams to look for optimizations.


To avoid all these risks, production budgets need to be under the control of editorial teams. And the performance management model must evolve to a product-driven view of profitability and ROI. Costs should be allocated to each editorial and production structure in line with the consumption of specific assets and resources, and each of these should be priced at a standard hourly rate. This enables the timely allocation of costs for each item of content. It also enables the cost of unallocated structures to be identified from the variance between quantities (e.g. the difference between needs and availability) and price (e.g. the difference between the standard/target and average actual price of each asset and resource).

Each one of these metrics could be used to define objectives for those involved in the supply chain, and thus to drive improved performance.

CORRECTLY IDENTIFY, through the structural quantity variance, the cost of under/overutilization and set targets for the C-suite and Content Area Heads accordingly. That will ensure strategic planning enhances the use of internal assets and resources and reduces the need for external capacity.

AVOID DISTORTIONS AND INEFFICIENCIES (lower productivity, higher quantities of resources charged to content, etc.) that, in the case of internal overcapacity, could be caused by setting the overall saturation at the same unique target for all those involved in content/services realization.

SET THE OPERATIONAL QUANTITY VARIANCE, together with process productivity, as a target for executive producers and channel/service managers (in other words, those responsible for product realization) in order to drive the appropriate use of both internal and external assets and resources.

IDENTIFY IN THE PRICE VARIANCE the most effective target for rights managers, heads of production facilities and CTOs (in other words, those responsible for each industrial asset) in order to ensure excellence in asset management regardless of the level of use (that is, the fulfillment of capacity needs at the lowest price).


Another all-important step in thriving in the new content economy is to set up an economically sustainable model, leveraging technology and sharing risk so that the in-house content factory is more competitive than the external market.

ADOPT A

DATA-DRIVEN CONTENT BRAIN TO SCALE THE NEW

Such a move is not without risk, since exclusive in-house production positions a broadcaster for both higher gains and greater losses. High-quality professional content comes with relatively high fixed costs and a relatively low hit rate of success. “Good” content, which attracts a significant mass-market audience, is scarce.

This poses a set of challenges for broadcasters. For those that have acquired their own content capabilities, the increased cost of content means the cost of failure is higher. And for those that haven’t, it means the stakes are raised when it comes to making programming decisions. But they can justify the higher level of investment if they can create predictable revenue streams. And they can minimize the financial risks of individual programs by placing them in a wider portfolio of content. Or by leveraging insights from audience feedback to make sure they’re investing in content likely to be well received.

Broadcasters must thus become better at analyzing and using the data they collect. They need to evolve their technology architecture, and then their operating models, to exploit this data at the very core of their businesses. They must develop the deep consumer insights that will help them understand what consumers want—and how much they’re willing to pay. This understanding should increase the likely success of future investments.

In making the shift to the new content economy, traditional broadcasters must adopt a culture that embraces change and challenges convention. They must abandon any “it’s always been done that way” mindsets and focus on strategic impact, and on the balance between growth and profitability.

This calls for a transformation not only within the production function itself, but also in the end-to-end relationship it has with editorial/content teams.

MANAGE THE CHANGE

TO LEAD IN THE NEW CONTENT ECONOMY



TO MANAGE THIS TRANSFORMATION PROPERLY, BROADCASTERS MUST FACE DOWN A SERIES OF CHALLENGES:THEY MUST REINVENT FROM THE INSIDE, adopting new capabilities far from current models. They must break down internal silos and collaborate with wider ecosystems to acquire new skills and experiment with new ways of working.

THEY MUST MAKE THEIR TRANSFORMATIONS VISIBLE to their workforces by creating job aids, reference guides, visualizations and journey maps for their employees.

THEY MUST ENSURE A SMOOTH TRANSITION TO THE NEW, minimizing disruption to operations and ensuring a strong and visible C-level sponsorship.

THEY MUST ENABLE CONTINUOUS INNOVATION by steadily introducing new technologies, production models and competencies.

THEY MUST ENGENDER A DEEP-ROOTED CHANGE IN MINDSETS to ensure production has strategic relevance across the company. ONLY BY DOING SO, CAN THEY GET READY TO LEAD IN THE NEW CONTENT ECONOMY.

AUTHORSSIMONA BUONO Senior Manager, Strategy Practice

LEONARDO PAPA MALATESTA Manager, Strategy Practice Our thanks for joining the discussion and sharing insights included in this paper RAYMUNDO BARROS CTO of Rede Globo

ROBERTO CECATTO Head of Production of RAI

LAURA DAMES Executive Vice President and General Manager of Turner Studios

FRANCESCO VENTURINI Global Communications and Media Practice Lead Accenture Thanks to Accenture Research for their contribution to the paper.

SOURCESAccenture, Bringing TV to Life 2017

Enders Analysis, European scripted content: rising demand and consolidation, July 2017

http://www.hollywoodreporter.com/news/miptv-sky- content-boss-gary-davey-talks-original-content-push- competition-netflix-amazon-988228

http://variety.com/2017/tv/spotlight/latin-american-tv- drama-production-1202020306/

Enders Analysis, Netflix's edge over broadcasters, September 2017

http://variety.com/2017/tv/global/mip-spanish-tv- producers-amp-up-the-original-drama-1202020297/

http://www.businessinsider.com/amazon-netflix-oscars- strategy-2017-2?IR=T

ABOUT PULSE OF MEDIAPulse of Media brings together Accenture's deep Strategy and Consulting expertise to envision the entertainment experiences required to delight customers in a fluid, digital world. Through our point of view series, Pulse of Media checks the pulse of the media and entertainment consumer, the industry and the competition.

ABOUT ACCENTURE STRATEGYAccenture Strategy operates at the intersection of business and technology. We bring together our capabilities in business, technology, operations and function strategy to help our clients envision and execute industry-specific strategies that support enterprise wide transformation. Our focus on issues related to digital disruption, com-petitiveness, global operating models, talent and leadership help drive both efficiencies and growth. For more information, follow @AccentureStrat or visit www.accenture.com/strategy.

ABOUT ACCENTUREAccenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining leading experience and specialized skills across more than 40 industries and all business functions—underpinned by the one of the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 425,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

Copyright © 2017 Accenture. All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.

Documents

DIGITAL DISRUPTION IS TRANSFORMING BROADCASTING,€¦ · reinvent content creation and production capabilities to get ahead of the massive shifts happening across the industry and