Internet-connected televisions, consoles, media players and tablets could be present in over 60% of households in the United States and United Kingdom by 2014. While a surge in the adoption of network-connected devices may indicate interest in new forms of online video, media companies and cultural institutions face stiff competition for incremental consumer spending unless new business models and ambitious content are created. That is the conclusion of a new report from global consulting firm Bain and Company.

Their survey of over 3,000 consumers in France, the United Kingdom, the United States, China and India suggests that consumer enthusiasm may lead to limited incremental profit potential for businesses unless new innovative ways for experiencing content are developed.

“Media and entertainment companies must pursue aggressive content development and diversification strategies to unlock new consumer spending,” suggests the lead author of the study, Patrick Behar, who is head of the Bain and Company media and entertainment practice in Europe.

Beyond new distribution channels and interfaces, connected devices and services can transform the content experience through customisation, sociability, interactivity and mobility.

The biggest shift in the connected content experience will come in video. While traditional linear programming of broadcast television still attracts most viewing, video-on-demand has largely remained in the realm of pay-television platforms, but that could change.

“A majority of consumers expressed an interest in internet video at the expense of traditional TV channels,” said Laurent Colombani, the co-author of the study.

Half of those surveyed in the United States and United Kingdom indicated that they intend to rely increasingly on search engines to find media, while one third said they would use their online social network.

The study suggests that such an evolution challenges historical aggregators and editorial platforms, broadcast networks in particular. Incumbents will have to defend their positions against such technology players as Netflix, Apple, Google and Facebook, offering an alternative, hybrid model combining human recommendations with data-mining technology.

This evolution could challenge the model of historical thematic channels, whose value proposition will face competition from connected services with unlimited choice, unless they decide to re-invent themselves and adopt the same principles and technologies.
“More than ever,” remarks the report, “organizations face an opportunity to invest in ambitious content that burnishes their brands, while experimenting with compelling new business models.”

However, the expected benefits of connected content will be limited by three factors.

Firstly, sustainable business models remain to be developed for many connected experiences. The emerging strategies of both new entrants and established players suggest greater diversification among business models in the future — combining advertising, subscription, fee-for-service and hybrid “freemium” models into a diversified revenue base.

Secondly, various new and established are players battling for the attention of the viewer. While the fragmentation that results can offer great diversity, it can also lead to an excessive balkanization of distribution channels that ultimately hinders the industry’s development.

Thirdly, preserving the delicate economic equilibrium on which content creation relies could represent a challenge for the whole industry.

“Significant change lies ahead for the media and entertainment industry as content platforms, new entrants, and incumbents battle for profits and market share,” concluded Patrick Behar.

The full report, Connected Devices and Services: Reinventing content is available from the Bain web site.