In this issue - INDUSTRY OVERVIEW - ECONOMIC TRENDS - ORGANIZATIONAL IMPERATIVES

 MEDIA PRODUCTION & DELIVERY - TECHNOLOGY - CONCLUSIONS

INDUSTRY OVERVIEW
Navigating Communication Channels, the May 2007 Professional Development Conference of the Communications Media Management Association (CMMA), has once again provided both the incentive and resources for this edition of Dynamic Media Trends Analysis.

The continual expansion and diversity in this industry is astonishing. Now we find ourselves in the era of podcasting and virtual environments: YouTube, My Space, FunnyOrDie, Second Life: the list grows exponentially. More and more companies are dipping their marketing and communications toes into these not totally clear waters. And they can become whirlpools if they are not approached with caution and an understanding of the target audiences. Companies need to be very careful not to arouse the ire of the YouTube community.

ECONOMIC TRENDS
Media producers report a continuation of increased production that seemed to start in mid-2006. Managers we spoke with attribute it to pent-up demand for media that had been put on a back burner until the economy improved. We hope it lasts a while. Corpo­rate profits are rising, in no small part because of cost cutting, staff reduction and offshore outsourcing. While corporate budgets for media seem to have opened up a bit, there is still reticence about investing in new technologies and communica­tions. So while in-house media departments and independent producers are busier than they’ve been in a long time, that doesn’t always translate into higher budgets or improved profits for the independents. The drive continues to be to do more with less. 

We don’t see that changing for three obvious reasons. One is that competition in production services keeps rates low. Clients can always find a less expensive source for any given service – maybe not as good, but decidedly cheaper. Corporate staff reductions plus increasing numbers of schools offering training and degrees in media production resulted in an overabundance of eager and hungry editors, videographers, directors, etc. The day rate for producer/directors, for example, is not much more than it was 20 years ago. Clients are reluctant to pay higher rates for media services even though they certainly are paying more for housing, food and gasoline. Conversely, media professionals seem afraid to raise their rates for fear of losing the business.

A second reason is that, in spite of the demonstrated quality of work done by in-house and independent media professionals, it still doesn’t have the perceived value of the work done by a marketing or advertising agencies. Agencies, on the other hand, are willing to pay more for production services as it allows them to increase their markups. 

A third reason is that newer technologies, such as desktop editing, makes it possible to do more in less time at a lower capital investment. Faster and lower overhead translates to cheaper.

The underlying factor, however, is the difficulty of measuring the value of most media production – a subject we continue to explore.

ORGANIZATIONAL IMPERATIVES
In-house media staffs are growing slightly. There is no great rush of new jobs, but we see evidence that new staff people being hired, more permanent contractors are being brought on board and contractors are even being converted to staff. 

Freelancers and contractors have always been factor in media production and we don’t see that changing because of the unpredictable nature of the business. However, the use of staffing services or “employers of record” is still not universal in spite of the potential risks faced by companies that hire unincorporated contractors and freelancers directly. That may have to change. The State of New York announced it will move aggressively to halt the “misclassification” of workers as independent contractors thus cheating the state out of unemployment tax revenue and workers’ compensation insurance premiums. The state of Massachusetts now presumes that every worker is an employee unless proven otherwise. New Jersey recently began requiring all companies that use unincorporated contractors to pay a tax on those workers. The New YorkNew Jersey programs target the construction industry, but we expect it will quickly expand even into the small and specialized area of media production.
 
These state actions take precedence over the IRS agreement negotiated by ITVA and the Minnesota Film and Video Association in 1994. The safest approach for any company is to move unincorporated freelancers and all full time contractors to an employer of record staffing service. The service fees paid will be a lot less than the potential government fines.

MEDIA PRODUCTION & DELIVERY
Have the multiple channels of communication now available changed the delivery model? As the experts tell us, new technology only adds to the potential communications channels. It never replaces older technologies. The paperless society never happened. Mobile phones keep adding features; e-mail, text massaging, photo imaging, but people still talk – some almost non-stop. Video streaming is replacing DVDs which replaced videotape, but that’s an evolution in delivery technology. It’s still video. Ultimately people want to see and/or hear and/or read, whatever they want, whenever they want it at whatever time is most convenient. That is as true of corporate staff and customers as it is of consumers.
 
As content creators, the media professional must understand the technology and be able to not only maximize its use, but also assure that people out there are watching. We were not surprised to hear that corporations are jumping on the new technologies and applications to market, train or influence their constituencies. Streaming video and video podcasts are now routine, made possible by improved compression and the availability of more bandwidth.
 
However, as Jim Rapoza commented in his column in eweek ⁽²⁾, these powerful new virtual worlds existing through Second Life or There.com have two hurdles to overcome. First is they are big video games requiring lots of resources. Trying to run a business application and Second Life at the same time, he feels, is “nearly impossible.”
 
The second hurdle is that, unless you are an experienced gamer, you will find these programs difficult to use. Mr. Rapoza says that he’s seen a number of generally savvy computer users at a complete loss as to how to use them. The result is that many people try them; leave early and never come back.
 
We recognize these applications are targeted toward younger and more computer literate employees and customers who, presumably, have more time to spend learning and using them. Nevertheless there is tremendous potential here for creating training, marketing and information centers. As a speaker at the CMMA conference pointed out, these technologies provide access to even more targeted audiences. The catch is that to make this work, a designer is needed who has the technical skill to create these environments, an understanding of the audience and the sensitivity to make sure client interests are represented appropriately.
 
ComScore Inc. reports that 71% of internet users streamed video in March, 2007.⁽³⁾ The average length was 2.6 minutes. Other sources have indicated that viewer attention span is 6 minutes. So much for streaming your annual report meeting. As for mobile video streaming, another research study found that only 3.6% of all mobile subscribers subscribe to mobile video services. Does that mean people realize the incongruity of trying to watch a motion picture on a videophone screen or that there aren’t enough motion pictures (content) available for downloading yet? The idea of people watching movies on iPods is somehow inconsistent with the popularity of in-home large screen high definition video displays.
 
Pete Putman forwarded the following e-mail press release that seems to be the ultimate step in democratization of the media. “Whether a novice or professional, Endavo allows anyone to distribute content and start to make the big bucks. This includes the ability to manage, market and deliver content to as many people as you want, over various networks, at a low cost. And with DVD-quality video available in various formats, everyone benefits. Now anyone can start his or her own business of digital media broadcasting. The bottom line is, with Endavo's EnHance platform, any content owner has ability to build a commercial Internet television service, launch it on their site, syndicate it to other websites and distribute it to a tremendous audience”.
 
Endavo does not have a Web site (don’t practice what you preach), so we can’t see exactly what this thing is, but it certainly seems to beat sliced bread.
 
TECHNOLOGY
In the last Trends report we wondered how high definition video conferencing could work, given the limited bandwidth generally available to support it. According to The New York Times, ⁽⁴⁾ broadband access has caught up. This was confirmed at InfoComm07 where we had a chance to see some pretty impressive demonstrations of high definition or near-high definition videoconferencing. The key is improved compression, though there are still some bandwidth limits. The new buzzword is “Telepresence.” That comes at a pretty steep price with systems upwards of $300k per location and fiber optic operating costs in the multiple thousands per month.
 
Apple’s Final Cut has cemented its position as the editing platform of choice. This is as true for corporations that are continuing to install their own editing suites as it is for editing houses and freelance editors. In-house media, departments, by the way, are adopting HD as rapidly as budgets allow.
 
IT/AV convergence is becoming a major factor in the AV systems design and installation business. It’s significant that InfoComm will be partnering with the NXTComm show in Las Vegas next June. Some IT companies are getting into AV, while some AV integrators are developing IT capabilities. We see corporate media departments working more closely with their IT departments and even assuming some IT functions. Servers are now being housed in Media departments, where content is created, rather than in the systems closet down the hall. Tim Cape, writing in ProAV ⁽⁵⁾ believes that IT will begin to move into digital signage. Certainly for companies heavily into digital signage already, IT support is necessary. However, we have found no evidence that IT departments have any interest in taking over content design. That remains firmly in the hands of the professional communicators.
 
CONCLUSIONS
All the new technology and applications are very exciting and can easily lead us to want to jump in with both feet right now. But we suggest a bit of caution is in order. We wonder what will be the next killer technology. Based on recent history, we could reasonably assume that as soon as media producers get up to speed with the newest tools, there will be new ones to learn. But we certainly feel it is essential to at least become a fast follower.
 
Meanwhile, traditional production continues to be strong. We don’t see corporate media departments being downsized or closed down any more now than has happened at any time over the past 50 years. People and functions that don’t serve a strategic purpose are certainly at risk. However communications continues to be an essential component of doing business. Marketing, training and informing customers and employees is what makes any enterprise function and smart businessmen know it. It’s encouraging to hear that younger senior managers are much more in tune with media than those of an earlier generation. Wait until Generation X takes over.
 
Dynamic Media Business Trends Analysis is a semi-annual publication of:
Media Strategies, Inc.
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E-Mail: revand@media-strategies.com