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Who Is King? The New Identity Crisis in Entertainment

Is content still king, or does the crown rest atop the distributor’s head? That was a question put to the panel on entertainment at the third annual “Road to Reinvention” conference, hosted by the Center for Digital Transformation at The Paul Merage School of Business at the University of California, Irvine on March 23. It turns out that whoever has access to large sets of customer data holds the keys to the kingdom.

Consider Netflix, said John Carnahan, who oversees data science and engineering at Ticketmaster. Netflix has always been direct to consumer. It knows which households prefer which programs. Over the years, it has refined its proprietary recommendation algorithm to factor in all types of data about customer usage habits and metadata about programs. As its growth declined, Netflix transposed this user-to-content matrix. Rather than figure out what to recommend, Netflix figured out what content people wanted to watch and then produced it.

According to Vijay Gurbaxani of the Merage School, Netflix signed up the series, House of Cards, when other network execs turned it down because Netflix had not just the consumer data from its streaming service—millions loved Kevin Spacey, millions loved the UK version of the series, and millions loved that genre—but also the algorithm that would connect those millions with the show when it launched. Netflix’s digital platform enabled it to know its customers, one on one, in an otherwise mass market.

KYC (Know Your Customer)

If an entertainment company knows who its customers are, it can reward them with content they love as Netflix is doing. A smart algorithm isn’t Ticketmaster’s problem, said Carnahan. There are open source solutions such as TensorFlow and Vowpal Wabbit, and it’s easy to “spin up a 200 Spark cluster” on Amazon Web Services to do iterative computations at scale. The problem is, Ticketmaster knows who purchases each ticket but not who actually attends each event, and it’s compounded by an obsolete pricing model for live events. Buying a ticket is the worst part of the fan’s experience, he said. Fans have to fight for a ticket online. Those who don’t get one, end up going to the secondary marketplace where prices have skyrocketed because high-tech scalpers have swooped in and bought up blocks of tickets for resale. And, unlike the airline industry, where a person’s identity is tied to each ticket and checked by airport security, thus making ticket resale very difficult, reselling tickets to live events is an arbitrage opportunity. Ticketmaster is figuring out how to capture data on event-goers through Facebook, Groupon, and other touchpoints so that it can put that arbitraged value back into hands of fans and artists.

CYM (Change Your Model)

Content producers and distributors—movie studios and cinema chains alike—are competing for the consumer’s time, said Jim Wuthrich who presides over strategy at Warner Bros. Home Entertainment. The industry’s business model hinges on windows of access through third-party distributors, starting with a theatre run, then a dark period, followed by DVD release, pay per view, premium cable, and ad-supported network TV. But consumers are asking, “If it’s made, why can’t I access it?” he said. Warner Bros. is building data management platforms for aggregating audience data from distributors as well as its own marketing efforts online. Through apps, it’s forging direct relationships with fans of franchises like Harry Potter and DC Comics. These data should help it develop a better model. So is content king or is distribution king? “It depends on where you are at any point in time,” Wuthrich said. “There’s only one Batman, only one Harry Potter, and people will find them.”

About the Session

What do you do if a disruptor changes the rules of the game? Companies often fail to recognize digital disruption until it is too late. How should executives at incumbent companies evaluate their competitive position, determine the right strategy, and take action? Allen Webb, Editor-in Chief of The McKinsey Quarterly, talks to John Carnahan, CDO and EVP of Data Science and Engineering, Ticketmaster and Jim Wuthrich, President, The Americas and Global Strategy, Warner Bros. Home Entertainment in this moderated conversation.

Presented as a part of the Center for Digital Transformation’s annual one-day Road to Reinvention: Leadership in the Digital Age conference on March 23, 2017 at the University of California, Irvine. + MORE

 

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