Distribution and Monetization of Entertainment Content: Changes Afoot

Distribution and consumption of entertainment content continues to shift away from traditional patterns. Recent examples include:

•Apple’s decision to deliver U2’s new album surreptitiously to iTunes customers    worldwide.

•Thom Yorke of Radiohead fame utilized BitTorrent Bundles, a sanctioned file-sharing    platform, to allow fans to download a portion of his new album for free or purchase the    entire album via Paypal for $6.00. Paid and unpaid downloads exceeded 1,000,000 in    the first week.

•In one of the most significant moves in the movie distribution space, Netflix    announced plans to release a full-length feature film theatrically on Imax and on their    streaming platform on the same day in August 2015.

•Exclusive content creation continues to build momentum, with Sony Crackle saying    they will soon produce and present a weekly sports based game show.

These and other strategies, such as bulk packaging of content for “binge” consumption, show that the entertainment industry is attempting to improve monetization of online content by adopting new and different strategies that cater to evolving viewer behaviors.

For bold enterprises, innovations in content distribution can provide powerful new ways to engage with audiences. Many consumers are frustrated that their media consumption is curtailed by distribution bottlenecks, including the 3-to-4 month lag between a theatrical release and a DVD/On-Demand offering, TV shows being unavailable for next day or post-broadcast viewing, and regional restrictions that block access to popular content.

Peer-to-Peer (P2P) file sharing has emerged as a popular alternative to mainstream media distribution channels. P2P sharing currently consists of a monthly audience of over 300 million sharing over 4 billion files, and it is growing. The vast majority of P2P files are available for free and many are stripped of ad content. As a result, Tru Optik projects about $700 billion in global unmonetized media consumption in 2014.

The P2P space encompasses content from the very new (e.g., current theatrical releases) to the very old, some of which is not available in legal content silos. P2P sites can also be more agile than legal distribution channels due to the simplicity of their design and more streamlined operational decision-making. As a result, even when digital entertainment is available legally at competitive price points, some users still prefer accessing it via P2P sharing based on factors such as ease-of-use and breadth of content.

Companies like Netflix and Apple, and artists like Thom Yorke are attempting new ways to engage audiences more fruitfully. Content distributors and advertisers need more comprehensive monetization and distribution strategies to mitigate the effects of unpaid P2P digital file sharing. Areas for consideration include:

•Leveraging the flexibility of digital files and distribution platforms to enhance content    delivery or even the content itself.

•Analyzing P2P-sharing activities to gain insights into the media preferences and    consumption patterns of the progressive, tech-savvy Millenials who are the dominant    users of P2P networks. Such insights can be used to anticipate, create, and serve more    relevant content to this critical segment.

•Extracting value from P2P transactions by delivering marketing messaging directly to    consumers who engage in this behavior via retargeting (a capability that only Tru Optik    can facilitate at scale) in contrast to less precise targeting methods or the dreaded    “spray and pray” strategy.

It is opportunities like these that are motivating content creators and distributors to attempt new ways to derive value from P2P sharing. Though laudable, efforts to date have been more evolutionary than revolutionary:

•Despite its release on BitTorrent Bundles, early indications are that pirated P2P sharing    of the complete Thom Yorke album will surpass paid downloads by a factor of 10 or    more. (Thom Yorke’s album is currently one of the top 30 most pirated music titles    globally over the past week on Peer-to‑Peer engagement.)

•Netflix’s simultaneous release of a movie in theaters and online is a move in the right    direction, but in and of itself is unlikely to curb P2P sharing of the film, or recoup value    from unmonetized P2P transactions.

Traditional methods of content distribution remain important, but moving forward, it will be increasingly vital for the media industry to flank these with new models.

With its unique ability to capture census-level P2P download activity and retarget segments of actual viewers at scale, Tru Optik is at the forefront of helping the entertainment industry, brand advertisers, and media companies understand and monetize P2P sharing of proprietary content.

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