If you are just joining us, this is week two in a five-part series on trends for content owners in 2013. Last week I discussed how privacy concerns are threatening content consumption and preference sharing and how content owners are responding. Let’s get started with number two on the list: the rise of the multi-tablet household.
The rise of the multi-tablet household
Total tablet unit shipments rose an astounding 246% to 64 million in 2011 according to Bank of America Merrill Lynch equity research.* With an average selling price of around $500, this market generated $32 billion in revenue for retailers, device manufacturers and component suppliers. Analysts predict tablet shipments will reach 94 million by the end of 2012. According to Deloitte Consulting, growth in this still nascent market will be supported by households buying their second or third tablet. By the end of 2012, almost 5% of tablets will be owned by individuals or households that already own a tablet.
Beyond the fact that consumers are rapidly adopting tablet versions of their favorite magazines, games and other online content, tablet versions of online and print content are also giving publishers greater flexibility in their pricing models. In May 2011, The New Yorker launched its tablet version for $59 a year, simultaneously raising its print subscription by 77% to $69 per year. Condé Nast is also leveraging the advent of its tablet version to increase subscription pricing. Condé Nast CEO, Charles H. Townsend, said in 2010 that the company had been too “overtly dependent on advertising as the turbine that runs [its business].” Given that digital advertising has traditionally been sold at lower price points than print, the ability to raise subscription fees has become critical for some publishers.
Many publishers have duly noted that consumers are using tablets primarily for content consumption (e.g., browsing websites, reading news, playing online games) rather than content creation (e.g., writing blogs, posting videos, creating spreadsheet models). A recent Morgan Stanley AlphaWise survey of 8,200 consumers across the US, UK, France, Germany, China and Japan supports this assertion, revealing that content creation usage is much lower on tablets than on traditional PCs. In fact, tablet usage appears to be driving reductions in time spent on PCs for key content consumption tasks, but not for content creation actions.
To add another wrinkle, consumers use different types of tablets differently. Smaller devices are likely to be used differently than their 10-inch counterparts due to reduced processing power and mobility. Smaller devices may be used more frequently for eBook reading, mobile-as-Web browsing, email and photo sharing on-the-go. However, smaller tablets may be less useful for browsing full versions of websites, reviewing emails or presentations, analyzing data in spreadsheets or watching full-length video.
How are content owners responding?
From a customer perspective, it’s all about experience and convenience. They’re looking for content that is quick to load, always available and optimized for all of their devices. Digital publishers are turning to content delivery networks with multi-device transmuxing to help optimize single files for consumption through a wide variety of venues including Apple iPhone and iPad, Flash, Android and Silverlight devices. Content owners are also “tiering” titles across infrastructure platforms. New content with highly uncertain demand patterns is increasingly being launched in a public cloud environment. Should demand take off quickly, compute and storage resources are turned up in minutes to address increased traffic, and virtual servers that carry unsuccessful titles are quickly decommissioned to avoid unnecessary costs. Assets that have predictable demand patterns can reside in a physical server environment, either via colocation or managed hosting to avoid the bursting premiums inherent in almost every pure public cloud model. The payoff for successful tablet content strategy implementation can be huge. After years of low-margin, advertiser-supported revenue models, consumers are beginning to embrace online subscription pricing models. This increased acceptance is due in large part to the fact that tablets allow a portable, easy-to-view, highly-customizable medium for content consumption. With stickier customers and more subscription pricing power, multi-device content initiatives can pay for themselves in a few weeks.
Check back for trend three next week as I explore how over-the-top (OTT) pure plays like Netflix and Hulu are changing the content consumption landscape.
*2012- The year ahead: Year of the tablet shakeout; December 2011