As business models in the new media arena continue to evolve, 2006 has witnessed a plethora of alliances between companies trying to turn their pioneering ideas into killer applications and must-have services.
While such deals are too numerous to mention, expect Mipcom to act as yet another springboard for new partnership announcements, with observers predicting that the next step in the new media age will be that of rapid consolidation.
MTV Networks recently secured the remaining interest in joint venture MTV Japan from private equity firm H&Q Asia Pacific, to set the scene for vertical integration, uniting MTV Japan, Nickelodeon and fast-growing social networking platform Flux into one cohesive business.
“This deal represents an important step forward in our strategy to drive international growth,” explains MTV Networks chairman Judy McGrath.
Flux delivers video and music content to mobile phone and online networks.
“Through our global network of 130 channels and more than 150 digital media properties, we are uniquely positioned to share innovation throughout our worldwide operations,” adds McGrath. “We will continue to look to Japan as a center of influence that will inform our global digital media strategies.”
That all-important mix of audio and visual content is not lost on smaller operations.
Paul Myers, CEO of U.K.-based online music store Wippit, notes: “Our most important deal this year was with Universal Pictures, offering Wippit customers the opportunity to download movies direct to their PC and portable devices. The move from a pure music to an entertainment service is a hugely important perception change for Wippit.”
Elsewhere, Albin Serviant, chief marketing officer of mobile music entertainment provider Musiwave, tells Variety that his company’s most significant contract this year was France Telecom’s selection of Musiwave’s music-on-demand service, “to provide a variety of mobile music services to Orange’s 56 million customers across Europe, both through the mobile and over the Internet.”
Viewing other major deals, Serviant cites Google’s agreement with Vodafone.
“This deal comes at a time when there is a huge amount of mobile content that consumers want to access,” states Serviant. “The biggest opportunity here for Google is that it enables it to target users of mass-market WAP (Wireless Application Protocol) portals and deliver relevant and available content to consumers from them.
“I believe the two companies may also be developing a range of search-based advertising opportunities, which will open up an additional business model for the world’s biggest mobile phone network,” adds Serviant
Myers proffers the sale of Loudeye/OD2 to Nokia as meaningful. He observes, “The $60 million value is a good yardstick as, up to now, most of the consolidation in the new music retail market was Stateside and this deal quite clearly shows there is value on this side of the Pond.”
For his part, Scott Cohen, co-founder of digital music distributor the Orchard, confesses: “I haven’t seen any truly significant deals from the digital music stores or mobile companies — at least nothing that changed the industry. But this is not a bad thing, as in some ways it shows the industry is maturing and focused on incremental growth.”
However, Cohen believes one area is worth following.
“The most significant deals surround social networking sites, such as Bebo and MySpace, and the hundreds of thousands of little deals they are doing with bands, labels and fans. The aggregate creates a fairly robust opportunity for all parties and shifts the way the industry connects with the consumer.”
As for his company, Cohen reports, “The Orchard’s most important European deal has been licensing our entire catalog to eMusic for their European launch. EMusic is second only to iTunes in sales in the U.S. because they understand the consumer. They sell unprotected MP3s, which means that consumers can use the music on any device.”
The numerous new revenue streams being created by such new services are also forcing royalty collection societies to review their operations.
Fran Nevrkla, chairman of U.K. collection societies Phonographic Performance and Video Performance, tells Variety: “We are acutely aware that the whole landscape is changing very fast, which means that broadcasters and others have a genuine need for certain additional rights to be delivered individually via the record labels, or collectively through a one-stop-shop solution offered by a collecting society.”
As a result, and in response to requests from commercial TV broadcasters, PPL’s record label and musician members recently allowed the society to broker licensing deals for the use of sound recordings in TV programs being simulcast or delivered by on-demand streaming via the Internet and to mobile phones.
Forecasting what lies ahead in the new media space, Wippit’s Myers believes, “A huge consolidation is on the way.”
Myers adds: “Wippit is still independent and privately owned, yet we’ve established a second-place position in the U.K. market, with a market share the equivalent to the combined online services of HMV, Virgin, Tesco and Woolworths. In a traditional physical environment, this would be impossible to achieve, and we’re aware that larger organizations are sniffing around this sector with a view to getting in while it’s still not too expensive and still in the last stages of nascency.”
In a similar vein, the Orchard’s Cohen concludes: “B2C companies that understand the consumer experience and put it above everything else will succeed, while successful B2B content providers will be those that understand how to market, promote and merchandise their content so that they provide value for both retailers and creators.”