The fight is on for your entertainment dollars. What's the impact of the Web though?

Photo Courtesy Duncan 

It's the weekend of September 8-9, 2012 and I have had a chance to catch-up in some detail on technology news this past week. In addition, I had a chance to review my weekend entertainment choices. Despite my bias (of being in the consumer internet space), I thought the impact of the Web was an undercurrent in the expanding entertainment choices competing for our time and dollars. Consider the happenings just this past week....

TV

Jay Leno took a 50% pay cut as part of the 20% belt-tightening at NBC's "The Tonight Show". Looking deeper into the market dynamics behind these austerity measures, most late-night shows on TV saw viewership shrink by 5% from the previous year. Not surprisingly, advertising dropped as well to the tune of more than 25% across Leno and Letterman's late night shows. Why? While cable-TV shows and the DVR viewer habit increasingly have had an impact, it's clear that viewers are voting with some of their time on Web programming and online channels.

TV Comedy of a different kind....Viacom's cable channels that include Nickelodeon and Comedy Central have seen viewership drop by 29% at Nickelodeon. To maintain ad revenue, Viacom is increasing the advertising time by over 9% over a year ago. This is a established yet controversial short term adjustment technique in this industry. The difference now though is the growing availability of internet video. Should viewers get impatient with ads, they can turn off their TV and turn to the web. For example, Nickelodeon's "SpongeBob SquarePants" can be watched commercial-free on Netflix.

On a slightly different but TV related note, investors are buying small, struggling TV stations in major markets for the value of airwaves or spectrum. Two impacts of the internet playing out here. One, the strategic acquisition of airwaves are targeted towards addressing the bottomless demand for wireless broadband services. Two, competition from the Web is one of the primary reasons cited for the struggles and often demise of the small TV stations.

Movies

Turns out, the summer box office was less than spectacular with a movie "The Oogieloves in the Big Balloon Adventure" having an all time worst opening in 2000-plus theatres, attendance being the worst since 1993 in North America and overall a summer box office down 2.8% from last year. The speculation is many factors contributed to this decline including the Olympics, the economy, the Aurora, Colorado tragedy but no doubt, newer online channels and web programs had an impact.

In the movie streaming business, this past week, Amazon bolstered its movie streaming offering through a multiyear licensing deal with cable channel, Epix. This deal will bring a set of popular films like "Iron Man 2" and "The Hunger Games" from several major studios like Lions Gate Entertainment, Paramount Pictures, MGM Studios. How big is video-streaming? According to the Wall Street Journal, Amazon subscribers have access to 25,000 TV shows and movies, Netflix about 50,000, Hulu more than 58,400. Is that enough entertainment for you?

(Streaming) Music

Apple is reportedly jumping into Radio and it looks like iTunes users will be able to create their own virtual 'radio stations' along the lines of the Pandora, Spotify etc. Regardless of the consolidation and competitive battles ahead, and the problem of the high music licensing costs, one thing is clear. Online music services are here to stay and serve as an increasingly valuable revenue source for record companies. And here is the challenge to terrestrial radio (traditional radio). If as reported, Apple is successful in negotiating past restrictions to online radio such as a current ban on playing a given song too frequently, online radio will become more of a direct competitor to terrestrial radio.

Multi-Screen

I am a big believer in the potential of the 'Second Screen' products/emerging segment. A decent explanation by wikipedia can be found here. In essence, we are increasingly watching TV with an accompanying 'second screen' device mostly a tablet or smartphone thus increasing our social engagement (Tweeting, FB posts etc.) and deeper consumption of the content - "What song was that?" "What location was that?" "What shoes is she wearing?" "I have to share this play with my buddies" etc. etc. This past thursday, MTV introduced a new type of multiplatform ad service called Reverb whereby a Pepsi commercial will appear simultaneously on TV, MTV's website, or an MTV mobile app. No escaping! While the "Second Screen" is largely a social media phenomenon, the increasing impact of the online world on the traditional media of TV is compelling.


Books

A new e-book pricing landscape is on the way and if you are a consumer, it's the good kind. E-book price cuts from three leading publishers are only a month to three months away. How low are we talking about? One past indicator, Amazon had priced e-book best-sellers at $9.99 before 2010. Not an internet phenomenon per se but definitely e-commerce impact.


There you have it. All within the past week. What's ahead of us?

• Second Screen Growth. More interaction with TV content through your tablet or smartphone by apps and more context-based advertising. Not just subtle product placements like Cameron Diaz's Christian Louboutin red-soled shoes in the movie "Bad Teacher" or Daniel Craig's Omega Seamaster watch in his James Bond portrayals. But increasingly, through your second screen, this is the model he/she is wearing in this scene and here is a pointer to merchants where you can get one of your own.

• More lobbying and court-room drama. Expect players like Pandora and now a heavy-weight like Apple to aggressively seek assistance to solve the high royalty costs that are weighing on the net radio business model. 

• The exclusivity of ESPN or HBO as a cable only offering will crack under market pressure. Alternate offerings will evolve for streaming services especially for the newer generation that grew up without ESPN. 

• Entertainment coverage such as listings will evolve to include original web programs. For example, this friday's Wall Street Journal covered the 2012 fall season from a traditional media/entertainment standpoint i.e. theatre, movies, TV, Art, Books and Music. Some day soon - a listing of upcoming web offerings in articles such as the before-mentioned WSJ article.

Want to make your App Sticky? Look no further than yourself. Nine traits that drive app engagement.

Be engaging! This is often the stated criteria for apps. Easier said than done. Actually, if you are looking to build or grow a business, the bar is even higher. A few weeks ago, in my Twitter feed, I saw a reference to a Fast Company article that described John Lilly's "first filter" investment criteria. John Lilly is the former Mozilla CEO who joined the prominent VC firm Greylock in 2010. The article described his guiding principle as "Lately I obsess about whether a product can be one of the 20 icons on my iPhone homescreen," he says. "That's my essential question right now." 

Utility and relevance are the table stakes component of an app-based business model. If I look at the current list of Top 25 apps in my smartphone app store, beyond the game apps, SMS-alternative apps, organizer apps, flashlight app etc. are some of the top apps. Clearly, utility and relevance play a big role. But beyond the app providing utility to us, what drives us to return to our apps? Think about it. You are standing in the line at an amusement park ride, at the DMV etc., you are bored or even panicky about unexpected 'empty' downtime, so you pull out your mobile device... What top 2-3 apps do you visit? In this scenario, utility is not the factor in your choice. Stickiness is. Successful apps are sticky, they engage users and this engagement is deeply rooted in our traits. And by appealing to our inherent traits, apps can compel us to keep us coming back. Let's take a look at nine traits that drive app engagement.

Serendipity - We love desirable discoveries by accident. My personal examples are discovering long lost high school classmates through Facebook's " People You May Know" feature or getting back in touch with former colleagues through LinkedIn's "People You May Know' feature. Or the more exciting nature of discovery through Twitter's public conversations and hashtags. In reality, serendipity in apps is not really an accident. By sharing our address books, educational and employment information and in general declaring our interests, this sort of discovery is expected and only a matter of time. In this Tech Crunch article, Henry Nothhaft, Jr. provides a discussion of the dimensions of serendipity and argues that serendipity is not really accidental. But, again, even if anticipated, these desirable discoveries are fun and keep bringing us back.

Personalization - Me, me and more me.  Whether the Pandora model of providing the name of an artist, genre or song and enjoying the personalized radio station or actually the ability to set up multiple personalized stations. Or the recommendation engines that Amazon and Netflix offer such as It's "Your-Name-Here's Amazon". Or personalized news/content apps or declared preference-based news discovery apps. There is a reason why people love to hear the sound of their own name. Apps that target this gratification are sticky.

The effect of Social Proof. The obvious phenomenon of the social network and the outstanding success of engagement of social media apps is well understood. Instead, I will attempt to offer how an app can tap into emerging themes or consumer preferences derived from social influence. For example, there is increasing comfort with location services such as social check-in found in social media products like Foursquare, Facebook etc. As individuals, we are nervous about declaring our location because privacy and security considerations are in the back of our minds. However, since there is a trend in increasing user comfort around declaring location, I believe we are relying on social proof and are influenced by those we consider similar to ourselves. Tap into the trait of social influence to determine influence trends and drive app engagement.

Reputation Scores and Gamification.  Gamification here does not refer to apps of the enraged feathered animals variety. Rather it refers to the application of game design techniques and game mechanics to a non-game context such as in this case, business. If winning doesn't matter, why do they keep score? This quote is attributed to the football coaching legend, Vince Lombardi. We are inherently competitive in nature and the social effect draws out this trait even more. For example, apps like Klout generate engagement by providing changing social media impact scores, the encouragement to share these scores and a view into the scoreboard that includes people in our network. Like us on Facebook. Really? Engage users by having them participate, leverage their expertise, provide them reputation platforms for their achievements and make them the hero.

Aesthetics - Looks Matter. Apps that are visually appealing and a delight to use are sticky. Since beauty lies in the eye of the beholder, I won't cite a specific example. However, I will suggest that the evolution and competitive dynamics of map apps are a good example of how visual dimensions of realism, the excitement of viewing places/roads less traveled, delightful performance etc. can make the difference between active engagement and simple utility. Mapping apps are thus increasing engagement on top of the utility they already provide. 

Out of Sight, Out of Mind. Push notifications, intriguing updates, well timed digests bring users back. Even inactive users (termed lurkers) on Facebook will act on a birthday notification. If you learn through a LinkedIn digest that a colleague changed a job, you are tempted to go back to the product to learn more about her new company. Breaking News on Twitter is another example. The 2012 Olympics will be underway soon and real-time updates are what we will consume versus the primetime television based consumption patterns of the past. Give your users the opportunity to set preferences and you have an endorsed mechanism to engage with your users!

Our Stuff i.e. Data. Apps that provide utility by storing our data such as cloud apps are also naturally sticky.  At one level, social media apps are a rolodex and address books in the cloud. When we need to reach someone in our network, we are drawn to engage with our social media app. File sharing apps like Dropbox is another example of utility apps that drive engagement through providing a home for one of our key possessions i.e. our data. Provide your users with a 'locker' and they will come back to check in on their 'stuff'.

Scarcity - There is a human desirability associated with scarcity. As Groucho Marx said, "I don't care to belong to any club that will have me as a member". Whether is an invitation only membership mechanism of Pinterest or a LinkedIn group that will have a maximum capacity/membership limit or providing early access to new releases for a sub-set of users. If it is scarce, we want it! By promoting the relative scarcity of elements of your app and business offering, you can enhance its desirability.

Sense of Community which often translates into the business model of crowdsourcing. Beyond the social connections of our private social circles of friends and colleagues, a bond that unites us is a sense of community based on shared interests and emotions. Find the community's common denominator. Build your business around concepts that people already care about emotionally. An app like Waze draws upon this sense of community to unite strangers with common interests. I also believe there is an undercurrent of anti-establishment/rebellious trait that drives people to contribute information on speed-traps to the community.

There you have it.  The above is not intended to be a top ten list. Nor is it intended to be a comprehensive list of all traits that drive app engagement. Rather, the traits I described above are influences that I am intrigued by and believe can be leveraged as marketing practices to drive higher app engagement.