Platforms like Netflix and Amazon have changed content consumption expectations, raising the bar in regards to user experience quality. But the reason for success lies not only in the content: technology plays a fundamental role and represents the greatest concern for CEOs in the Entertainment and Media sector, today.
Reed Hasting, CEO of Netflix, attributes the success of the company to large investments in original programming as well as the more than $8 billion allocated to purchasing content in 2018. And this is certainly true. But the $1.8 billion that the company will invest in technology this year are equally important.
Among the investments, are:
- Quality of streaming
- The service reliability
- Optimizing the user interface
- The use of algorithms to create personalized content recommendations based on consumption habits
- Tests performed on subscriber subsets (A / B testing) to verify each individual’s decision
They are all indicators of how Netflix is not only a media company but also a tech company. And this worries the other companies in the sector.
According to a study published by PWC , the CEOs of companies in the Entertainment & Media sector are particularly worried about the speed at which the technological evolution is taking place, and not having the technical skills necessary to cope with this evolution, in-house.
It’s a matter of fact that the market for the sale and distribution of content is becoming increasingly sophisticated, and this will translate into the need for more advanced technology to be competitive. In addition to technology, each of these elements also has an impact on the results:
- Data analysis
- Content customization
- Business model optimization
- Purchase funnel structure
- User interface navigability
- Distribution on different devices and platforms
And together, they can make the difference between a business that works and one that doesn’t.
In a recent conversation, an important Italian publisher told me how, in the past, they invested a lot of resources in developing apps to distribute their content. However, the apps did not work and, over time, they were closed. More importantly, they could not understand the reasons for this failure. If we consider that all the investments were made only at the beginning of the project - with limited or no development in the following months and years - we can assume that the critical point lies in the static nature of the project, namely the lack of continuous innovation. Companies like Netflix and Amazon start with a detailed analysis of the user experience and work on constant optimizations. This is why the right technology is essential: it allows you to monitor each of the areas indicated above, modifying them and optimizing them according to performance.
Every company is a tech company
"Every company is a technology company, no matter what product or service it provides. The companies that embrace this fact are the ones that shape our world. " -Stephenie Stone, CIO Americas at M + W Group
If it is true that all companies must become technology companies, it is also true that not everyone can afford to have an internal technical team. It is also not always in every company’s best interest for two reasons: critical mass and scalability.
1. The critical mass has to do with the amount of data available. Complex algorithms, such as those that personalize content recommendations according to our interests, require large amounts of data to be analyzed in order to improve results — just as all artificial intelligence research needs to access huge amounts of data to gain experience and get closer to the expected results. Only large, global platforms have the critical mass of data to achieve effective results in this field on their own.
2. The scalability is related to the possibility of amortizing a technological investment on a greater number of users (and therefore on a larger business dimension). Building an ecommerce engine has the same cost both for a company with a few thousand customers and for a multinational company with millions or tens of millions of customers. The result is that the quality of an internally produced product will be very different in the first case compared to the latter.
The only possibility for a medium-sized company to compete with the big players is to use a SaaS platform (software as a service), avoiding bringing responsibilities in-house that are not strategic for its business.
The SaaS model operates a sort of "democratization" of technology: even if you do not have the size of the big players over-the-top, you can still access the same level of quality. This is possible because the same platform is serving hundreds or thousands of different companies of varying sizes.
In this article on Forbes, Mark Rhyman, Co-CEO of BigBangERP, discusses the 5 advantages of moving to a SaaS or Cloud model for companies. There are two main areas that make SaaS solutions the best (if not the only) choice for companies:
1. Sustainable cost of access. A cloud solution does not include initial development costs, require dedicated spaces in the company, or a technical team. The barriers to entry are very small and this allows companies of any size, even startups, to easily access extremely complex and advanced services and platforms, which would otherwise be expensive and sometimes impossible to develop independently.
2. Less pressure of maintenance, updating, and development. Not having the technology in-house, you can forget about maintenance: from hardware upgrade to security management, from new device support to performance optimization. An always updated and flexible technology allows companies to devote energy and investments to analyze data, test different solutions, optimize interactions with the audiences, and generally work to continuously improve the content and the user experience.
This does not mean that companies do not have to bring in technological skills: every company is a tech company, but to be efficient it must focus on "core" skills. It is necessary to identify which technologies make sense to invest in.
Some products such as productivity tools, CRMs, ad servers, and web analytics tools are already in a mature SaaS phase, and there are rare cases in which companies decide to build them again internally. In other cases, such as with video players, CMS platforms, and mobile app development, many companies still work with custom solutions. They are convinced that these are "core" skills. In the past, this may have been a convenient choice, but today the global competition has raised the bar of quality, making the solutions that allow us to be competitive stronger than us.
The container becomes just as important as the content: if an application for smart TV or mobile will not be able to offer a user experience comparable to that of Netflix or Amazon, the app will not succeed — regardless of the quality of the content.
For this reason, Applicaster developed a SaaS solution for content apps: technology becomes a service, with all the advantages of a consistent operating cost to access the best solution in every phase of the business’s evolution.