UK Media and Entertainment Barometer KPMG S DIGITAL DEBATE. The rise of the media-savvy consumer: quality triumphs over quantity kpmg.co.

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1 KPMG S DIGITAL DEBATE UK Media and Entertainment Barometer The rise of the media-savvy consumer: quality triumphs over quantity kpmg.co.uk 1 Rise of the media savvy consumer

2 Introduction With the continued explosion of smartphones, tablets and, to a lesser extent connected TVs, the options for consuming media content continue to expand, swelling the range of media choices for consumers. However, despite the vast array of choices available today, the results of KPMG s latest Media & Entertainment Barometer suggest that consumers have become savvier about their choice of media as well as the time and money they spend on it. 2 The rise of the media savvy consumer

3 One of the perhaps surprising results of this year s survey is that consumption of media, measured by average time spent, has levelled out or even slightly decreased. But more interesting for media companies and content producers is the fact that spend on media, whether new or traditional, is up in some categories, such as digital books, online games or magazine apps, quite considerably. It seems that consumers are increasingly prepared to spend money for the content they want. This goes against previously held assumptions that UK customers, who have grown accustomed to accessing free content, would be resistant to paying for digital content. On the contrary, our latest survey suggests that consumers know what they want and are prepared to pay for it. Our research supports our long-held view that media companies have the potential to build highly profitable digital business models. Our survey also shows that UK consumers are well on the way to becoming digital multi-taskers, flicking between one screen and another in search of information and entertainment. Of course, we have always had one eye on the TV and the other on the newspaper, but in the digital world, the two-screen concept is a product of the explosive growth in portable media device ownership and the rapid expansion of next-generation, high-speed wireless networks that enable anywhere, anytime consumption. Media companies are already changing habits and persuading consumers that content is worth paying for. The pace of change is such that in the five years since we began this research, we have seen the emergence and widespread adoption of devices such as the smartphone and tablet; we have The ingredients are right here: Devices 98% of UK households have a digital TV and 70% a PC/ laptop; 58% of UK consumers own a smartphone and 19% a tablet 1 Internet connectivity 83.6% of the UK population has an internet connection 2 High-speed network availability BT and Virgin Media s superfast broadband services are available to an estimated 60% of UK homes, whereas the whole country should be covered by 4G networks by the end of witnessed social media go mainstream; and we have watched companies like YouView and Netflix launch online streaming services in the UK to deliver content both free and paid to a receptive British audience. This, the sixth in our UK series of reports into consumer sentiments towards new and traditional media, gauges receptiveness to new products and innovations and determines where consumers are most likely to spend money. We remain enthralled by the digital revolution and excited by the prospects that it offers. 1 Ofcom, Internet World Stats, Ofcom, The rise of the media savvy consumer 3

4 Media consumption UK media consumers are getting savvier. A new trend is emerging from this year s survey: while UK consumers continue to have a huge demand for entertainment and information, media consumption across almost all categories has either plateaued or slightly decreased. Compared with the previous year, consumers are making more conscious decisions about what type of media they choose to consume and how much time they spend on/with it. Looking at this trend more closely, UK media consumption has evened out or slightly decreased across almost all forms of traditional and new media. UK consumers now watch less TV and spend fewer hours reading books and magazines or browsing social media websites than in the previous year. 4 The rise of the media savvy consumer

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6 Media consumption Q: Please indicate which, if any, of the following activities you have done in the past month. Traditional Media 0% 20% 40% 60% 80% 100% Watched TV Listened to the radio Read a newspaper Read a book Read a magazine Listened to music on a CD/MP3 player 1 Watched DVD/Blu-Ray Played a console/video game (not via the Internet) October 2012 October 2011 March 2011 September 2010 March 2010 September 2009 Survey completed in October Question was worded Listen to CD in earlier waves of the research which certainly explains why the result of wave 6 (October 2012) is higher than the ones of the former waves. 6 The rise of the media savvy consumer

7 New Media 0% 10% 20% 30% 40% 50% 60% Accessed news online (ie, websites) Visited social networking/blogging sites Accessed map/directions 1 Used VoD services for TV programmes through computer, tablet or smartphone 2 Played online games Streamed music Downloaded music Read digital books (via e-reader, tablet or smartphone) Viewed magazines websites Streamed live TV programmes 3 Streamed radio programmes Viewed sporting events online Used newspapers apps Used VoD services for films through TV connected to the internet 4 Streamed films online Downloaded radio programmes Used magazines apps October 2012 September 2010 October 2011 March 2010 March 2011 September 2009 Survey completed in October New question introduced in The question wording changed slightly in 2012, from Used VoD services for TV programmes to Used VoD services for TV programmes, through computer, tablet or smartphone. 3 The question evolved slightly in 2012, from Streamed TV programmes online to Streamed live TV programmes online. 4 The question wording changed slightly in 2012, from Used VoD services for films to Used VoD services for films through a TV connected to the internet. The rise of the media savvy consumer 7

8 Media consumption TV still most popular media activity UK consumers continue to spend more time on traditional media (circa 8.5 hours per month) than on digital media (circa 5 hours). Conventional live TV remains a solid favourite with consumers 86% watched TV in the month to October It took up 15 hours of their time. It is however significantly less time than in 2011 and non-linear (catch-up TV, video on demand [VoD] and film streaming) formats, now account for around 6 hours of respondents viewing time. All other traditional activities in the UK, for instance: radio, print and newspapers, and even console gaming are showing a decline in consumption. In September 2009, our survey found that 81% of our respondents read a print newspaper; this was 70% in October ebook consumption accelerated from 4% in 2009 to 17% by In fact, our most recent survey concludes that the average time spent reading print and digital books is now broadly similar, at 10 hours and almost 9 hours per month respectively. Time spent on social networking and blogging sites (almost 8 hours per month), while declining from 2011, is on a par with reading activity. Other traditional activities are accessed less frequently than in the past. Listening to CDs has fallen to 6 hours per month, while playing non internet-linked console and video games is down to 7 hours per month, a fall from 34% in 2009 to 21% in The foundations for a shift from print news to online news are predicated on the accelerated adoption of smart devices. And so we see our survey respondents turning to newspaper websites (50%) and newspaper apps (9%) for their news. The same trend applies to magazines. Olympian thirst for digital content: During the 2012 London Olympic Users wanted to keep in touch with Games, the BBC received more than events on the move and at home, 12 million requests for video over switching between devices to suit mobile devices. their location. On the day that cyclist Bradley Wiggins won gold, the BBC delivered 2.8 petabytes of data at 700 gigabytes per second. Source: 8 The rise of the media savvy consumer

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10 Media consumption Q: Excluding time spent for work and/or school, approximately how many hours did you spend on each of the following activities, if any, in the last month? Traditional Media HOURS Watched TV Read a book Listened to radio Played a console/video game (not online) Read a newspaper Watched a DVD/Blu-Ray Listened to CD/music (not online) Read a magazine October 2012 October 2011 Survey completed in October The rise of the media savvy consumer

11 New Media HOURS Read digital books Visited social networking/blogging sites Played games online Streamed films online Used VoD services for TV programmes through computer, tablet or smartphone 1 Used VoD services (for films) through TV connected to the internet 2 Streamed radio programmes Streamed music Streamed live TV programmes 3 Accessed news online Viewed sporting events online Used newspapers apps Used magazine apps Downloaded radio programmes Downloaded music Viewed music events/performances online Viewed magazines websites Accessed maps/directions 4 October 2012 October 2011 Survey completed in October The question wording changed slightly in 2012, from Used VoD services for TV programmes to Used VoD services for TV programmes, through computer, tablet or smartphone. 2 The question wording changed slightly in 2012, from Used video on demand services for film to Used VoD services (via satellite/cable/digital box). 3 The question evolved slightly in 2012, from Streamed TV programmes online to Streamed live TV programmes online. 4 New question introduced in The rise of the media savvy consumer 11

12 Media consumption Money spent on media increases, but digital is yet to conquer traditional media spend One of the most interesting results of this year s survey is that money spent on media is up across almost all media categories. Compared to the previous year we see the biggest increases in spend on digital books, online games, magazine and newspaper apps as well as on traditional TV. For now, however, as well as spending more time on traditional media activities, British consumers devote more of their monthly media budget to them too. The average monthly spend on traditional media is 6.02, while the average monthly spend on digital media is Paid TV has become more popular in the past year. It may be explained by the competition between Sky and Virgin Media. And it will likely continue with BT s market entry for premium content (primarily sport at this stage). Q: Please estimate the total amount of money you spent on each of these activities over the past month (in ). Traditional Media Watched paid-tv Bought a video game (on console) Bought a newspaper Bought a book Bought a DVD/Blu-Ray Bought music on a CD Bought a magazine Listened to the radio October 2012 September 2010 October 2011 March 2010 March 2011 September 2009 Survey completed in October The rise of the media savvy consumer

13 New Media Read digital books Downloaded music Played online games Used magazine apps Downloaded radio programmes Used VoD services forfilms through a TV connected to the internet 1 Used newspaper apps Visited social networking sites Streamed films Streamed music Streamed live TV programmes 2 Accessed news online Used VoD services for TV programmes through computer, tablet or smartphone 3 Streamed radio programmes Viewed music online Viewed magazine websites Viewed sporting events online Accessed maps/directions 4 October 2012 October 2011 March 2011 September 2010 March 2010 September 2009 Survey completed in October The question wording changed slightly in 2012, from Used VoD services for films to Used VoD services for films through a TV connected to the internet. 2 The question evolved slightly in 2012, from Streamed TV programmes online to Streamed live TV programmes online. 3 The question wording changed slightly in 2012, from Used VoD services for TV programmes to Used VoD services for TV programmes through computer, tablet or smartphone. 4 New question introduced in The rise of the media savvy consumer 13

14 Media consumption Spend on packaged physical goods, like CDs, DVDs and video games is falling. Each saw a net decrease in monthly expenditure. The reasons are obvious. New generation laptops and netbooks, as well as fast-growing devices like smartphones and tablets, do not come with CD/DVD readers, making physical purchases defunct. It is here that providers like Netflix and LOVEFiLM have seized the advantage, offering choice and content over internet-connected TV from the comfort of the home. Additionally, the choice of multiple physical media, like DVD or Blu-Ray, can dilute sales of packaged physical goods. There is also a thriving market in second-hand games, which depresses new retail sales, as well as a significant uptake in online gaming the likes of Farmville and Angry Birds on social networks. Of course, the other trend is that streamed services, say catch-up TV or VoD, are often more affordable than the packaged product or indeed free. Meanwhile, commercial-music streaming services, including itunes and Spotify, are growing their paid-subscriber bases and now seriously challenge revenues in the traditional CD market. At just 2.06 per month, spend on new media is almost three times lower than on traditional media ( 6.02). It goes mostly on music, ebooks and online gaming. This spending differential is most probably due to lower unit costs for new media. Consumers no longer have to buy a whole album but can pick and choose tracks, while ebooks and game apps tend to be less expensive than their physical equivalents. News websites currently attract very little of consumers average monthly budget, possibly because many consumers are reluctant to pay for content that they can get elsewhere free, and settle for non-premium sites for their news. Other respondents in the sample may also benefit from paid-for access by their employers. Last, print newspapers were highly popular certainly because of a year rich of major events (eg, the Queen s Diamond Jubilee, the Olympic and Paralympic Games). Interestingly, although users spend less on online media than on traditional media, the amount of expenditure has increased across almost every type of digital media in the year to October Paid apps have proved to be highly popular in 2012 with a 175% increase on money spend for magazine apps and nearly 160% on newspaper ones. Preference for traditional or new digital media Consumers say that digital content offers greater choice (55% of respondents) and that it is easier to find content that interests them online (57%). Conversely, traditionalists argue that it is easier to read content in its physical form (58%) and that they prefer watching TV and films on a TV set rather than on a laptop or desktop computer (76%). 14 The rise of the media savvy consumer

15 Q: Please indicate the extent to which you agree or disagree with the following statements. I would rather watch TV and films on my TV than on a laptop/desktop 0 20% 40% 60% 80% 100% I prefer to watch TV on a mobile phone than on TV because I can watch it when I am out and about 1 I prefer to watch TV on a tablet than on TV because I can watch it in any room 2 I would rather read something physical than on a screen With new/digital media it is easier to find content that I am interested in There is a wider choice of content online I can access the content I want online free I spend a lot of time on my computer, so it is more convenient I can access online content whenever I want I can access the content I want online at a better price/value for money It is more environmentally friendly to access content online I don't want to make payment online due to security concerns I don't have a fast enough Internet connection to make online media an enjoyable experience October 2012 October 2011 March 2011 September 2010 March 2010 September 2009 Survey completed in October 2012 All questions were phrased slightly differently in 2012, which may skew some of the data: From 2009 to 2011, we asked: You said that you prefer to consume traditional [or new] media. Which, if any, of the reasons below apply? In 2012, the question was rephrased as: Please indicate the extent to which you agree or disagree with the following statements. 1 New question introduced in New question introduced in The rise of the media savvy consumer 15

16 Media consumption Device desirability In this new digital world, consumers want to be permanently connected.they never want to be far from the latest sport or news update. And for that, there is the smartphone and the tablet. Smartphone ownership has continued to grow strongly in the UK, currently owned by 52% (up from 44% in October 2011) of our surveyed population, while tablets are now owned by 20 % (up from 7%). In the UK, most commonly owned devices are TVs (82%), laptops (70%) and DVD/Blu-Ray players (60%). In terms of media priorities, the connected TV, with its Wi-Fi server to store all types of digital content, including music, has the potential to become the central component of home media systems of the future: it tops respondents wish lists, with 6% intending to buy a smart TV in the next 12 months, 5% considering a tablet and 3% thinking about a standard TV set. Q: Which, if any, of the following types of devices do you already own? Own a TV 82% Own a laptop 70% Own a DVD/ Blu-Ray player 60% Own a smartphone 52% Own a tablet 20% Survey completed in October The connected TV tops consumers wish lists because, empowered by superfast broadband, it will become the gateway for multiple devices, media and services. Linear, catch-up and streamed TV; video-on demand from providers like Netflix and LOVEFiLM; games; apps...are all possible from the box in the corner of the room. David Elms, Head of Media, KPMG in the UK 16 The rise of the media savvy consumer

17 Q: Which, if any, of the following types of devices do you intend to buy? A smart TV (connected to the internet) 6% A tablet 5% A TV 3% A smartphone 3% A laptop 3% A DVD/Blu-Ray player 3% A desktop (PC/Mac) 2% A personal media player 2% A satellite/cable or IPTV set-top box 2% A game console 1% A standard mobile phone 0% Survey completed in October 2012 This appetite for TV is a consequence of increased availability of streamed TV and VoD and the opportunity to dictate personal viewing schedules. In October 2011, our survey indicated growing consumer awareness of streaming services offered free of charge by terrestrial channels like the BBC and ITV, as well as paid-for services offered by BT Vision and SkyPlayer. Awareness, however, did not translate into usage, with conversion rates for free services significantly higher than for paid streaming. Now, with the launch of Netflix VoD services in the UK in 2012, consumers have greater choice of paid online digital content than ever before. Six months after its launch, Netflix claims it already has one million online subscribers, paying 5.99 per month, in the UK and Ireland, while Amazon-owned LOVEFiLM has amassed two million in five countries, including the UK, over the past decade Netflix is already a huge threat to Amazon s LOVEFiLM, Paidcontent.org, 25 July 2012 The rise of the media savvy consumer 17

18 Content worth paying for UK consumers have been brought up on a diet of free digital content. Our survey shows that there is now less resistance amongst consumers to pay for digital content, but we believe that media companies need to get smarter about propositions and pricing models if content is to be fully monetised. The UK consumer has evolved with the internet, as it graduated from fixed line to mobile devices, and is accustomed to free digital content. Since September 2010, our survey respondents have told us they will not pay for content that they can find elsewhere for free. It is a point of principle. In October 2011, this view was shared by 82% of respondents, with just 1% saying they might be prepared to pay for unrestricted access to a website they currently use. Judging by our survey, respondents today seem to be prepared to pay for content, notably music (7%), ebooks (4%), games, films and sport/leisure (each 3%). However, consumers raise a few show-stoppers to pay for content: they say they can get all the content they want free (76%); that they cannot afford to pay for online content (19%); or that they do not want to give out their payment details online (10%). In October 2012, though the same consumer behaviour remains evident (80% of consumers are still not ready to pay for content), there are signs that it is tapering off. They have spent more money per month on almost all kinds of digital content in 2012: ebooks witnessed a 30% increase in spend ( 5.92 per month), and spend on both online games and online news nearly tripled in a year ( 3.47 and 1.07 respectively). The spend on social networking sites was also up, almost eight times higher ( 1.95 per month) than the previous year. 18 The rise of the media savvy consumer

19 Q: Which of the following content, if any, have you accessed online in the last month? This could be via your PC/laptop, smartphone or tablet. Q: And how much, if anything did you pay to access this content? If you have accessed this content more than once in the last month, please think about the most recent time (in ). Q: You said that you do not currently pay for any of the following. What content would you be prepared to pay for? Please select all that apply. Local/national news 54% Podcasts 2.89 None of these 80% International news 42% Photography content 2.69 Music 7% Video sharing sites 37% Books 2.14 Books 4% Music 35% Music 1.92 Streamed TV/films 3% Travel 33% Games 1.83 Games 3% Streamed TV/films 31% Editorial/opinion 0.92 Sports/leisure 3% Sports & Leisure 31% Other 0.90 Video sharing sites 1% Games 26% Streamed TV/films 0.71 Travel 1% Books 23% Arts/culture content 0.68 Arts/culture 1% Business news 18% Sports/leisure content 0.67 Local/national news 1% Editorial/opinion 15% Travel 0.40 Business news 1% Arts/culture 14% Local/national news 0.31 International news 0% Photography 11% Business news 0.31 Other 8% Video sharing sites 0.31 Podcasts 7% International news 0.26 Editorial/opinion 0% Photography 0% Podcasts 0% Survey completed in October 2012 The rise of the media savvy consumer 19

20 Content worth paying for Q: Please estimate the total amount of money you spent on each of these activities over the past month (in ). October October Increase in spend Read digital books x 1.3 Download music x 0.9 Played online games x 2.9 Used magazines apps x 2.7 Downloaded radio programmes x 3.3 Used VoD services (for films) through a TV connected to the internet x 1.0 Used newspapers apps x 2.6 Visiting social networking sites x 7.8 Streamed films x 1.2 Streamed music x 2.1 Streamed TV programmes online x 1.2 Accessed news online (websites) x 4.0 Used VoD services for TV programmes through computer, tablet or smartphone x 0.5 Streamed radio programmes x 4.4 Streamed music online x 34.5 Viewed magazines websites x 1.5 Accessed maps/directions N/A 0.26 N/A Q: Why have you NOT paid to access online content in the last month? 0% 20% 40% 60% 80% I can get all the content I want free 76% I can't afford to pay for online content 19% I don't want to give my payment details to these sites I prefer to pay for offline content None of the above Other I don't know I don't know where to look 10% 6% 6% 3% 2% 1% Survey completed in October The rise of the media savvy consumer

21 Compare, however, the UK experience with that of metropolitan China or Brazil, where there is much greater propensity to pay for content. These nationalities have essentially circumvented fixedline access. They came straight into the mobile environment due to different market conditions, which meant later, but more rapid, adoption of new media. With no free content heritage or expectation, they are not only prepared to pay for digital content, but will spend significant sums as they seamlessly consume data on the move. Tapping into what consumers want According to a report by Forrester, the rising popularity of smartphones and tablets will help grow the online paid content market in the UK by 65% to 8bn per year by Already there are signs that UK consumers may open their wallets a little wider in the future. This mind shift has happened before. As a nation, we moved from licence-fee paid terrestrial TV to multiple channel choices on subscription-based satellite and cable television. Now, we are beginning to acknowledge the perks of paying for the digital content we want especially in music, ebooks and films. The delivery mechanisms technology, networks and spectrum exist and are constantly upgrading, with 4G networks now rolling out nationally. It is up to the media companies to respond with pricing strategies and content that consumers want to embrace. Streamed music providers, for instance, recognise that some content is more valuable than others. They have listened to what customers want and recognise revenue potential in allowing users to buy single tracks rather than entire albums. In the same way, news providers might shift to selling single articles rather than entire newspapers or magazines. A magazine that has 20 valuable articles may attract three potential audiences those who buy the entire magazine; those who buy two or three articles and those who buy single articles. By developing a competitive pricing structure, the provider may be better able to maximise revenues from online sales. Our survey found that reading a newspaper is the third most popular activity, while accessing news online is the top reason for using digital media. Yet, currently, there is barely any price differential between buying the physical newspaper product and the app. But, by capitalising on the benefits of smartphones and tablets and the appetite for content on the move, digital providers that get their pricing strategies right may be rewarded with a revenue shift as subscriptions migrate from print to digital. David Elms, Head of Media, KPMG in the UK The challenge for media providers is that they are yet to establish a loyal UK customer base. Consumers are fickle. They flit from site to site until they find similar free content that will suit their purposes. Media providers tend to monetise content by appealing to the mass audience, explains David Elms. The danger is that they effectively give away content free and bring down their margins. They need to become more sophisticated by looking at, and understanding, both the content they have and the consumers who use it, to develop a more targeted proposition and pricing model. 1 Online paid-content market poses threat to traditional advertising, Guardian.co.uk, 1 November 2012 The rise of the media savvy consumer 21

22 Content worth paying for Paying for apps Spend is still small, but consumers are increasingly inclined to pay for apps over smart devices. Like the content delivered through traditional media or websites, the apps need to be worthwhile to persuade customers to buy. Average spend per app in October 2012 was 0.33, with apps for ebooks, games, TV/film streaming, travel and art/culture proving most popular amongst the diversity of apps downloaded. Consumers paid from a few pennies to 1.25 per app. It is interesting to note the rapid adoption of magazines and newspaper apps. In October 2011, consumers spent per month (not per app), on average, 0.95 on magazine apps and 0.81 on newspaper apps. One year later, monthly spending rose to 2.61 and 2.09 respectively. Notwithstanding this still modest spend, apps are a critical element of online content. Given growing consumption of apps via tablets and smartphones, they constitute a significant element of consumers media budgets. Moreover, the following two trends detected in our survey certainly give room for a much broader adoption of paying for apps provided they offer tangible value for money: Still half of the owners of smartphones and/or tablets had not downloaded any apps in the six months before our 2012 survey. A third of consumers had still not perceived the quality of paid apps as better than the one of free apps which may explain why more or less the same percentage of people (35%) don t think they offer good value for money. It is also worth noticing that more than half (53%) of UK consumers would not download free apps if they were asked to provide personal data. Advertising was a turn-off too, with almost onethird (31%) claiming that they would pay for apps in return for advert-free content. Q: Please indicate to what extent you agree or disagree with the following statements. Strongly Somewhat Neither Somewhat Strongly Don t know agree agree agree nor disagree agree disagree Paid for apps are often better quality than free apps 8% 23% 36% 20% 3% 10% Paid for apps are not good value for money 12% 23% 38% 18% 1% 8% I do not download free apps that require me to provide personal details 20% 33% 25% 15% 4% 3% I am happier paying for apps to ensure that my detaiks are secure 8% 17% 39% 21% 8% 7% When downloading paid for apps I feel concerned that my personal data is not 8% 18% 38% 19% 7% 10% secure I am happier to pay a bit more to receive additional features 7% 22% 34% 23% 9% 5% I prefer to pay for apps of it means that I don t have to see or listen to adverts 8% 23% 36% 19% 10% 4% Survey completed in October The rise of the media savvy consumer

23 Q: You said you have a mobile phone or tablet and have accessed the following services. For which of the following services, if any, have you downloaded an app in the past 6 months? Q: Any how much, if anything, did you pay to downlaod this app? If you have downloaded more than one app within this category, please think of the most recent app you downloaded. None of these 50% Arts/culture app 1.25 Games 16% Photography app 0.97 Local/national news 15% Books app 0.94 Video sharing sites 13% Music app 0.70 Sports/leisure 13% Editorial/opinion app 0.56 Music 11% Games app 0.49 Streamed TV/films 11% Travel app 0.39 Books 10% Podcast app 0.39 Travel 10% Average spend per app 0.33 International news 8% International news app 0.27 Business news 5% Video sharing sites app 0.15 Podcasts 5% Video app 0.12 Editorial/opinion 2% Sports/leisure app 0.10 Arts/culture 2% Local/national news app 0.07 Photography 2% Business news app 0.05 Other 0% Survey completed in October 2012 The rise of the media savvy consumer 23

24 The multi-screen multi-tasker Today s media-hungry consumer is no longer content with just one screen but is increasingly likely to engage in simultaneous multi-screen entertainment activity. 24 The rise of the media savvy consumer

25 The multi-tasker typically combines a passive medium most commonly watching TV with an active media, such as accessing the internet via computers and laptops (45% of respondents), via smartphones (22%) and via tablets (11%). We have always been inclined to have one eye on the TV and the other on a newspaper (39%), but multimedia activity now takes in two or more screens or devices. The multi-screen strategy is an opportunity for advertisers to tap into second and third screens through social media... and have more, not less, tailored engagement with their communities. David Elms, Head of Media, KPMG in the UK Q: Which of the following activities, if any, do you engage in at the same time? 0% 10% 20% 30% 40% 50% Watch TV and access the internet (not for social networking) via PC/laptop 45% Watch TV and read newspapers 39% Watch TV and use a social networking site Listen to the radio and access the internet (not for social networking) via PC/laptop Watch TV and read magazines Listen to the radio and read newspapers Watch TV and access internet (not for social networking) via a smartphone 27% 25% 23% 22% 22% Listen to the radio and read magazines Listen to the radio and use a social networking site 15% 14% Watch TV and access internet (not for social networking) via a tablet 11% Read newspapers and access internet (not for social networking) via a home PC/ laptop 8% Listen to the radio and access internet (not for social networking) via a tablet Read magazines and access internet (not for social networking) via a home PC/ laptop Read magazines and use a social networking site Read newspapers v use a social networking site Read newspapers and access internet (not for social networking) via a smartphone Read magazines and access internet (not for social networking) via a smartphone Read newspapers and access internet (not for social networking) via a tablet Read magazines and access the internet (not for social networking) via a tablet 4% 4% 4% 4% 3% 2% 1% 1% Survey completed in October 2012 The rise of the media savvy consumer 25

26 The multi-screen multi-tasker Watching TV while using a social networking site proves to be highly popular too (27%). Traditional media and digital media co-exist very well too in such multi-tasking behaviours with almost 40% of consumers watching TV while reading newspapers, and almost a quarter (23%) watching TV while reading a magazine. So, accepting that television is no longer a single entertainment experience, are there implications for advertising? Will consumers attention be diverted away from the ads that fund much of the broadcast content? On the contrary, says David Elms, the multi-screen strategy is an opportunity for advertisers to tap into second and third screens through social media and to link with the consumer stv viewing. Advertisers will have more, not less, tailored engagement with their communities. They will adapt to the dualscreen challenge with greater product placement on TV, supported by online contextual content that underpins the paid content on the main screen. Q:To what extent do you pay attention to different types of advertising? TV advertising 70% Social network banner advertising 24% Newspaper/magazine advertising 64% Online VoD advertising 23% Outdoor advertising 62% Online audio advertising 22% Radio advertising 50% Mobile advertising 18% Online banner advertising 31% Mobile location based advertising 15% Survey completed in October The rise of the media savvy consumer

27 Traditional media remains the most critical advertising vehicle in the UK. TV advertising attracts the attention of 70% of respondents; press advertising (64%); outdoor (62%) and radio (50%). However, TV companies need to develop their models to better interact with their audience. Though digital advertising is not yet as influential, with consumers least responsive to online advertising and banners on social networking sites, media companies, including Google, Facebook and Amazon, are introducing advertising that is more relevant to the new generation of connected devices. Meanwhile, publishing groups, including Daily Mail and General Trust (DMGT), are beginning to show rising revenues from online advertising. Events like the Olympics, which proved consumers appetite for content on the move, provide media companies with an ideal stage to reach audiences on multiple platforms and to develop their business models and monetisation strategies for a digital world. Q: When buying products or services, how influenced are you by each of the following? Recommendation by friends and/or family 48% Discount voucher sites 13% Third-party product comparison sites 22% Social network sites 6% Newspaper/magazine reviews 19% Mobile advertising 3% Product or service website 19% Survey completed in October 2012 The rise of the media savvy consumer 27

28 Tech and media to find growth in collaboration Technology and media companies are mutually dependent. Instead of going it alone to seek control of a greater share of future digital revenue, strategies of co-operation could grow the total opportunity. Already, 52 % of UK respondents own a smartphone; and barely two-and-half-years since Apple launched the ipad, 20% own a tablet. On their devices, consumers want access to more content as they go about their daily routines. Both technology and media industries stand to gain from finding new business models to capitalise on consumers appetite for digital. Collaborative strategies may well be by way of partnerships. Whatever the set-up, partners will need to be chosen carefully and the relationship structured so that everyone, including the consumer, gets value from the arrangement. 28 The rise of the media savvy consumer

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30 What content providers need to do next The results of our survey indicate that content providers need to do more if they are to satisfy multi-screen, multi-tasking consumers seeking quality digital content whenever and wherever they want it.the challenge, especially pertinent in the UK market, is to break the cycle of free content and to implement pricing strategies that represent good value, while raising awareness through targeted advertising. 30 The rise of the media savvy consumer

31 Here s where we think content providers ought to focus their attention: 1. Understand your customer Not all customers behave in the same way. If they don t properly understand their consumers online behaviour and preferences, media companies end up playing to the lowest common denominator. This reduces the value of the content. It is less tailored and, therefore, less personally relevant to the consumer. The business then fails to generate sufficient revenue from its content because it is not giving consumers the media experience they anticipate. 2. Create a new advertising model Today s advertisers recognise the power of digital information. They want to understand their prospective consumers at levels that go far deeper than demographics. The emergence of smartphone and tablet applications has enabled brands to form direct relationships with consumers. There is potential too for increased online or digital ad spend as new devices, with larger screens, come to market, improving the consumer experience. Despite growing temptations for TV viewers most notably teenagers and young adults to divert attention from one screen (typically the TV) to online content via a computer, smartphone or tablet, TV advertising continues to retain the attention of much of its audience. However, given the rapid adoption of smartphones and tablets, consumers new multi-tasking behaviour must not be ignored by advertisers. Wave 6 of our research (October 2012) reveals that 45% of our respondents watched TV while simultaneously surfing the internet. Meanwhile, 27% admit to watching TV while accessing a social network. Such behaviours present huge opportunities for advertisers to match content viewed on TV with relevant ads over the internet and social networks. These online ads, displayed on second and third screens, far from cannibalising the space occupied by TV advertising, will be: Complementary and interactive, introducing a gamification factor (the use of gaming techniques in non-game contexts) as recently deployed in advertising campaigns at the Super Bowl. Displayed before or after TV spots, but will not clash. We believe that advertisers should certainly continue to develop from a mono-channel to a dual/ multi-channel marketing strategy. Against this backdrop of innovation, traditional media companies cannot remain as mere intermediaries. They have to give advertising clients the kind of consumer metrics that facilitate one-toone and more targeted relationships. 3. Embrace the new world Traditional media, enabled through cable, satellite and digital terrestrial TV companies, is holding up against online alternatives. These companies still generate significant advertising revenue, particularly from major events and programming such as The X Factor and The Super Bowl. But they cannot bank on it lasting. These companies need to continue to embrace digital, if they are to maintain their status and competitive advantage. The rise of the media savvy consumer 31

32 What content providers need to do next Indeed, as online advertising spend continues to rise, some traditional media companies are showing that they have adapted to the new world. In March 2013, DMGT reported that increases in revenues from digital advertising are likely to more than compensate for falls in revenues from print advertising sales Engage with digital multi-taskers Technology companies can enrich the consumer and advertiser second screen experience by combining the reach of broadcast with the interactivity of online. Media companies, meanwhile, have a responsibility to ensure that content reads and scans well, irrespective of the device or network. Gaming consoles, as well as set-top boxes that interact with smartphones, tablets and smart TVs, are paving the way for a seamless media experience. 5. Find innovative ways to make online as valuable as offline Consumers are very comfortable with offline media but are yet to fully embrace online content. Often, when they search for information, they are faced with a deluge of choices. Not knowing where to go or what to trust, they turn to family and friends for recommendations and advice. In fact, in the UK, 48% of respondents take product and service recommendations from family and friends; 22% trust product reviews on comparison websites; and just 3% will base a decision to buy on mobile advertising. Things have to change. If operators are to make online as valuable as offline, they have to think innovatively about what their customers want. Often, for instance, online consumers are faced with high data transport costs and are reluctant to pay for content. This might be combated by a paid carriage model, where content owners foot the traffic bill and build that cost into the price of their content. Adopting this approach may enable freemium and other business models, which blend ad-supported content with premium services in innovative ways. Consumers are very comfortable with offline media but are yet to fully embrace online content. Often, when they search for information, they are faced with a deluge of choices. The same rationale applies to companies that advertise goods and services online. They question whether there is any return on investment from communicating with a fairly unresponsive online audience. 1 Mail Online traffic dip fails to dent DMGT, FT, 27 March The rise of the media savvy consumer

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34 About this survey All figures, unless stated otherwise, are from YouGov Plc. Research was conducted in six waves, from September 2009 to October The rise of the media savvy consumer

35 The surveys sampled people aged 16 and over in the UK. We asked participants for their preferences and consumption habits across all types of media, including publishing, broadcast, music and gaming in the prior month.their online responses inform our analysis. Sample size WAVE DATE NUMBER OF RESPONDENTS WAVE DATE NUMBER OF RESPONDENTS 1 September ,037 4 March ,103 2 March ,034 5 October ,177 3 September ,241 6 October ,033 Our wave 6 research coincided with a wider global study. To view the findings of this global research among 9,000 consumers in Australia, Brazil, Canada, China, Germany, Singapore, Spain, the UK and the US, log onto: The rise of the media savvy consumer 35

36 The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. RR Donnelley RRD May 2013