• by Ross Fadner , May 26, 2004

Recently, some media analysts dismissed the idea of convergence as a mere pipe dream. Nowadays, media convergence is everywhere. From Web-enabled cell phones that also serve as digital cameras to interactive television, Internet radio, and TV webcasts, massive multiplayer online gaming, BlackBerrys, and PDAs, the shift toward media convergence is prevalent. While manufacturers and service providers should be bullish about moving forward, content providers should be wary, according to a new Yankee Group report.

The report, "In-Home Connectivity May Not Be in the Best Interest of Content Owners," notes that as consumers begin to demand greater connectivity from their PC's and other electronic devices, content owners might think that they stand to benefit from this crossover. Not so, says the Yankee Group.

For content providers, device convergence and in-home connectivity present problems. According to the report, "the concern for content providers must be maintaining core revenue while independently growing other channels; this is threatened by device convergence."

Intuitively, more channels should mean more options, which usually leads to greater opportunity. But when the devices that support these channels start converging, content providers must be cautious about repeating themselves. For example, why would a consumer who has his television connected to his PC want to pay for premium television content if he can gain access to it by downloading or streaming the same content online? This will become more of a consideration point for content providers in a converging media landscape.

The report highlights ESPN as a good example of a content provider that has succeeded in providing distinct content across multiple channels. The Yankee Group notes that it has done this by differentiating the content provided in its cable, print, online, and radio distribution channels. The content quality enables its revenue streams--primarily advertising and subscription services--to thrive.

For broadband providers, the Yankee report notes that in-home connectivity drives broadband growth--and, to a certain extent, ensures broadband providers that a given household will keep the service, as broadband homes with a home network are 50 percent less likely to switch providers or revert to dial-up.

On the consumer electronics end, for manufacturers, connectivity is a great consumer value proposition that also helps electronics manufacturers differentiate themselves from a cluttered audio/video device market. The Yankee report says that connectivity between devices might redefine a product's value to consumers.

Convergence may be good news for broadband providers and device manufacturers, but "vigilance" will be the more appropriate watchword for content providers as media continues to come together. As the report says, "home networking should spur caution for content providers in managing the greater diversity of content channels."

The Yankee Group recommends that content providers wishing to expand their channels of distribution not simply re-purpose content. Expansion into online, in particular, could offset production costs and help expand reach. Re-purposing content, however, is a bad idea because consumers won't go for it. Also, content providers will note that the Internet is an excellent channel for reaching niche audiences.