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One challenge for media and entertainment companies in the year ahead: focusing on new business models and opportunities without sacrificing or compromising existing revenue streams, according to Gerald Belson, vice chairman and U.S. Media & Entertainment leader for Deloitte Consulting LLP.

Where do you see opportunities for growth in this sector?

Gerald Belson: In last year’s outlook, we stressed that the media and entertainment sector is experiencing a rare moment during which existing business models continue to thrive at the same time new models—especially online “over the top” (OTT) models—were emerging. The traditional model still dominates, but movement to an OTT model is hastening.

The acceleration is driven by the availability of Internet-based content and the proliferation of mobile devices offering high-quality viewing. The notion of consumers watching television shows at programmed times from the comfort of their homes is quickly giving way to a market of viewers (particularly younger ones) who use multiple devices to consume content whenever and wherever they choose.

Changing viewing dynamics pose challenges for networks, and cable and satellite providers, but they also present lucrative opportunities for entertainment content companies. The challenges include adapting pay TV subscription and advertising models to align with online content consumption trends and shifting demographics. Pay TV subscriptions in particular have less appeal to younger generations. Millennials, for example, have grown up less dependent on paid television and are less likely than other demographic groups to subscribe to TV when they establish their own households, according to analysis of results from Deloitte’s 2014 Digital Democracy Survey.

For entertainment content companies, the Internet offers the possibility to connect with and market directly to consumers. Although cable companies will continue to play a primary role in content distribution for the foreseeable future, initial steps content companies have taken to offer individual channels and packages online show incredible potential, especially with millennials.

A similar dynamic is playing out in education, where access to branded, high-quality content is no longer confined to physical classrooms. Rather, educational content is increasingly distributed globally through MOOCs (massive open online courses) and other means that offer much greater reach. While these innovations provide unprecedented learning opportunities for individuals, they pose significant challenges to traditional educational payment and delivery models.

What should businesses bear in mind as they plan for growth?

As the media industry transforms, companies should focus on new opportunities, but not at the expense of their current businesses. To strike the right balance, media companies should focus on the changing economics coming their way. Advertising metrics are a prime example. These need to move beyond measuring the number of viewers and the share of audience during a particular time slot. Instead, they must capture the relevance and significance of changing viewing habits. Consider that 86 percent of U.S. consumers multitask while watching television, and more than 90 percent of millennials (ages 14 to 30) typically engage in four different activities while sitting in front of the TV, according to the 2014 Digital Democracy Survey. Therefore, the intensity of viewing attention becomes a meaningful metric for understanding advertising effectiveness. Unfortunately, it is extremely difficult to quantify, particularly in the traditional TV viewing world.

What’s the “next big thing”? What markets do you see emerging in the sector?

In terms of emerging markets, the industry’s transformation demands new business models that have yet to fully come into focus. Mobile advertising, for example, is still evolving. Meanwhile, the prospect of combining viewing habits with social media, location-based services, and other technologies is opening new opportunities for media targeting. Advertising messages in the online world will have the potential to be as individualized as advertisers want.

The “next big thing” may well arise from the convergence of the technology, media, and telecom industries and the hyperconnectivity inherent in the “Internet of Things.” These industries are steadily converging as each increases its capacity to generate and analyze eye-opening amounts of individual consumer data. Consequently, media viewing habits may become only a small part of the data set advertisers use to understand, segment, and target their audiences.

The downside of convergence, however, is that it will drive an escalating battle for control of customer relationships. Device manufacturers, telecommunication companies, media distributers, content providers, and even app developers are seeking direct relationships with customers, even as they compete and collaborate with one another. Expect to see unexpected partnerships and intensifying competition among these players in the year ahead. ​