theibcdaily executive summary 35 The investors Ensuring value for everyone John C.


Hahn Managing Director, Providence Equity Region: US


If, in the long term people will become less and less willing to watch ads, then the source of money for content will come from subscription


PRIVATE EQUITY FIRM Providence Equity targets and manages $22 billion worth of investments in the media, entertainment, communications and information sectors. Its managing director believes that it is up to platform operators and content creators to capitalise on technological change in a way that doesn’t destroy their value chain but at the same time gives consumers a value-for-money opportunity. “I think there is a way to thread that needle,


but there are a lot of problems en route,” says John C. Hahn. “If you produce good content and it is entertaining, people will generally be willing to pay for it and advertisers will want to advertise on it. But because of the internet and OTT, a business model which balances the two revenue streams is important.”


This could include changes in where production budgets originate. “High quality production— ideas, actors, production—costs money and that has to come from somewhere. Historically, it comes from taxes, in the case of public


broadcasters—but there is some pressure on that model—or advertisers,” Hahn says. “If you believe that in the long term people will become less and less willing to watch ads, then the source of money for content, it seems logical to me, will come from some form of subscription.” Hahn continues: “In some markets moving


toward a subscription model is complicated and may not be what the consumer is used to—and if they are not used to it, they are certainly not demanding it. Quite the opposite, they demand value for money. That manifests itself in a variety of ways, pushing content out to tablets and mobile devices, for example, and having more choice in when and how they watch content. The concept of paying per use or a la carte has consumer appeal, at least on the surface.” But there’s a warning. Hahn says this scenario could lead to deterioration in content quality. “That is something nobody wants, even the consumer. I’m not one who thinks the next generation is going to spend their life on YouTube.” CG


Picking winners F


By Ann Marie Corvin


orge a digital future but avoid debt – that’s the key message Lorna Tilbian has for media companies looking to grasp the opportunities presented by digital. The executive director and head of media at investment banking and stock


broking firm, Numis securities, says that broadcast companies can take a leaf out of the book followed by some members of the old print media. “The B2B trade press, including publishers Centaur and Future [both Numis clients], had the courage to move swiftly into offering online subscriptions and charge the end user who was sitting at their desk at work.


“Unfortunately the business to consumer (B2C) market – newspapers and consumer magazines – never had the courage to charge and once you start to give a whole generation something for free they are not likely to want to pay for it.” However, one B2C model she thinks just might weather the tide of change is television – thanks to its ability to draw huge numbers to live events such as the Olympics and the Royal Wedding. Another advantage broadcasters have is their established branding and their IP. By comparison, VoD players like Netflix and Lovefilm have to work harder


as middle men without their own content


or networks. “It’s the reason Arqiva shut down its VoD site Seesaw and why VoD start-ups such as Blinkbox


Lorna Tilbian Executive Director & Head of


Media, Numis Securities Region: UK


sold to Tesco and LoveFilm sold to Amazon – the latter for a higher price than it would have achieved through IPO,” she says. Ultimately, Tilbian believes most of the important international content companies will be owned by the silicon powerhouses Amazon, Apple and Google.


“I could see Apple buying ITV. We know they want the brand ‘ITV’ because the ‘i’ in its title would tie in with its products.” She adds that the content Apple would inherit through such a deal would be an added bonus “…60 years of Coronation Street thrown in.” Tilbian would like to see a home-grown silicon giant entering the fray but she’s doubtful this will happen unless the UK invests more in tech IP. “We invented the internet for goodness sake! Maybe we’ve been too interested in what was happening in the financial services industries and not enough in technology.” There are British companies with innovative business models that are generating interest. Cambridge-based ARM, for example, creates, buys and licenses IP and then charges a royalty on every chip produced by its suppliers. However, Tilbian believes ARM may eventually get swallowed up by a US giant like Intel because “UK investors undervalue technology media and telephony companies. Americans invest more and pay more.”


Once you give a whole generation something for free they are not likely to want to pay for it


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