There has been so much in the news about the current economic downturn and the effects on all markets and industries that the general feeling is to take cover and head for the hills. But TRACY SHELDON challenges this take with a call to action, a new battle cry to seize this opportunity to reassess, regroup and turn the dial for our businesses.

Yes, it’s true. We are in a global recession. DVD sales are declining, which is hurting movie studios and impacting on film finance. Although, looking at the slate of blockbusters that have been coming out this year, you could be forgiven for thinking that the situation is not that dire.

Sales of Blu-ray discs are growing fast, admittedly from a small base, and digital delivery is picking up. But confusing data abounds, and statistics are spun in a variety of self-serving ways. I believe the lack of a clear picture is a manifestation of the hiatus between our expectation and the speed of development.

The current trend seems to be to cut back and ride out the global storm. But, as with all things, you can only cut back so far before you destabilise what is still a strong industry. It’s a pity because the signs are there is so much more we can do, and there is every indication that consumers actually want packaged media. However, the challenge is in the way we do things, in the supply chain, stock holding, planning and selling, all taking place in the context of fast moving targets. That makes it difficult to just rely on sales data to guide us through the turbulence.

DVD is now a mature product, having been in the marketplace for over ten years. Its rapid and profitable growth instilled an element of complacency and pats on the back at the huge successes we have all enjoyed. We recognised the impact of technology on the music industry, but despite similar trends, we chose to ignore some of those elements impacting on the DVD market with the expectation that we could sustain much more longevity from this product. Equally, the technologies themselves were not aligned with supply chain efficiencies and consumer trends, leading to a mismatch of expectations and sales.

In a nutshell, Blu-ray is here to stay and making inroads, though not at a speed we had hoped to compensate the downturn in DVD sales. Consumers want real value for their money and they look to home entertainment to take them out of the doldrums of credit crunch and recession, if only briefly.

The current situation in replication has kept the client base in a state of flux for the last two years. The reduction in the number of suppliers and consolidation in the market may seem to point to efficiency, but it eventually reduces choice and the ability to spread risk, where everyone fights for the best deals and tries to push prices down to increase profitability at retail. It’s tough out there for the replicators, and the studios cannot afford to let them slip or we won’t have a product to sell in volume.

Printing is in the same boat, with fantastic ideas and products, but these cannot be produced profitably to enable investment in new technology and innovation and retain current contracts with lower price points and high quality. Printing companies will readily accept any work, but the list of talent on the market and the number of closures suggest the sector is in a dire situation.

For everyone now there is the question of financial stability. When a major bank can go down, who will be next? So, let’s cut back, trim the sails – or should that be sales – and ride out the storm. So, where do we go from here, and why do I believe there are some really good times ahead? They will be different from before, but no less exciting and challenging.

Price is everything, and even more so now. But, we should not confuse ‘price’ with ‘value’ and we should not believe that the consumer does not understand the difference. Experience shows that consumers are happy to pay for products they want, nothing new here. But, it also reveals that cleverly re-packaged content targeted to specific niche consumers, can command differentiated pricing and hit the jackpot. Disney is an excellent example with High School Musical and Hannah. Both global brands now, they have expanded into rock schools, TV shows, online games, merchandising, etc.

People are still interested in good content, and box office takings are proving it. The real teeth for our industry in this recession is in retail, and this is where price, value and a deep understanding of the target market are key.

The wholesale panic is not over, but it is showing signs of cautious optimism. The film Twilight showed great numbers and Marley and Me sold 5-6 million units as of March. Despite its premium price, revenues from the Blu-ray disc version of the title doubled and it was considered successful after reaching 8% of total sales. Now Blu-ray figures are in the region of 20% of total title sales.

So, where does this leave us? Digital? Games? Marketing? Innovations? Sustainability?

Digital revenues are up and, although not making the expected impact in terms of speed, it is nonetheless growing –a growth put at up to 50% in 2009. If this is the case then the industry could only be 2-3% off overall 2008 figures. This digital sector is driven by the young consumers, and this could actually lead to more sustained growth once the economic tide turns upward.

Games overtook DVD and Blu-ray for the first time ever in 2008 with an estimated 6% growth in retail, mainly driven by the Wii platform. However predictions are still for an optimistic 12% growth this year. So, even with the current struggle in retail, consumers are looking to home entertainment to entertain them and take away the blues with new and exciting platforms and systems.

Marketing has historically had its bashers and complainers, but most of the information on which we base our strategies comes from good solid market research. I am a great believer in integrated marketing communications. Utilising these tools effectively to understand our markets, sectors and output give us clear measurable information to speed up business decisions. That’s the only way to go. Businesses that think it can rely on cutbacks and ever lower prices to survive fool themselves. This is a shortsighted and uninventive way to look to the future.

We should not presume our products are what our customers want just because we make them. We should invest in knowing precisely what our consumers need and fulfil those needs at a profitable and valuable price, and to the standard and quality expected. We should be analysing the market trends now and subsequently plan and produce what the industry needs before it knows it needs it! This will give you a competitive edge, not just price based sales/competitor comparisons. Too often we relied on capacity rather than innovative solutions.

The future may not require a new pack or even a new type of disc – check out some of the new eco discs already available – but social media and new applications. We seem to be turning into ‘app-mad’ maniacs where any forward-thinking person is into social networking, Twitter and the apps that support these. Twitter has now passed 10+ million users – following the Oprah and Ashton battle – and Apple has sold more than 37 million iPhones and iPods. The point here is the speed at which these new platforms have emerged and the volume of traffic they drive. No surprise that most major studios are now using Twitter to connect to their audiences.

The Crazies was the first film to make use of Twitter to spread the word about it via special features. Official tweets from the stars themselves are used to create publicity. It’s also a great way to ‘listen’ to your potential audiences and gauge the way to promote either your film, your stars or your releases. You can also create a marketing buzz that drives consumers through to product sales and promotions. This is a concrete way of utilising integrated marketing media and combining the full range of tools rather than separating out a campaign into separate small budgets. The key word is getting value for your money and return on investment.

This integration across platforms is a way to get your products to the consumers in a variety of ways with which they want to interact, pulling them towards your interesting content which is valuable to them. It is not for everyone, but it is certainly here to stay given Tweeter’s ability to generate a digital buzz with a low-cost, 140-character message. Look out for iPhone in China this year, iPhone 3.0 as well as Google Android and new apps for Nokia, not to mention Blackberry moves.

Sustainability is another area not to be dismissed in the range of cost-cutting exercises. Don’t think it will go away. It’s here to stay. When people want to look for the edge on the competition and add real value then eco-friendly sustainability could be the way to your consumers’ hearts. If you win those, then you have a loyal following built on a platform seen to be ethical.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change,” says Darwin who understood evolution, transition and change (and most people thought he was barking up the wrong tree when his theories first were discussed). The industry will change in various ways and at various paces over time. The most adaptable companies will survive by utilising their skill, talent and experience to create and drive new species of home entertainment, based on good market information. It will have to deliver what the consumers want, not necessarily what the industry can currently manufacture.

The following tips for change may be useful to kick off the thought processes against current strategies:

Establish a sense of urgency
- examine market and competitive realities
- identify and discuss crises, potential crises or major opportunities.

Form a powerful, guiding coalition
- assemble a group with enough power to lead the change effort
- encourage the group to work together as a team.

Create a vision
- create a vision to help direct the change effort
- develop strategies for achieving that vision.

Communicate the vision
- use every vehicle possible to communicate the new vision and strategies
- teach new behaviours by the example of the guiding coalition.

Empower others to act on the vision
- get rid of obstacles to change
- change systems or structures that seriously undermine the vision
- encourage risk taking and non-traditional ideas, activities and actions.

Plan and create short term wins
- plan for visible performance improvements
- create those improvements
- recognise and reward employees involved in the improvements.

Consolidate improvements and produce still more change
- use increased credibility to change systems, structures and policies that don't fit the vision
- hire, promote and develop employees who can implement the vision
- reinvigorate the process with new projects themes and change agents.

Institutionalise new approaches
- articulate the connections between the new behaviours and corporate success
- develop the means to ensure leadership development and succession.


Tracy Sheldon is Managing Director of Brug Consultancy, formerly she was Marketing Director Europe for AGI Media Europe, part of MWV. Tracy has twenty years plus experience in business, working in areas from brand and product innovation, marketing, mentoring and coaching through to strategic change management. She has managed company turnarounds, developmental change, strategic mergers and built teams in design, localisation, print, sales and marketing. Contact: tracy.sheldon@brugconsultancy.co.uk

Story filed 03.11.09