The “Real” Secret Sauce

What do McDonald’s and Netflix have in common? Well, the answer to that is that both companies derive significant value from assets that are secondary to their stated core mission. While McDonald’s is well known for its low-cost fast-food, it is less commonly known that their true source of value stems from owning and leasing the properties on which its franchises are located. Today, McDonald’s isn’t only the biggest fast-food chain in the world, it’s also one of the biggest real estate companies, with properties valued at more than $28 billion. In the same way that McDonald’s understood that their key cash cow was in real estate and not hamburgers, Netflix understands that data at scale is the true source of its worth, not content.

Data is Prime Property – The More You Have, The More You’re Worth

What does this mean for broadcasters and service providers? It’s the understanding that quality content alone is not enough these days to succeed in the media business. The beaten phrase “Content is King!” should now be caveated with “Data is Queen!”. The first to truly understand this were Netflix. From inception of its streaming service in early 2007, Netflix gathered user data and used it not only to improve recommendations and keep users engaged but also to improve its original content lineup, which, in return, provided them with increased brand recognition and fueled their massive subscriber growth over the years. The cycle goes like this: content (at a low-cost price) lures viewers to your platform, who feed your system with data, which you can use to improve your service, which will help you upsell to the existing subscribers and grow beyond your current footprint to potentially new market segments.

In just over 11 years, Netflix has acquired an unparalleled database of over 125 million subscribers worldwide. It is therefore no surprise that today Netflix boasts a market cap that, benchmarked against other media companies, is second only to Disney – the world’s largest media conglomerate.

To Own the Data You Must First Own the Platform and the User Experience

Gaining exclusive access to user data is so important that content providers across the globe are increasingly willing to risk their existing traditional relationships with MSOs and go direct-to-consumer, launching their own streaming services. By engaging users directly, they gain both brand recognition as well as an unprecedented understanding of how much their content is worth, which allows them to negotiate better deals with the MSO distribution channel. This and more; by going direct-to-consumer, broadcasters like HBO and MediaCorp can now engage viewers in a variety of ways and experiment with new business models, enabling them to rely less on advertising and content rights as their only two sources of income. MediaCorp for example, monetizes its original content by offering premium access to trailing episodes of popular shows before they air on TV, thus, pioneering new business models previously unthought of.

Applying the McDonald’s-Netflix Model to the Asian Market

Across Southeast Asia, many broadcasters seeking to address their audience online are faced with a challenging decision: either invest in their own OTT solutions or opt for the YouTube rev-share model. At first glance, YouTube seems like a good option, since it’s provided “free” and without any upfront investment in infrastructure. However, those looking to simply dump their content on YouTube and collect the ad-revenue will not only cannibalize their existing business (as Google reaps a hefty part of the revenue) but also undermine their long-term survival (since Google are exposed to more data than is eventually shared with the content provider). In a world where data is increasingly becoming the new currency, handing over your precious user data to others is nothing short of a suicidal move. Furthermore, in the long run, preferring YouTube’s user experience over your own will only enhance YouTube’s brand equity and erode yours.

The Value of User Data

It is no secret that today media organizations of all sizes are accumulating massive amounts of data, on an ongoing basis, as an imperative part of their business strategy. However, knowing which data to collect, and more importantly, how to analyze it to extract meaningful business insights is what sets apart a stellar business from a mediocre one. Turning data into actionable intelligence is the real secret sauce. Furthermore, regulatory requirements now impose limitations on how this precious data can be obtained, kept and used. Therefore, just like any asset, data too needs to be handled by experienced personnel who know the ins and outs of data collection and protection.

Whether your goals are to reduce churn, increase revenue, grow your subscriber base, diversify your sources of income, negotiate better distribution deals, increase brand awareness or improve user experience, quality data at scale is required across all facets of your business. Simply put – if you don’t understand your data, you don’t understand your business.

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