The entertainment and media industry has been undergoing major transformational changes, primarily triggered by digital distribution and convergence, which is growing rapidly and not only playing a more important role in the overall market, but also in creating a new medium.
The industry size is forecasted to increase from $1.4 trillion in 2006 to $2 trillion in 2011 at a growth rate of 6.4 percent, according to PriceWaterhouseCoopers (PwC). Under its various sub-segments, media would be the fastest one to grow: It is expected to grow at a CAGR of 7.9 percent and is set to cross $1 trillion mark by 2011.
In addition, there are a number of drivers that are changing the dynamics for the industry, such as the increasing prevalence of HDTV, digital content and on-demand programming. The changing dynamics have created a need for the media companies to ensure that their content is digitized and available to customers for access and use. There is also pressure on media companies globally to cut costs and outsourcing seems one of the established means to achieve this.
Media Outsourcing
Still in the nascent stage, outsourcing of technology and business processes in the media and entertainment industry is fast maturing across its sub-segments. Most media companies — battling with the forces of convergence and digital media — initially look at outsourcing to help drive cost efficiencies but quickly realize there is much to be gained in business process and quality if the outsourcing partner is chosen carefully.
“Currently 70 percent of all media work is digital and virtually 70 percent of this can be outsourced. In some ways, the media world is currently at an inflection point similar to the Y2K phenomenon, as decades of analog is being converted to digital from major process-based operations to high-end functionality,” said Harpreet Duggal, Head, NGEN, the Media Process Outsourcing arm of Genpact, formed jointly with NDTV.
In fact, last year’s $1.2 billion worth deal between the media giant The Nielsen Company and Indian IT giant TCS, also paved way for an increasing trend toward full service; large volume, quality and content-based outsourcing deals in the industry.
“TCS’ focus has been on constantly and consistently adding business value to our customers, as our corporate statement embodies. TCS has been helping leading Media and Entertainment organizations to experience a level of certainty that enables them to focus on their core operations,” commented Ed Altman, Global Head, Media and Entertainment, TCS. “However, today, the focus is on digital supply chain and efficiencies improvement across operations and channels as most of the content is digitized.”
And to keep the media consumers assured of better and disturbance-free telecast, services such as home-phone line service are introduced and can be outsourced as well. U.K.’s Virgin Media signed a five-year deal with BT, which would see the telecom major provide fixed-line telephone switch operations to Virgin Media customers.
“The move is good news for households as it will assist Virgin Media in continuing to meet its customers’ needs,” informs Sally Davis, Chief Executive for BT Wholesale. Meanwhile Paul Weir, Managing Director of Networks for Virgin Media, said, “The move paved the way for greater technological development in the media industry in the future.” Virgin Media’s fixed-line voice switching network currently supports around 20 percent of all landline telephone connections in the U.K.
Films and Animation Outsourcing
Since there are many risks involved with filming in another country, especially a developing country, some companies aren’t willing to take those risks for larger productions. And instead they take the option to outsource post-production processes, which can include editing, sound, and special effects. The fastest growing area of post-production outsourcing is the addition of special effects for foreign movie studios.
It’s also, of course, a cost-effective strategy for Hollywood. As paychecks for actors get higher every year, studios are putting more effort into developing films like “300,” which proved that gorgeous digital effects can draw box-office numbers as big as any movie star.
Eighteen months ago, the digital-art powerhouse called the Lucasfilm, the empire launched by George Lucas, creator of “Star Wars,” launched its first overseas studio in Singapore. Lucasfilm is the first major production studio to set up shop in Asia, but competitors are right behind it. Its 170 employees come from 33 nations to make sure that Luke Skywalker’s animated cloak swings naturally in the TV series “Clone Wars” and that Jackie Chan slides effortlessly down the Eiffel Tower in “Rush Hour 3.”
More than 90 percent of the animation for American films and television shows is processed in Asia, mainly in Japan and South Korea. Now, however, the $100 billion animation industry is rushing to tap the deep pools of young, well-trained artists in countries such as Singapore, China, India, South Korea and the Philippines as it is cheaper to produce in Asia, but Lucasfilm executives deny that cost cutting brought them to the region.
Still, the move has allowed them to experiment with new ideas — including its first animated TV show — and take chances on young talent without as much financial risk. The Singapore studio’s less experienced artists demand lower salaries than their California counterparts, and Lucasfilm doesn’t have to navigate U.S. immigration laws to hire them. And by making use of the 16-hour time difference between Singapore and San Francisco, Lucasfilm has essentially doubled its productivity.
Lucasfilm's biggest competitor in animation, Disney, has so far limited its creative forays in Asia to teaming up with local companies, using a very different formula with some early success. In June, Disney released “The Secret of the Magic Gourd,” its first Mandarin-language film made for Mainland China. But the movie was produced entirely by Hong Kong-based Centro Digital Pictures.
