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TV sets, Blu-ray players and video game consoles are already shipping with built-in network connections. As consumers become more adept at the use of these products, content owners will be able to connect directly with their end-users. This creates challenges for “middlemen” that aggregate and distribute content, such as cable TV, satellite TV and telcoTV (IPTV) service providers. However, traditional Pay-TV services are not going away, and up to half of consumers still prefer these tried-and-true methods. The new markets will not end the old markets.

In addition, most consumers are also already heavily involved with mobile services. Cellular networks not only know who is on a call, but where that person is, thanks to global positioning systems (GPS) built into handsets. Social networks and games will further disrupt entertainment. New technologies enable video on a TV screen to be overlaid with enhanced content from the Internet. Semiconductors from Broadcom, ST, and Intel provide advanced graphics capabilities alongside multi-core processors.

Texas Instruments, Freescale, NXP, and Qualcomm have low-power products that bring similar capabilities to smart phones and other mobile devices.

Shifts in Business Models are Inevitable to Gaining Competitive Advantage
There is no silver bullet to stop the disruption caused by the impact of digital and the rapidly changing demands of consumers who themselves have more control than ever before.

What makes the digital transformation a real conundrum is the fact that all existing entertainment infrastructures will still need to remain as a significant number of consumers will continue with “business as usual”. Companies must face an inevitable transformation of their business models and fundamental operations as digital revenues will not reach the same peak as physical revenues.

Therefore, companies need to consider dramatic changes to their physical and digital operations in order to attain a cost structure that balances the size and margins associated with shift in physical and digital content sales.

All of this connectivity directly between content owners and their audience creates unprecedented opportunities to engage customers 24/7. But the audience is always going to be a moving target. Existing Information Technology (IT) infrastructures are not set up to handle the surge in new applications, nor do they scale up to support tens of millions of users generating billions of transactions.

The entertainment industry is going to need to re-engineer their IT systems, interconnect with content delivery networks (CDNs), enable advanced advertising capabilities and create entirely new interfaces with their distribution partners.

Companies that make the right moves can tap into $10 billion in revenue opportunities made possible by the growth of digital electronic entertainment. Those that don’t will be left on the sidelines.

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