Tech companies are seeing the value in controlling content. What are the factors that can outline a successful convergence strategy for tech brands?
Technology is no good without content – blank screens, silent stereos and empty pages. Content is king (or at least, a powerful prince) and tech brands are wising up to the fact. Yet, some big-name brands are managing the move into content better than other.
“Apple - definitely a technology company - got into content and did it on the basis of being a storefront only and they do it very well,” says Reed Smith’s Gregor Pryor. “All they are doing is retailing content that sits next to their devices as a complimentary approach. They don’t try to produce their own content and they clearly defined their position in the market place as a distributor. They stick to their core business.
“On the other hand, Samsung has had a difficult time when they tried to create their own content businesses. They did have celebrity tie-ins and spent a fortune on marketing. Their biggest challenge is they are seen as deep-pocketed. The price attracts big IT company tags.”
The market is still trying to find its feet on how to support and monetise content. For example, this year, Spotify has reportedly been raising funds up to US$400m and an IPO for the UK-based company worth more than $US8bn is rumoured to be in the cards. Meanwhile, its latest strategy revealed in May aims to position it in music and video streaming where it can give Apple a run for its money.
“Companies are working out how to deliver and make money from content,” says Michael Young, Reed Smith corporate partner, London. “And technology companies are working out what content they need to have. The market is asking itself questions such as: what is the right level of advertising to pair with ad supported content which is free to the consumer, and what is the right price point for content available on an ad-free subscription model? And how do we make money with all the new devices?”
Young posits that one route to success could be a “test-the-water-type” transaction that doesn’t necessarily have to have an M&A spin to it. For example, a deal with a record label to put their music repertoire on a tech-based music service. Young advises the key is to do it “so that neither party are locked in to paying or receiving less or more than they feel they can actually get in a longer term transaction.”