Last night, Zeitgeist eagerly devoured the first episode of the new season of Netflix‘s House of Cards, a series that has received lavish praise – not least from us – both for its content and its position as vanguard of a new wave of television distribution, production and consumption. The series lead, Frank Underwood, takes on his competition with a ruthless lack of morality that is unlikely to jar with those in the cutthroat television industry. The New York Times recently featured an excellent piece on the series, focusing on the showrunner Beau Willimon, the unique nature of doing such a show with Netflix, which among other things guaranteed 26 shows upfront, and the new mood of “post-hope” politics. Is traditional linear TV entering its own post-hope state?
Such talk of impending doom makes for nice editorial (which Zeitgeist is not averse to), but how true is it? To some extent, such new forms of consumption are being hampered by externalities as the platforms make the switch from early adopters to the everyday consumer. Indeed, Netflix’s sheer popularity is proving to be a thorn in its side. In November last year, Sandvine reported that the content Netflix provides now accounts for almost a third of internet traffic in the US. This staggering figure no doubt accounts for at least part of why internet speeds take such a distinct hit during primetime viewing hours (see chart below). As Quartz has the insight to point out, such issues are less to do with intentional throttling and more to do with peering agreements between ISPs and content providers.
Such issues are likely to be ever more prevalent as the notion of net neutrality continues to come under attack. At the end of last month, a federal appeals court overturned the Federal Communication Commission’s Open Internet Order, which had stipulated that ISPs could not prejudice one type of internet traffic over another. The fear of any such policy being overturned has always been one of the creation of a two-tier internet, where people who can afford faster internet get preferential access, and companies are free to charge distributors differing amounts based on the type or amount of content they are delivering. Such consternation was also felt in government, where five US senators called on the FCC chairman to “act with expediency” to preserve the open internet. The news immediately caused concern for Netflix, as shareholders fretted that ISPs might start to charge the company for the traffic it takes up. CEO Reed Hastings responded categorically,
“Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver.”
Consolidation and the narrowing of choice took a further hit on Wednesday this week when Comcast announced it would buy all of Time Warner Cable for $44.2bn. The choice on cable landscape is already limited for the US, so it will be interesting to see what regulators make the deal. Chad Gutstein, former COO of Ovation, an independent arts-focused cable channel, penned an article in Variety saying that any concerns over the deal should be restricted to the possibility of abuse of a dominant position, rather than simply market share.Columbia Law School professor Tim Wu, writing in The New Yorker, rightly points out that the FCC should be approving such mergers only if they serve the public interest. He sees no such possibility in this instance, where the most pressing need for cable customers is lower prices. Last year, he writes, Comcast collected about $156 a month on average, per customer. For cable. Professor Wu contends that the merger would put Comcast in a position that would make it easier to raise prices further. This, despite the fact that conditions created via the merger would technically put the company in a position where it could create savings, both through economies of scale and more advantageous negotiating positions with programmers like ESPN and Viacom. Of course, Comcast is probably keen on preserving if not extending margins as it faces increasing competition from players like Netflix and Amazon. Cord cutting may be in vogue now, but Comcast will try to combat this by creating what is called ‘lock-in’. Craig Aaron, president of Free Press, a consumer advocacy group, is quoted in the New York Times; “Comcast and the new, giant Comcast are going to do as much as they can to stop you from unbundling. In order for you to get content you like, you’re going to be pushed to pay the cable bill, too”. Such tactics will test the limits of customer inertia, but only if they have somewhere else to go as a viable alternative.
The switch to online viewing is also raising issues of policy change in the UK. Public service broadcaster the BBC has long left it unclear as to at what point requiring a TV licence is mandatory, leaving citizens to infer that simply owning a television set is reason enough. Recently though, the broadcaster finally clarified that owners can use their TV, with no fee, to play games, watch DVDs, basically do anything that doesn’t involve watching live television. For the moment, this also includes their IPTV offering, iPlayer. In an article earlier this month, The Economist said the fee was “becoming ever harder to justify”. Antonella Mei-Pochtler of the Boston Consulting Group, quoted in the article, believes the increasing trend of young people to timeshift their viewing is likely to become ingrained. Coupled with the growth of internet-connected TVs, this is bound to accelerate a shift away from traditional linear consumption. The BBC is soon to begin developing premium content for its iPlayer service in order to seek additional revenue streams that may offset a decline in fees paid. But as The Economist points out,
“[T]hat would suggest, dangerously, that the BBC is like any other optional subscription service. Folding on-demand services into the licence fee could also amplify calls for the BBC to share its cash with other broadcasters, not least because such consumption may be precisely measured.”
When we look at the market for television sets and set top boxes, the news isn’t that superb either. The curved TVs debuted at CES in January are surely little more than a distraction. Last week, Business Insider reported that Sony is to finally spin off its TV operations into a separate unit, amongst news of $1.1bn in losses and 5,000 job cuts. But while we’ve talked of consolidation and narrowing choice, we also need to recognise this is also a period of unprecedented choice for consumers. As a recent article on GigaOm points out, there are millions of channels on YouTube alone. There are growing pains. As consumption of such content moves “to the living room”, the article details various sub rosa negotiations by retailers like Walmart with their own video market, or players like Netflix willing to pay top dollar to put branded buttons on remote controls. What is clear, with all the issues described in this post, is that consumer choice needs to be preserved in an open market with plenty of competition. Such an environment will always foster innovation. This may breed disruption, but that doesn’t have to mean devastation. The age of linear TV viewing may be at the beginning of its end, but that doesn’t mean there’s still a lot to fight for, even if it’s a scrap. Frank Underwood wouldn’t have it any other way.
UPDATE (22/02/14): The New York Times published an interesting article comparing Netflix and HBO recently, showing how the two companies are faring financially (see image above), as well as their approaches to developing content, which started off as opposing ideologies but are slowly starting to meet in the middle as they borrow from each other’s playbook. The article quotes Ted Sarandos, Netflix’s chief content officer: “The goal is to become HBO faster than HBO can become us.”
UPDATE (22/02/14): Of course, commercial network television in general is also going through a period of consternation, slowly building since the day TiVo started shipping. At the end of last year, the Financial Times reported that share of advertising spend on television is set to end after three decades. This is partly due to a proliferation of new devices and platforms – not least of which is Netflix – but also partly due to the amount of people time-shifting their viewing and skipping through the ads along the way. Thinkbox, a lobbying arm for the television industry, recently published a blog article with accompanying chart. It illustrated how many people time-shifted a particular programme depending on the genre. For example, fewer people time-shifted the news than drama shows. But one of the key points made in the article is “that there is no significant difference in the amount of commercial TV which is recorded and played back compared with BBC equivalents. To put it another way: TV is not time-shifted in an attempt to avoid ads”. This is specious reasoning at best. While it may be true that, yes, people do not discriminate between whether they time-shift a BBC show or an ITV show, it would be totally wrong to infer that those viewers are not avoiding ads when they do appear. The article’s author is guilty of confirmation bias, not to mention grasping at straws.
PSFK this week wrote about a subject Zeitgeist have taken great interest in over the years, that of tech layering over retail to create unique experiences. Our focus on this blog with regard to retail has often been the way that new technologies are disrupting traditional bricks-and-mortar establishments, sometimes for the better, sometimes for the worse. PSFK take data strategy back to basics, pointing out quite rightly,
“To succeed retail brands need to provide what has been called over the years ‘a value exchange’. In others words, to learn more about a customer, we must always provide them something in return. This may manifest itself as discounts and other perks, but what if the reward was simply a better brand experience in itself?”
Earlier this week, as a precursor to the US going crazy for the Black Friday shopping extravaganza (even though The New Yorker tells us everything we know about Black Friday is wrong), Deloitte released new research on the way consumers like to buy their wares. Unsurprisingly, it seems shoppers are now keen for an omnichannel experience. Some of this talk may be a bit premature, or vary by retail sector. Online groceries, for example, though seemingly prevalent, are having little impact on grocers’ bottom lines. In the UK, where the march of online shopping is advanced, grocery shopping online may account for just 5% of sales this year, according to Datamonitor analysis. Select highlights from Deloitte’s report below – which mostly reads like customers are wanting to have their cake and eat it – full report here.
- The high street remains the number one destination for shops, services and leisure, compared to online and out-of-town: 59% use the high street for top-up grocery shopping, 58% prefer the high street for banking services, and 52% for cafés.
- Consumers still want more from their high street, and 73% believe that the consumers themselves should decide what shops and services should be available.
- The omnichannel experience is in demand with 45% wanting free high street Wi-Fi and 1 in 3 wanting to use a Click & Collect service.
UPDATE (13/12/13): The Economist this week published an interesting piece on the closing of UK department store Jacksons, which refused to keep pace with changing consumer demands. Interesting lessons on how to be cognisant of customer insight while trying to remain “authentic”.
At Cannes Lions tomorrow, Burberry’s Chief Creative Officer Christopher Bailey will ask “What if ads didn’t have to look or feel like ads?”. In a guest post, Chloé Hajnal-Corob writes about how luxury goods companies are seeking new and diverging paths in order to engage with their customers. Chloé spent time working at a fashion startup earlier in the year, assisting with the launch of a fashion hub for Vine videos, among other things. She is currently placed at Editd, a fashion data insight company.
This spring, the House of Dior descended upon Harrods in London, one of the world’s premier department stores, for their “So Dior” exhibition and café. Last month, for one week only, Hermès had their “Festival des Métiers”, at London’s Saatchi Gallery. These two events represent a recent trend for providing luxury experiences, and though they are markedly different in some ways, they share a common goal: to drive revenues via brand education.
The “So Dior” exhibition, café and pop-up boutique took over a large designated area of Harrods alongside their usual concessions. Their presence was felt throughout, and Harrods have described the takeover as “a luxury-charged adventure combining French Savoir Faire and British charm”, the premise of which is to showcase the brand’s relationship with the store, and Christian Dior’s personal affiliation with the capital. Zeitgeist and I paid a visit, after seeing the social media hype from opening night. The event did not disappoint. On arrival, we were offered a private tour of the exhibition. What followed was a complete education into the history, heritage and identity of the brand and designers (Christian Dior, as well as Yves Saint Laurent, John Galliano and now, Raf Simons). The assiduousness and attention to detail demonstrated in the event were striking, and the quality of the experience was exceptional. It stands in particular favour given it was a free event, especially when compared with similar exhibitions such as the recent Valentino show at Somerset House, for which entrance was £12.50. We wondered if Dior and Harrods would set a precedent for luxury experiences where no fee is charged. Enter Hermès’s Festival des Metiers, which has been touring the world in a travelling circus of craftsmen, demonstrating their skills, and charging nothing for the privilege of seeing them. This harks back to how customers at high-end boutiques are treated, but without obvious intent to purchase. We are rewarded for our passion for the brand, not simply our contribution to sales.
What is the ROI for these free events then, when the cost of execution is so high? Both exhibitions come after a lengthy stream of brand “experiences” (as noted in a previous Zeitgeist article) that represent the latest luxury market strategy for driving revenue and footfall to retail spaces, in attempt to allay fears of a mass exodus of shoppers from the street to the website. However, Dior’s CEO, Christian Toledano reportedly told vogue.co.uk at the launch party of the event: “This isn’t a marketing tool… It’s a transmission of Couture”. But these are not mutually exclusive concepts; rather they are means to the same end, and arguably an education into the brand is simply the chosen method of marketing. Indeed, Hermès openly acknowledges the lucrative repercussions these luxury experiences have. An article in the FT cites that the event, in each city, draws around 30,000 visitors, which in turn increases footfall to brick and mortar stores. A twenty percent increase, to be precise, in the week following the festival in Seattle, Washington. In a far more low-key event than Dior, these are impressive figures, particularly given that no attempt at sales was made on the exhibition site. A bespoke, or even generic, selection of products on sale at the event would likely have been very popular.
Both events encouraged significant online chatter, though neither seems to have been particularly driven by the host brands. Dior at Harrods was littered with high impact branded totems, ripe for the social media picking, and as usual, Twitter, Facebook and Instagram were filled with images and comments from the event, and now Vine, twitter’s 6-second video app, provided the ideal way to document the experiential nature of the event. It is interesting that Dior made no attempt at harnessing or leveraging the veritable mass of attention the event garnered. On investigation, I found only a limited amount of content around the event on Dior’s twitter feed and Facebook timeline. There was no official hashtag for the event and no evidence (that I could find) of any engagement with consumers who were talking about it. Hermès, though a far more low-key affair, “discreet to the point of invisible branding”, were no less well-represented in the social media space, but were almost equally poor at engineering and engaging with their online audience. The hashtag #festivaldesmetiers seems to have been widely adopted but it is completely unclear whether this was brand-driven, and Facebook interaction was limited to a single status update announcing the event. For brands that exert meticulous control over themselves in the physical space (something that was made patent in the exhibitions), it is strange that they are not attempting to implement this in the digital space, where barriers are borderless and the opportunity for damage is massive. This is a bold (perhaps naïve) move in the current climate, albeit that both events seem to have been highly successful.
It is somewhat ironic that Dior’s exhibition was held at Harrods – an obviously commercial venue, where special Dior products were available to buy – choosing to assert their mission as education rather than marketing. By contrast, Hermès chose an established art space to host their Festival des Metiers, albeit one that is often known for its consumer links, and have clearly acknowledged the potential of education as a means of marketing. Neither space is less appropriate then the other, but both are indicative of the kind of events hosted. Harrods, with its lavish window displays, reputation for luxury and labyrinthine layout, was apt for Dior’s fantastical and grandiose display, not to mention that it was intended to draw on the relationship between brand and department store. The Saatchi gallery’s minimal open space provided a neat backdrop for hosting “a rendez-vous with the Hermès craftspeople”, and apparently, sought to appeal to a younger demographic than perhaps the Hermès customer would ordinarily be. It is appropriate too, to present what can only be described as a fine art and craft, in an artistic space. It’s a notion that rival (and owner of Dior), LVMH, clearly thought worth cashing in on, since they have subsequently launched a similar initiative: the Journées Particulières, which this year will see it open 40 of its ateliers to the public for a weekend.
Both Dior and Hermès certainly made good attempts at getting people to engage physically (as well as virtually). The “So Dior” exhibition, and of course the café, were multi-sensorial. Beyond visual aesthetics, short films with headphones were provided, touch-sensitive technology was exploited and food inspired by Dior’s cookbook made for a wholly engrossing experience. Perfume was a key focus of the exhibition, explored from many different angles; not content with simply handing out the usual sticks of paper to smell, Dior and Harrods provided a telephone box (grey and white, in-keeping with brand décor, naturally) emitting one of Dior’s signature scents. Hermès was less immersive but more intimate; the possibility of viewing and interacting with those who create the product (and by extension the legacy), and even partaking in the sewing of scarves or ties, successfully created a feeling of exclusivity and privilege that the event no doubt strove for.
Toledano stated of the “So Dior” exhibition, “We need to explain why and how we do what we do. I want people to understand the passion, the innovation and our commitment to excellence.” In a similar vein, Guillaume de Seynes, great grandson of Emile Hermès explained: “We want to demonstrate that for us, craftsmanship is something that happens everyday.” Both brands sought to educate the consumer about themselves – Dior by making comment on the ideas and inspiration that produce the end product, and Hermès by demonstrating their commitment to the heritage of the brand by maintaining the quality of garments through skill of craftsmanship. Were they successful in their mission? Certainly; both provided real insight and inspiration. In doing so, Dior and Harrods, and Hermès’s Festival des Metiers, created an opportunity to become part of a legacy, and with this, the aspiration to turn something memorable into something wearable.
Last night, at the Royal Automobile Club on London’s Pall Mall, Zeitgeist was fortunate enough to hear Harper Reed, the Chief Technology Officer of the Obama 2012 US presidential campaign speak candidly about how he helped get out the vote and keep the Democrats in the White House. Harper is ex-Threadless, the famous T-shirt company that lets users contribute their own designs, with the most popular becoming actual products sold the world over. It’s a democratic philosophy, one that understandably caught the attention of the campaign committee. It is also the kind of thinking that cities like New York and Chicago are starting to employ; actively gathering, analysing and distributing data to inform policy implications and help citizens. What follows is a brief summary of his thoughts and points that Zeitgeist found interesting.
Harper began the talk with the fundamentals, discussing how, when he arrived, the campaign seemingly already had much of the data gathering resources needed to achieve what he wanted. The trouble was it as all siloed. Putting all the data together was a major step in the right direction, toward cohesive data analysis. He elaborated, saying they went from having fifteen different numbers for doors that needed to be knocked on, to one. On hiring the right people for the task at hand, Harper was explicit in noting that they had hired tech people and taught them about politics, rather than the other way around. He riffed on the state of journalism, saying it was similarly important when hiring journalists that know about tech.
One of the more interesting insights Harper talked about involved the target demographics. Those most likely to vote are male or female 18-28, and women perhaps in her 50s. The younger group is adept and comfortable with all digital platforms, but still uses paper a fair amount. Paper, by contrast, is an essential medium for that middle-aged female voter. So the insight was about making paper use more efficient, given these groups’ use of it. Understandably this was a hard decision for a group of very tech-minded people to arrive at, but the acknowledgement showed they were willing to park their own pre-conceptions on how things ought to be done.
Like many startups, they were constantly trying to fail in order to create redundancies. This involved hosting hackathons where code was obsessively broken and then reconstructed, “ensuring things would break in ways we understood”, as Harper put it. They had the same approach with the content they published, aggressively testing every piece to make sure it was relevant and engaging for the intended audiences. What they failed to foresee was the Internet activist group Anonymous launching a DDOS attack the day before the election to coincide with Guy Fawkes day, which helped trigger a meltdown over at Amazon’s cloud servers, AWS. Harper made it sound like not too much trouble to switch the servers from the East Coast where they had been affected, to the West Coast, but the experience must have been a stressful one.
Lastly, he offered an opinion increasingly shared by many in the industry, which was a reluctance to talk of mobile device use as “second-screening”. Mobile devices, Harper pointed out quite rightly and obviously, are the first thing you look at when you wake up, the last thing you look at when you go to bed, and the thing you’re actually looking at when you’re supposed to be watching TV. Mobile first should always be the initial mindset.
In questions, Ruth Porter asked whether there were any pearls of wisdom that could be applied to those in UK politics and how they go about with their own strategy of getting out the vote. Harper conceded he had met that day with a party “whose name starts with ‘L’”, and believed that what was key was investment, commitment and belief from the very top in what social and data could do for the campaign. Without that, such efforts would amount to nothing. The lessons of the Obama 2012 campaign – and the pitfalls of Romney’s campaign – offer valuable lessons for political parties, but it seems any efforts at cherrypicking ideas or going in half-hearted would doom any prospect of leveraging what the Obama team were able to do.
“Wine is valued by its price, not by its flavour”
- Anthony Trollope
It would be difficult to argue today that attendance and appreciation of Shakespeare’s plays are not, for the most part, restricted to the large niche of the middle classes. This is a pity, and interesting, given that his works are ridden with ribald language, iconoclastic storylines and slapstick humour. In his time, the plays were attended and enjoyed by the masses, ageless and classless. Such reach is the envy of productions performed today. High ticket prices charged by theatres – in a quest to secure enough funding every season to recoup the cost of production - must bear some of the blame. But does price, apart from acting as an immediate barrier to entry for some customers, also act as its own signifier of what the event entails, and the audience it is appropriate for?
In 2009, BBC’s Question Time hosted writer Bonnie Greer and, among others, Nick Griffin, chairman of the radical BNP. The ordeal was such that Greer was inspired to write an opera chronicling the evening’s events. Performed at the end of 2011, Greer hoped Yes would make an effective contribution to the UK debate on both immigration and racism. Such substantive content is what media like opera need in order to maintain relevance.”It’s relatively recently that opera has been seen as an entertainment for the elite”, Greer commented. “It used to be a populist medium – I’d like to play some role in reinstating that status”. This runs counter to other contemporary productions, such as Stockhausen’s operatic sci-fi saga Licht, recently performed in Birmingham. At one point, a string orchestra ascends into the air in helicopters, while later a cellist performs lying on the floor. It would be remiss not to mention the climax of the production, which, Alex Ross, writing for The New Yorker, fails to describe: ”Space does not permit a description of the scene in which [a] camel defecates seven planets”. It is hard to imagine such fare being everyone’s cup of tea. Indeed, it is this sort of seemingly self-interested, arcane and intellectually challenging art that is likely to turn people off an entire medium. Some institutions recognise this. Earlier this month the Royal Opera House hosted what they called the “first in a new series of live-streamed events to feature debate, performance, and audience questions”, around the question ‘Are opera and ballet elitist?‘.
In the past though, the Royal Opera House and other institutions have been too focused on short term gimmicks, with a focus on price, to get people through the door. The thinking is broadly logical: Why don’t more people come to the opera? / The opera is expensive / Lowering prices will attract more people to the opera. These three thoughts have plausible connections, but in reality little in common. Like ‘vulgar Marxism’, such an approach reduces the problem to its most simplistic attributes. It is a fallacy. Despite this, The Sun newspaper has in the past partnered with the ROH to offer tickets from GBP5-20. The scheme was a lottery system, guaranteeing few winners. It provides little opportunity for conversion into a regular customer. Meanwhile, both The Sun and the ROH achieve their aims of shifting brand perceptions. But there is far more that could be accomplished. The BBC reported positive reactions from those that took up the offer, “What The Sun is doing is fantastic – opening the opera up to people who wouldn’t normally be able to come”. This despite the fact that opera tickets are consistently available for GBP10 at the ROH, every season. Away from price, the English National Opera tried their own tactic in October last year, inviting people to enjoy the opera in “jeans and trainers”. But does the problem of democratising opera really have its answer in allowing people to wear denim? It seems absurd to think that a one-off event of such a nature could really attract new, long-term audiences. Indeed, The Telegraph reported on the affair, saying the ENO was missing the point, that in fact it was the “alluring glamour” of the medium that was what attracted audiences the world over; “It turns opera into an everyday thing, rather than something exceptional and magical”, wrote Rupert Christiansen. He elaborates on the problem,
“[Opera] can make for an atmosphere that outsiders and newcomers find exclusive and intimidating: it’s as though there’s a set of rules that nobody is going to explain or even admit the existence of. This… rubs up the wrong way against the Arts Council’s understandable insistence that the granting of subsidy via taxpayers’ money should mean open access at reasonable prices. Squaring this circle is a formula that nobody has yet managed to crack.”
The outgoing director of the ROH, Tony Hall – on his way to assume a new post at the BBC – wrote diary entries published last weekend in the FT. He wrote about the recent partnership established with the Theatro Municpal in Rio. Like the ROH, they are also looking to attract new audiences: “An idea I particularly like is where every seat in the house for a day a year is sold on the day for a real (about 33p)”. On the face of it this sounds noble and effective. Who wouldn’t want to see any form of entertainment, let alone an extravagantly produced opera, for a mere 33p? But let’s think about it. Doing this one day a year is miserly. It hardly encourages upselling, or long-term commitment. What it most assuredly encourages is that one day a year the opera house attracts plenty of press coverage as people line the streets queueing for such cheap tickets. Cheap tickets for one day a year is an act that smacks of condescension. And what of the price itself? Zeitgeist has written before about the power of behavioural economics. McKinsey have an interesting article on the study. To wit, for most people, consciously or otherwise, price is an overriding symbol of value. Price is used often, especially by premium brands, as a means of framing the product versus its peers. We often make irrational purchases on big-ticket items (a car being chief among these). Conversely, when something is cheap, especially when perceived as ‘too’ cheap, the consumer questions why it is at such a price, acting with suspicion. At its simplest, pricing tickets to the opera at 33p implies that it might not be something you would enjoy. The first reaction – often the most powerful – instilled in the consumer is one of trepidation.
Just as with the current government’s wrangling over minimum pricing policies for alcohol, the approach from the arts to occasionally allow the unwashed masses into their buildings misses the point. In the case of alcohol, the scheme was mainly invented to curb youth drinking, especially among the ‘working class’. But, as The Economist points out, “People on the lowest incomes, who are most price-sensitive, are surprisingly abstemious anyway; those in rich parts of the country, such as the south-east, consume copiously”. Shakespeare’s Globe does a good job of making the Bard’s plays accessible, with standing tickets for GBP5, something that Zeitgeist has taken advantage of several times over the years. It is one of the few artistic houses to have preserved this manner of watching a performance. It upholds tradition while at the same time ensuring the plays have access to a broader public. The Royal Court Theatre in London’s Sloane Square offers a few standing tickets for every performance for a mere 10p. It’s a great idea to have this option as a constant as, apart from anything else, it increases the likelihood of having returning customers who can be upsold to – or cross-sold to in the bar downstairs. Zeitgeist imagines however that the theatre could easily get away with charging ten times the amount for a standing ticket, with zero depreciable effect.
There is no doubt that a certain amount of price elasticity indeed exists with items like tickets to the opera. But occasionally releasing cheap tickets is not the whole answer. There are larger questions here on arts funding and the absence of dedicated, large-scale philanthropy in the UK that have not been discussed here, but will be important in encouraging accessibility to the arts. Earlier we mentioned the recent debate the ROH hosted asking whether people thought opera and ballet to be elitist. The problem with such a question is it immediately consigns the word ‘elitist’ to a pejorative category. One of the greatest points Jon Stewart ever made – now some years back – on The Daily Show, was that the word ‘elite’ should in some contexts be a good thing, something to be embraced. That some people excel in a certain discipline is something to be celebrated. That some art transcends others, is beautiful, challenging, creative and stimulating is something to be cherished. Instead the word and concept have become uniformly demonised. Though one could easily question ‘canon’ texts in any medium, there should be no need to mask something that is perceived as being ‘high art’, rather attention should only be paid to debunking any preconceptions about its exclusivity. Quick price gouges are most certainly not the answer to improving access to these forms of art. It takes time, relevance and above all a security in the knowledge that not everyone has to enjoy every type of entertainment. Just provide them with opportunities to be sufficiently exposed to it, without making it seem like you’re deigning to include them.
“[T]he big screen. That is its natural habitat—the only place, you might say, where its proud and leonine presence has any meaning. Anything more cramped is a cage, as Jon Stewart showed during this year’s Oscar ceremony. At one point, we found him gazing at his iPhone. “I’m watching ‘Lawrence of Arabia.’ It’s just awesome,” he said, adding, “To really appreciate it, you have to see it in the wide screen.” And he turned the phone on its side. Deserts of vast eternity, reduced to three inches by two.”
- Anthony Lane, The New Yorker
Film can sometimes be a mercurial medium. Especially nowadays. It encompasses multiple genres, and, like food, is meant for different occasions, for different needs. Of course, sometimes we go to bad restaurants, or order in, and the experience is terrible. Uber-flop John Carter cost Disney a cool $200m, and wasted many a precious dollar and hour for those that went to see it (admittedly few). But sometimes it’s like a great burger and fries – Die Hard springs to mind – and sometimes it’s a sumptuous 6-course meal cooked by a Michelin-starrred chef – Lawrence of Arabia, or All the King’s Men. Film can stimulate us, it can teach us, and it can be a breezy bit of consumption to pass the time, like a coffee at Starbucks. Moreover, as with food, it can be consumed in different places and circumstances. There are times when the right way to watch a certain film is on your iPad in a cramped airline seat. Pure escapism. But cinema has a crucial place too.
It was interesting today, when Zeitgeist went to see a movie, that it was preceded by an announcement showing an empty cinema, covered in cobwebs and dust, bemoaning the death of the medium at the hands of pirates. Its aim was to take the audience on a guilt trip: ‘Why are you illegally downloading films?’ ‘Why aren’t you coming to see more films at the cinema?’ it pleaded. There are a couple of things strategically wrong with this approach. Firstly, what is the principle problem here? Alright, people are not going to the cinema as often as we would like. Zeitgeist remembers in a brief stint working for Fox several years ago that people went to the cinema 1.8 times a year in the UK. The Economist reports that the share of Americans who attend cinema at least once a month has declined from 30% in 2000 to 10% in 2011. The assumption is that people are instead pirating films at home, thereby depriving studios of money (ignoring research that suggests those that pirate are often avid cinema-goers, and optimistically equating every film downloaded to ticket revenue lost). Well, one quick way to address this is to make films legally available – at a sizeable premium – on multiple platforms day and date. We’ve argued this before, and entertainment trade Variety has used our argument for a lead editorial. It should be recognised, that, although the most prominent face of the film industry, cinema is not what makes the studio money; for years the bulk of profits have been made in home entertainment consumption. Furthermore, there are two fallacies here. One is that cinemas make most of their profit from the snacks people buy at the cinema, not the films themselves. If you want to increase margins, there should be a much more prominent focus on food options, and that means offering a wider, more tempting range of food to be eaten, which is then promoted more effectively. The way such snacks are currently promoted – “Let’s all go the lobby” – has not altered for a half century. Lastly and most egregiously, the communication is completely misdirected, talking to the very audience who is already doing what the ad asks them to do. The ad is shown nowhere but the cinema, therefore only people who go to the cinema will be subject to this guilt trip. To avoid feeling guilty, one can avoid the ad by avoiding the cinema. The logic is completely twisted. Negative communications have been shown to be much less effective in influencing behaviour than positive affirmation. So let’s think about a way to promote cinema that goes beyond a highlight reel of what movies are on in a particular season. More robust revenue streams will have to be found soon. Less people are turning out to the cinema, and in foreign markets, which are doing relatively well, a far smaller chunk of box-office receipts go to the studios.
What also played during the reel before the film started was a short film by Disney Animation that has been nominated for an Academy Award, called Paperman (see trailer above). Zeitgeist had watched the short some days ago on his iPhone after coming across it on Twitter, and enjoyed it thoroughly. It was exciting and convenient to be able to consume something so quickly after hearing about it. Moreover, it was instantly shareable with the 400-odd people who follow our tweets when we retweeted the link. Seeing it in the cinema today though really reinforced the power of the big screen; the detail you couldn’t see on the iPhone, the great sound, and the shared laughter and enjoyment from those around you. “Grandeur is a far from simple blessing”, writes Anthony Lane in the same article quoted at the beginning of this post, in The New Yorker back in 2008. The pleasure of watching something in the cinema is ultimately an irrational benefit, which can be hard to quantify, but even harder to ignore.
UPDATE (06.12.13): The Economist featured a good article on how cinemas are seeking new revenue streams around the world, here.
It’s a common fallacy to think of a time before a change in status quo as somehow being magically problem-free. A Panglossian world where all was well and nothing needed to change, and wasn’t it a shame that it had to. Similarly, we cannot blithely consign the retail industry of the past to some glorious era when everything was perfect; far from it. The industry has been under continual evolution, with no absence of controversy on the way. It was therefore a timely reminder, as well as being a fascinating article in its own right, when the New York Times provided readers recently with a potted history and a gaze into the future of Manhattan department store stalwart, Barneys. Not only is their past one in which the original proprietor sought to undercut his own suit suppliers, creating a bootlegging economy by literally ripping out their labels and replacing them with his own, but it was also one where department stores served a very different purpose to what they do today. They had less direct competition, not least unforeseen competition in the form of shops without a physical presence. Moreover, today they are run in an extremely different way, with an arguably much healthier emphasis on revenue (though some might say this comes at the expense of a feeling of luxury, in a lobby now brimming with handbags and little breathing room). The problems and opportunities for Barneys could serve as an analogy for the industry of which it is a part.
Despite brief reprieves such as Black Friday (click on headline image for CNBC’s coverage), as well as the expected post-Christmas shopping frenzy, can one of the main problems affecting retail at the moment simply be that it is undergoing an industry-wide bout of creative destruction? Zeitgeist has written about the nature of creative destruction before, and whether or not that is to blame for retail’s woes, the sector is certainly in the doldrums. In the UK, retailers are expecting a “challenging” year ahead. Recent research from Deloitte shows 194 retailers fell into administration in 2012, compared with 183 in 2011 and 165 in 2010. So, unlike the general economy, which broadly can be said to be enjoying a sclerotic recovery of sorts, the state of retail is one of continuing decline. How did this happen, and what steps can be taken to address this?
Zeitgeist would argue that bricks and mortar stores are suffering in essence due to a greater amount of competition. By which, we do not just mean more retailers, on different platforms. Whether it be from other activities (e.g. gaming, whether MMOs like World of Warcraft or simpler social gaming like Angry Birds), or other avenues of shopping (i.e. e-commerce, which Morgan Stanley recently predicted would be a $1 trillion dollar market by 2016), there is less time to shop and more ways to do it. The idea of going to shop in a mall now – once a staple of American past-time – is a much rarer thing today. It would be naive to ignore global pressures from other suppliers and brands around the world as putting a competitive strain on domestic retailers too. Critically, and mostly due to social media, there are now so many more ways and places to reach a consumer that it is difficult for the actual sell to reach the consumer’s ears. This is in part because companies have had to extend their brand activity to such peripheries that the lifestyle angle (e.g. Nike Plus) supercedes the call-to-action, i.e. the ‘BUY ME’. The above video from McKinsey nicely illustrates all the ways that CMOs have to think about winning consumers over, which now extend far beyond the store.
If we look at the in-store experience for a moment without considering externalities, there is certainly opportunity that exists for the innovative retailer. Near the end of last year, the Financial Times published a very interesting case study on polo supplier La Martina. The company’s origins are in making quality polo equipment, from mallets to helmets and everything in between, for professional players. As they expanded – a couple of years ago becoming the principle sponsor of that melange of chic and chav, the Cartier tournament at Guards Polo Club – there came a point where the company had to decide whether it was going to be a mass-fashion brand, or remain something more select and exclusive. As the article in the FT quite rightly points out, “Moving further towards the fashion mainstream risked diluting the brand and exposing it to volatile consumer tastes.” The decision was made to seek what was known as ‘quality volume’. The company has ensured the number of distributors remains low. Zeitgeist would venture to say this doesn’t stop the clothing design itself straying from its somewhat more refined roots, with large logos and status-seeking colours and insignia. Financially though, sales are “growing more than 20% a year in Europe and Latin America”, which is perhaps what counts most currently.
In the higher world of luxury retail, Louis Vuitton is often at the forefront (not least because of its sustained and engaging digital work). While we’re focusing purely on retail environments though, it was interesting to note that the company recently set up shop (literally) on the left bank of Paris; a pop-up literary salon, to be precise. Such strokes of inspiration and innovation are not uncommon at Vuitton. They help show the brand in a new light, and, crucially, help leverage its provenance and differentiate it from its competition. Sadly, when Zeitgeist went to visit, there was a distinct feeling of disappointment that much more could have been done with the space, which, while nicely curated (see above), did little to sell the brand, particularly as literally nothing was for sale. The stand-out piece, an illustrated edition of Kerouac’s On the Road, by Ed Ruscha, Zeitgeist had seen around two years ago when it was on show at the Gagosian in London. Not every new idea works, but it is important that Louis Vuitton is always there at the forefront, trying and mostly succeeding.
So what ways are there that retailers should be innovating, perhaps beyond the store? One of the more infuriating things Zeitgeist hears constructed as a polemic is that of retail versus the smartphone. This is a very literal allusion, which NBC news were guilty of toward the end of last year. “Retail execs say they’re winning the battle versus smartphones”, the headline blared. What a more nuanced analysis of the situation would realise is that it is less a case of one versus the other, than one helping the other. The store and the phone are both trying to achieve the same things, namely, help the consumer and drive revenue for the company. Any retail strategy should avoid at all costs seeing these two as warring platforms, if only because it is mobile inevitably that will win. With much more sound thinking, eConsultancy recently published an article on the merits of providing in-store WiFi. At first this seems a risky proposition, especially if we are to follow NBC’s knee-jerk way of thinking, i.e. that mobile poses a distinct threat to a retailer’s revenue. The act of browsing in-store, then purchasing a product on a phone is known as showrooming, and, no doubt aided by the catchy name, its supposed threat has quickly made many a store manager nervous. However, as the eConsultancy article readily concedes, this trend is unavoidable, and it can either be ignored or embraced. Deloitte estimated in November that smartphones and tablets will yield almost $1bn in M-commerce revenues over the Christmas period in the UK, and influence in-store sales with a considerably larger value. That same month in the US, Bain & Co. estimated that “digital will influence more than 50% of all holiday retail sales, or about $400 billion”. Those retailers who are going to succeed are the ones who will embrace mobile, digital and their opportunities. eConsultancy offer,
“For example, they could prompt customers to visit web pages with reviews of the products they are considering in store. This could be a powerful driver of sales… WiFi in store also provides a way to capture customer details and target them with offers. In fact, many customers would be willing to receive some offers in return for the convenience of accessing a decent wi-fi network. Tesco recently introduced this in its larger stores… 74% of respondents would be happy for a retailer to send a text or email with promotions while they’re using in-store WiFi.”
These kind of features all speak more broadly to improving and simplifying the in-store experience. They also illustrate a trend in the blending between the virtual and physical retail spaces. Major retailers, not just in luxury, are leading the way in this. Walmart hopes to generate $9bn in digital sales by the end of its next fiscal year. CEO Mike Duke told Fast Company, “The way our customers shop in an increasingly interconnected world is changing”. This interconnectedness is not new, but it is accelerating, and the mainstream arrival of 4G will only help spur it on further. The company is soon to launch a food subscription service, pairing registrants with gourmet, organic, ethnic foods, spear-headed by @WalmartLabs, which is also launching a Facebook gifting service. At the same time, it must be said the company is hedging its bets, continuing with the questionable strategy of building more ‘Supercenters’, the first of which, at the time a revolutionary concept, they opened in 1988.
One interesting development has been the arrival of stores previously restricted to being online into the high street, something which Zeitgeist noted last year. This trend has continued, with eBay recently opening a pop-up store in London’s Covent Garden. These examples are little more than gimmicks though, serving only to remind consumers of the brands’ online presence. Amazon are considering a much bolder move, that of creating permanent physical retail locations, if, as CEO Jeff Bezos says, they can come up with a “truly differentiated idea”. That idea and plan would be anathema to those at Walmart, Target et al., who see Amazon as enough of a competitor as it is, especially with their recent purchase of diapers.com and zappos.com. It serves to illustrate why Walmart’s digital strategies are being taken so seriously internally and invested in so heavily. Amazon though has its own reasons for concern. Earlier in the article we referenced the influence of global pressures on retailers. Amazon is by no means immune to this. Chinese online retailer Tmall will overtake Amazon in sales to become the world’s largest internet retailer by 2016, when Tmall’s sales are projected to hit $100 billion that year, compared to $94 billion for Amazon. The linked article illustrates a divide in the purpose of retail platforms. While Amazon is easy-to-use, engaging and aesthetically pleasing, a Chinese alternative like Taobao is much more bare-bones. As the person interviewed for the article says, “It’s more about pricing – it’s much cheaper. It’s not about how great the experience is. Amazon has a much better experience I guess – but the prices are better on Taobao.”
So how can we make for a more flexible shopping experience? One which perhaps recognises the need in some users to be demanding a sumptuous retail experience, and in others the need for a quick, frugal bargain? Some permutations are beginning to be analysed, and offered. Some of these permutations are being met with caution by media and shoppers. This month, the Wall Street Journal reported that retailer Staples has developed a complex pricing strategy online. Specifically, the WSJ found, it raises prices more than 86% of the time when it finds the online shopper has a physical Staples store nearby. Similar such permutations in other areas are now eminently possible, thanks in no small part to the rise of so-called Big Data. Though the Staples price fluctuations were treated with controversy at the WSJ, they do point to a more realistic supply-and-demand infrastructure, which could really fall under the umbrella of consumer ‘fairness’, that mythical goal for which retailers strive. Furthemore, being able to access CRM data and attune communications programmes to people in specific geographical areas might enable better and more efficient targeting. Digital also allows for a far more immersive experience on the consumer side. ASOS illustrate this particularly well with their click-to-buy videos.
As the Boston Consulting Group point out in a recent report, with the understated title ‘Digital’s Disruption of Consumer Goods and Retail’, “the first few waves of the digital revolution have upended the retail industry. The coming changes promise even more turmoil”. This turmoil also presents problems and opportunities for the marketing of retail services, which must be subject to just as much change. If we look at the print industry, also comparatively shaken by digital disruption, it is interesting to note the way in which the very nature of it has had to change, as well as the way its benefits are communicated. It is essential that retailers not see the havoc being waged on their businesses as an opportunity to ‘stick to what they do best’ and bury their head in the sand. This is the time for them to drive innovation, yes at the risk of an unambitious quarterly statement, and embrace digital and specifically M-commerce. What makes this easy for those companies that have so far resisted the call is that there is ample evidence of retailers big and small, value-oriented to luxury-minded, who have already embraced these new ideas and platforms. Their successes and failures serve as great templates for future executions. And who knows, the state of retail might not be such a bad one to live in after all. Until the next revolution…