The passing of the Digital Economy Act in April has thrown up a whole host of issues for those of us in the digital entertainment industry. No longer a niche industry, but resolutely mainstream, how many businesses are able to get to grips with the lightning speed at which the world of digital entertainment and consumer behaviour is changing?

As a new report suggests consumer behaviour and attitudes are shifting almost as quickly as new technology itself is emerging, how can organisations large and small, new and established, keep up to speed with key commercial issues affecting them and shaping the industry at large?

Social media is now very much for the masses, but how permissive can brands be in reaching audiences in this way and what do consumers really feel about brand presence in their online socialising? In turn, how many consumers are more than happy to become brand advocates or virtual ‘traders’ on social networks?

Are the government's latest moves to prevent piracy and foster legal alternatives understood and supported by consumers? Do consumers understand what copyright is and how to ensure their computers aren't used to infringe? Are people likely to stop infringement when the DEA moves into action?

What does the dawn of 3D TV and the inexorable rise of Apps mean for the TV and mobile industry alike?

These are just some of the subjects for discussion to mark the publication of the annual Digital Entertainment Research report commissioned by leading media law firm Wiggin, which analyses the attitudes and preferences of digitally active consumers across all digital platforms.

Morgan Holt, Director of Digital Public & former Big Brother producer joins Alexander Ross from media law firm Wiggin, live online at www.studiotalk.tv on Friday 28^th May 2010 to discuss the critical issues we need to address to remain a global leader in the digital entertainment world.

For more information visit www.wiggin.co.uk

Wiggins Webchat

H: Ian Collins, host

A: Morgan Holt, director of media, Digital Public

B: Alexander Ross, Wiggin

H: Today Studio Talk is all about diet and digestion, not talking about food but how we digest digital entertainment in 2010. Join us as we analyse and track the trends of the new digital entertainment industry

Titles

H: Hello and welcome to the Business Show, I'm Ian Collins. 3D TV, Smartphone apps, brand advocates, the media world of course is changing faster than ever before and for the next 20 minutes or so we're going to be trying to make sense of the whole thing. Coming up on today's show –

Research shows how pirates could become paying subscribers.

The digital economy act, what it means to brands, media owners and consumers alike

And a peek at the shape of things to come in the world of digital entertainment

Now joining me to discuss this and much more, Morgan Holt, director of media consultancy Digital Public and former producer of reality show Big Brother and Alexander Ross, partner at the media law firm Wiggin. Welcome to you both, gentlemen. This of course is a live show and we want your questions about the changes in the world of digital entertainments and what they mean for you as well. So whether you're a consumer, a brand, a social networker or a media owner with a question for our guests, please use the box on our screen and click send. Now some new research has just been commissioned by Wiggin, carried out by Entertainment Media Research, analysing the attitudes and preferences of 1500 active consumers across all digital platforms. First of all Morgan, in your role as director of Digital Public what do you see as the most surprising and exciting revelation in the annual study here?

A: I think the study bears out a lot of what you'd expect, so there's a move towards on-demand and there's an increasing comfort with technology, but the devil's always in the detail and it's interesting to lift the hood and start looking at the things that you wouldn't immediately see, and I was struck by not what people were moving towards but what people were moving away from, and there was a clear indicator that people were moving away from pirated experiences being unsatisfying and not the expect – not meeting consumer expectations

H: Ok. Alexander same to you, what do you make of the research?

B: I agree with Morgan, I was very pleasantly surprised to find that move away from piracy and also very interested in the continuing popularity of the social networks, and particularly interesting finding I thought was the apparent popularity of small payments, 10-20p for content which consumers seem to find attractive

H: Now the pace of change of course was a subject well-covered at Wednesday's research launch by a distinguished panel of guests, one of those guests was Andrew Fisher from Shazam, part of a line-up. He had this to say about digital publishing and how his company reacted just in time to be ready for the launch of the I-Pad

Andrew Fisher, Shazam: About digital not being able to have the resources to invest in every platform. These are big decisions. If you look at the I-Pad, I think the I-phone outstripped the I-pod at a ratio of 10:1 in terms of sales volume. You compare a 12 month period for the first 12 months in market. The I-Pad has outstripped the I-phone by a ratio of 3:1 in the first 3 months of sales. So who can predict that, and when you're sitting in your company deciding whether you invest in this platform or you don't, these are very big decisions. So Shazam for example, we don't get every decision right, but we decided to build for every mobile platform except for Palm and we – when we launched social networking we integrated Facebook and Twitter, we decided not to do MySpace. We decided to engineer for the I-Pad very late in the day, people thought it was an obvious one for us but it wasn't, we had a crunch on resources in our company, suddenly decided actually we had to make the launch, we made the biggest music app on I-Pad on the day of launch. Only just made it. These are real time decisions and they're just difficult to get right

H: That's Andrew Fisher there from Shazam. Now fascinating stuff this, one of the primary issues addressed in the research is piracy, illegal downloads that kind of thing. One interesting result from the research found that 44% of those who download unauthorised content would in fact we willing to pay a small fee to carry on visiting a site. £3 a month, something like that. Conversely 91% are not willing to pay the proposed £1 a day or £2 a week for the Times online. So what's the best approach for the way forward in a world that's so difficult and costly to police? Also on the subject of payment, a surprising proportion of consumers have said they're willing to pay a micro payment of 10, 20p for the internet content without ads. How does this affect your opportunities available for brands? Let's ask Morgan first of all, your thoughts on that research first of all?

A: I suppose the interesting thing about piracy is what it reveals about people's behaviour and what they're expecting, and as we saw in the survey people are dissatisfied with the experience of accessing unauthorised information. I think what's interesting though is what a company decides to do and companies can choose to respond in a number of different ways, so they can either respond directly to that, as being engaging with it, so there are tens of millions of people on torrents sites and downloading illegal stuff and so on, what's the product, what's the service that you can create to engage with those people directly that then drives towards your business. Or alternatively you can respond to it –

H: So it is a case of engaging and not trying to –

A: That's one alternative

H: It can't be stopped? Is that the reality?

A: I think one alternative, one option is that you can engage with that behaviour and you can recognise that people are expecting something different. The second thing is that a lot of reasons that people go for piracy is because they are - it's not necessarily just because it's free, just because it's more convenient, and so what you can do is you can actively take down the barriers towards your content, so you can reduce the time windows, you can reduce the payment walls, you can reduce a whole bunch of stuff, and create products that are specifically for those people improves convenience

H: Ok and Alexander were you surprised to see the people that illegally download, many of them are in fact happy to pay if they could find a way that would work for them?

B: I think – I think it was surprising, but I think the point about being happy to pay is really how about what – how much that payment is. It's a very different proposition saying please pay £10 a month to please pay £1 a month. And if you hit the sweet spot I think there's a possibility of making a great deal more money, potentially, from these services

H: And Morgan what about the – I mentioned micro payments there a second ago, 10,20p I mean do you see that as being a realistic way to address some of these issues?

A: I think if you start from a point of view of what's the currency value, then it gets quite misleading, but if you say that is there a value in what you're providing as a content in a media company, over and above what the piracy firms are offering, then I think you'll be able to charge for that, whatever the right price is

H: Yes. And Alexander?

B: I think it's about the service as much as the content. I think if the service is right, if the content is presented in the right way, then there's a real possibility of presenting a proposition to even pirates that is better than the unlawful content -

H: And that's – is part of that down to editorially what they're showing?

B: It's all – it's about editorial, it's about presentation, it's about packaging and as Apple have discovered it's about the hardware you actually consume the content on

H: Sure. Here's a question just come in from Ricardo. The business model Try Now and Pay for More, I'm talking about freemium services. Is that a substantial - is that sustainable in the long term for businesses?

A: It's been going on for well over a hundred years. It used to be called lost leader, now it's called freemium – fundamentally you give something away in return for charging for something later on down the line. So as a model it absolutely exists. What technology offers is the ability to sell from within the product, so there's lots of interesting models that exist within games where you get a free game and then you start paying for extra episodes and chapters beyond that, and for a media company, a content company to be looking at that is an interesting model

H: Alexander?

B: I think that's certainly the view – certainly in the world of apps which we are now experiencing the view to succeeding with apps is to present the app free but then sell in app payments so sell-up and trade-up to interesting content that consumers are prepared to pay for

H: But is it a case of – is it a case of hiding the idea that you're paying it from the consumer or getting the consumer to enjoy the experience almost of paying , upgrading to the premium version of what they've just got for free?

B: I think part of it must be that phrase that everyone uses; it's got to feel like free. Part of it certainly has to be free, the consumer's got to feel they've discovered something themselves, that is a good deal, a good buy, and at that point when you've hooked the consumer, that's the point where you can trade up

H: Ok. Don't forget to keep those questions coming into us as well, just click and submit on the screen. Coming up on the next part of the show we'll be trying to shed some light on the digital economy act of 2010, is it a bit of a minefield? We'll find out more and ask will it change our behaviour?

Break

H: Welcome back to the Business Show. One of the hot topics at the launch held at BAFTA earlier this week, shared by Alexander, with Morgan on the panel of course, was the digital economy act, one of the Key Note speakers Simon Baggs offered this summary about how the new legislation deals with piracy. We'll come to that in just a second, Alexander first of all, how did you feel the, the whole event went and your thoughts on, initial thoughts on the digital economy act 2010?

B: It was a very interesting discussion, it brought up a lot of very interesting issues, particularly from panellists analysing the results of the survey. In terms of the digital economy act, it's a – it's a piece of legislation in two halves really. A large part of it is a blueprint for how to implement potentially blocking and bandwidth restriction measures in the future. For the moment it provides for a system for copyright owners to notify ISPs of infringers, and for ISPs then to send letters to those infringers, telling them effectively stop infringing

H: Ok we are going to hear from Simon Baggs, let's hear what he said at BAFTA earlier this week

Simon Baggs: In April this year the digital economy act was passed. This is a milestone for rights owners across the board. It's essentially a piece of legislation that will enable two things from rights owners points of view – first off there will be a process, clarification of a process for rights owners to notify ISPs where individuals have been or their internet accounts have been used to make available content and then the ISP will write to the consumer and say you've been spotted, caught basically, or your internet account has been spotted, please spot. So that's the first thing the digital economy act is going to introduce. If that's effective, great. If in fact what happens is people don't stop then Offcom is also empowered to then look further at what else might happen and one of those things might be a suspension of your internet account if you continue to infringe despite being told or asked not to.

Ben Drury 7Digital.com: We've always believed that the best way of combating piracy is to provide something much, much, better that is paid for where everybody gets remunerated reasonably. Remember it's only been less than two years since we went MP3, and it was in September 2008 that we went 100% to MP3 with all the major labels, and before that we were trying to sell something that was patently inferior that what you'd get for free. That was not a good business position to be in. We're now trying to sell something which is actually better, guaranteed quality, comes with all the extras. But as you've just pointed out we've got to go a lot further, we've got to make that content instantly accessible on audio devices, no hassles, with all the extra value that you can provide. There'll be subscription models as well which give you more unlimited access if that's what you want

Andrew Fisher, Shazam: On mobile you can actually detect piracy depending on what apps store you distribute through and what the billing capabilities are. And so if you're a content owner and you're working with distribution owners into your marketplace, you want to ask the question of them, "how are you going to protect my intellectual property and how knowledgeable are you about mobile landscapes given that you're giving apps around my IP?" There are , there are certain billing environments which are absolutely bullet-proof in terms of anti-piracy, there's others that are pirated and the industry just doesn't want to talk about it and it's not shared widely. And I'm sure this will be a topic for next year's survey, I'm convinced that we will become aware of the app economy and the piracy that's going on. You can prevent it, and in the case of ourselves, on certain deployments we know exactly who you are because we have a unique identifier on the server and we just don't know your personal attributes

H: Now I suppose one of the main questions that this all throws up, I'm going to put this to our two guests as well, is the issue of whether it will change behaviour. Interesting responses to this research gents. Alexander, just to start with you – one third of pirates said this would do nothing to change their behaviour. Is that a disappointing result or is it encouraging?

B: I think it must be disappointing, you know we expect to find a significant number saying they will change their behaviour but that suggests that two thirds will change their behaviour, but nice to see also that 22% of people will monitor their internet activity, you know and that's presumably the parents to make sure their children aren't misbehaving on the internet, so I think we can see positive outcomes but it rather depends on how the legislation is finally implemented

H: Sure

B: I think we have to wait and see what the real results are

H: Yes. And Morgan do you think it's too early to really tell what this legislation is going to do?

A: I think it probably is, I mean what the act is a framework that allows law to act in certain ways, but how companies and individuals respond to that is anyone's guess

H: Ok. Question from James Lodge, James says "does the digital economy protect or disadvantage small businesses?"

B: Again I think it's too early to say. Certainly there's the opportunity for businesses to, as it were, notify ISPs, say we suspect people are pirating our content, and ISPs have to under the present rules notify those subscribers, so yes but I think there are issues about costs and the allocation of the costs of implementing these measures which need to be resolved

H: You don't think it's stacked against small business in any way?

B: Not necessarily, no

H: Morgan?

A: I think it might almost be the opposite which is that piracy tends to impact the larger media owners more than the small ones, and I think that by understanding behaviour or pirates it would be easier for small companies to ride along that kind of engagement with new types of content

H: Ok, question in from Elvin, "can regulating the internet ever really succeed? File sharing is impossible to stop even if the internet is completely turned off, children will be exchanging memory sticks of copyright content in the playground, the very next day, not to mention there are already new forms of non-P2P piracy emerging on the internet as well."

A: I think there's a slightly controversial point of view which is that when football matches were starting being filmed more people went to football matches, when television programs were being recorded more people watched live television, so there's a possibility that this new form of engagement could actually drive up legitimate forms of consumption as well

H: Ok. In the next section of today's show we're going to be considering virtual brands, and what's the future of marketing, what it might look like. Do keep sending your questions in about the future of digital media and we'll try and get through as many of those as we possibly can. We're back in just a moment

Break

H: Welcome back to the Business Show, a new audit that monitors the behaviour and attitudes of 1500 consumers has thrown out some interesting statistics about branding and what it means for business at this week's survey launch, panellists including Andrew Fisher from Shazam offered some thoughts on that, we'll hear from him in a few moments' time. But just have a look at some of these figures that this threw up - 62% of us have a profile on Facebook as an example which may or may not be a surprise to some of you. That rises to 75% of all teenagers, 48% of Facebook users are fans of a brand of one sort of another, and just over a fifth of users would add a widget to their social network to promote or endorse a product in exchange for a small reward. Now that's quite interesting Alexander isn't it, that it does suggest that people are happy to get on board, there is a level of understanding that this can't all be free perhaps for want of a better word. Somewhere along the line there's a game that's got to be played

B: I think it's actually born perhaps more of a desire to partake in a reward system. The figures are actually higher than that, I think it's 37% of voters that said they'd be happy to put a widget on their site, particularly teenage males, I think that's perhaps an obvious result there, but also surprisingly those who are connected to brands and fans of brands on Facebook, I think there's something like 30% of them said they do it in order to support the brand, which is I think interesting in itself

H: Ok. So let's have a listen to a selection of the panellists sharing their thoughts on social networking.

Do you think Facebook is doomed for failure?

Charlie Marshall, Ingenious Consulting: No I don't actually. I think it's going to need to evolve and – but I sort of have every confidence that you know in the sort of dominant digital businesses that we have at the moment of being capable of evolving

Andrew Fisher, Shazam: I think the key thing for Facebook in terms of its longevity is right now if they can create a currency via Facebook credits and there's been a lot of discussion as to whether Zynga was going to pull out of Facebook and create their own network or whether they were going to lock in, I think they now said yesterday that they're actually going to lock in with a multi-year deal with Facebook to use Facebook credits

Jason Binks, ITV: We're not seeing it as a revenue or a commercial model, we're seeing it much more as a marketing platform at this stage. So it's very much engaging with fans, adding value in and around a program, say for example Dancing on Ice, there's already an existing fan base on there talking about the program, so we're looking to engage with them and add value to that community

Andrew Fisher: We're big believers in what we call democratic advocacy so today you can't target a 16-19 year old and tell them you've got the best product in the market, they need to believe that they've discovered this in their social environment and they want to shout out to their friends, and that's really important because the way that mindset's operating is they want the badge of honour, they want to look like they have the kudos value, that they found this amazing product before anybody else in their peer group did. Well at that point in time you've got a consumer's full endorsement, amongst the group of friends that they're interacting with in the social community, and the question is how can you influence that decision process, is it just building a great product and letting people find the product or is it doing something like a widget or commercial incentive?

H: Well that selection there of some of the distinguished panellists at this week's seminar. More questions coming in from you as well, here's one from Clare Foster, Clare says "I run a small business, we've set up a Twitter and Facebook account but we don't really have the time to keep them up-to-date. Any tips on how we can use time efficient methods to appear more cutting edge when it comes to social media?" Morgan?

A: Well the interesting thing is Twitter was set up by people who thought that Facebook was too all-consuming, so there's probably a bit of crossover between those two, but you can be very easily busy fools in digital media, the trick of it is to think of it as a product, so who are you trying to influence, where are you trying to influence and what's your schedule, and updating a Twitter account twice a day takes about 30 seconds so I think you can probably find time in your day to do that

H: Is it important to really build up those followers on something like Twitter?

A: If your followers can drive money into your business, yes. If you're just doing it as a vanity then no

H: Ok. We'll take some more questions in a few moment's time, if anything you want to say on any of the issues we've touched on, click and submit on the screen there. Let's have a look as well about the future of marketing as well, the technical innovations that that encompasses, 3D TV, I-Pads, Blu-ray, things that are coming around all the time. It's moving faster and faster Alexander

B: Yes I mean consumers show consistently a huge appetite for the new kit. Sometimes even before it's relevant. John Lewis I think sold its first 3D TV last month and yet there is very little 3D TV being broadcast, if any. Consumers are rushing for the I-Pad without actually I think analysing whether or not they need one

H: Well I bought one yesterday and I think I need it but I'm not sure. We've got to address that huge issue as well; music consumption which I guess really is perhaps the centrepiece from a consumer point of view when it comes to digital media. The audit has shown that consumers favour kind of a new business model when it comes to consuming music. Just 28% said they would be willing to pay a small sum for music streaming without ads mid-way between a subscription service and a free ad supported model. Can those kind of schemes work, Morgan, when you look at issues such as that, does that seem to you that we've still yet to find correct model for consuming music?

A: The point of consumption music is very difficult to understand and the – most of the business models at the moment are predicated on hardware margins, so the I-pods and the X-Boxes and so on. But I think Alex has got better views on that than I have

H: Yes but it does divide people, you've only got to strike a conversation up in the pub about that one and you'll have six different opinions as to where it should come from –

B: It's a very strange one because the concept of a subscription, per say, is as old as the hills, and yet the concept of a subscription for a music service seems a very difficult one to sell, or at least has been in the future. And I think probably the subscription will succeed where it's not simply about a single product, it's more about a bundle of content with certain you know different range of products in it. I think it's probably slightly easier for a consumer to digest that sort of proposal and that sort of offering

H: Ok on that issue of subscription, Helen sent us a question – "will Murdoch's move to get us to pay for news really work?" This of course is reference to a pound a day or £2 a week for the Times Online which is a huge – one would have thought is a huge risk for News International

B: Interesting time to take this risk, and our research showed that 91% of people wouldn't be willing to pay the fees proposed by Rupert Murdoch, and yet of course presumably Rupert's done his sums, his figures and he will be making a margin on that 10% who will take out the subscription

H: What – similar point from Sally – "what do you think will happen to national newspaper sites in the future?" Because one of the issues with something like the I-Pad is that is the first device where you can read a paper and it feels a bit like a paper in terms of the size, it's tangible and all the rest of it. Is all of that going to be free forever?

B: I think it's too early to say. I'm sure the other newspaper proprietors are waiting with baited breath to see what the take-up of the new Times website will be, and they will then move accordingly

H: Ok and just before we go, lots of issues that we've been chatting over for. Just briefly Morgan, the key issues, the future in the next – say five years – what do you think they're going to be?

A: I think gesture technology is very interesting, be it – computers being able to read what we're doing and how we feel by our physical actions. But mobile, I remember through the 90s that we were always waiting for the year of the web, and it never came, and then suddenly it was there and I think that's where mobile is. Mobile's very, very soon to just become ubiquitous and an entire technology in its own right

H: Ok and briefly Alexander, same question?

B: I think the value of data is something we haven't fully explored yet. Data is a currency, and the return that you can – that businesses can get from not just cash return but information and data on consumption

H: Ok gentlemen thank you great to have you in with us. That's just about all we've got time for. More information about the legal issues we've discussed today, very simply log on to www.wiggin.co.uk, thanks to our guests and goodbye for now