E-Convergence: re-casting media and entertainment.

• Author: Heffes, Ellen M.
• Position: Cover Story - Technology propels industry consolidation

You're likely familiar with terms like "e-Commerce," "PIP" (picture in picture), "DVD" (digital video disc) and "PDA" (personal digital assistant). Get ready, because here come a slew of new terms: "T-commerce" (television commerce), DSL (digital subscriber line), VOD (video on demand), TiVo (TV-video recorder), PVR (personal video recorder) and 3G (third-generation wireless), to name a few.

Taking advantage of technology and e-commerce, the giant media and entertainment industry icons are merging and converging to simplify the means for "empowering consumers to control their own streams of information, communication, entertainment and education provided by the media companies," says Terri Santisi, a partner and industry leader of KPMG LLP's media and entertainment practice.

This couldn't be made clearer than by reading Vivendi Universal SA's Web site home page headline: ... to be the world's preferred creator and provider of entertainment, education and personalized services to consumers anywhere, at any time and across all distribution platforms and devices. And, from Comcast Corp.: .. providing people with the communications products and services that connect them to what's important in their lives.

"The digital age is here," says Santisi, who framed industry issues for discussion on new business models at the World Economic Forum's early 2002 meeting in New York. The explosion of broadband capability and digital technology is driving the industry to create new business models that deliver new revenue sources to lessen its dependence on advertiser revenue, as it suffers the worst advertising period in its history. Competitive Media Research (CMR Media) reports that industry ad revenue in 2001 sank to a six-decade low, especially from the 19982000 period when dot-coins contributed to record-breaking earnings. U.S. ad revenue in 2001 was down by just under 8 percent overall, and global revenue declined by almost 5 percent, according to CMR Media.

Even before the broad economic downturn coupled with the events of 9/11, media companies and their advertisers were exploring fundamental changes -- changes that Michael J. Wolf, a director of McKinsey & Co., writing in a Wall Street Journal article, said are driven by two imperatives, financial and strategic. "What investors are counting on, and executives are pursuing, is a burst of revenue through new digital services," he wrote.

Indeed, both Santisi and Wolf say more industry consolidation and...