Cinema owners face severe disruption from online retail giants, delegates to this week’s UK Cinema Association conference were told.
[/private]Keynote speaker Laura Chaibi, Head of Digital Research and Analytics at MBC, Middle East Broadcasting Centre, said companies such as Amazon in the US and Alibaba in Asia will transform consumer purchasing habits over the next 5-10 years.
She said the creation of “dopamine-hitting experiences” — dopamine is a neurotransmitter that is linked to pleasure and reward — by digital businesses has addicted consumers to their mobile phones. Now those businesses will concentrate on using another neurotransmitter, oxytocin — linked to trust — to drive consumer choice to their commercial advantage.
According to Chaibi, whose career spans senior research roles at Yahoo! and Orange, Alibaba’s recent acquisition of a sizeable stake in China’s cinema giant Wanda was a logical move for a company that currently has access to 2.7 billion people worldwide: “It has access to 35% of the world’s population for cinema ticketing.”
She warned an audience made up of UK and European exhibitors and suppliers that the Alibaba acquisition follows a set pattern for this type of digital disruptor: “What you need to know about these kinds of companies is that they start very small and they take down industries one by one by one and they move very quickly at the pace they want to — industry by industry and then country by country. I want you to think about Alibaba because it may be your biggest competitor and you guys are not even paying attention to them.”
Central to the threat posed by the digital giants is the use of data, search and payment systems to dis-intermediate businesses from their customers.
Chaibi said, “My question to you is: Do you own your customer? If a customer comes in and they pay cash, yes they’re your customer but they are relatively anonymous. If they pay with their bank card, they are actually the bank’s customer in your cinema. If they pay with their credit card, they are the credit card company’s customer. This is the way digital companies think. They own the customer and they are letting their customer into your space.”
Underlining the point, she noted the use of social media log ins to access many cinema websites: “If people are on your digital assets and they are logging in via social media, they are not your customer. So, when you come to build your data infrastructure and you want that information about your customer, you cannot get it. It’s Facebook’s customer in your cinema, it’s Google’s customer in your cinema. The first thing I advise businesses is about how they are going to work out how they own their customers. Every single major industry is going through this revelation.”
Chaibi also urged cinema owners to look at extending their brands into other media platforms: “I can guarantee that, in 5-10 years, the businesses that were not in your space — they will come. If you are not thinking about how to get into theirs, are you willing to wait for them to get into yours?”
Here, she also warned about the threat of voice-activated search on all businesses. Quoting The Law of Requisite Variety, which states that the system/person with the most flexibility of behaviour will control the system, Chaibi said the digital disruptors are using data and then search to dominate business categories.
She said, “If you want to understand an extremely complex problem, the inputs to understand that problem must be greater than the problem itself. In layman’s terms what this means is that if Amazon’s Jeff Bezos wants to know which are the best pillow covers to sell, he gets lots of companies selling pillow covers to come on to his platform and he then figures out how to master selling pillow covers. He is now systematically doing that industry after industry.”
Anyone doubting the impact of companies such as Amazon or Alibaba should look at Proctor & Gamble, which had more than 170 product lines 10 years ago, it now has 65, she said: “It is systematically selling off business lines that compete directly with the companies that have moved into its product lines.”
This type of brand contraction will also have a direct impact on any business that relies on advertising income, Chaibi noted.
Companies should also be aware of the impact of voice search from now on because, instead of offering the multitude of results seen in a traditional Google search, “These voice-activated services turn an infinite number of results into one,” she said.
“External offline distribution is systematically being dis-intermediated as the result of choice. These results are biased, they are commercially driven, they will push people to their own platforms before anywhere else unless governments mandate that the level of bias is changed.”
In the entertainment sphere, she said Amazon’s ownership of iMDB has given it a massive advantage: “It knows exactly what people are looking for. Amazon owns Alexa, these voice systems will play on your oxytocin and you will trust the answers they give. It owns Audible, it knows what people are listening to, it owns Box Office Mojo, Twitch TV, Amazon Prime, Amazon Prime Direct… it is systematically bleeding into all the categories around entertainment. The one thing it didn’t have, that the Asian companies have, was banking licenses but in the last 24 hours I read that Amazon is going after banking licenses. The moment it owns your money, it owns the customer.”
Coined by Jack Ma, founder of Chinese online giant Alibaba, “New Retail” is a phrase that describes customer-led value-creation via fully connected access through mobile phones, Chaibi said: “If an Alibaba were to come into the UK cinema sector, it would probably set up a cinema with automatic tellers, you would get your popcorn yourself and you swipe a code on your phone and there is really little intervention. It has so much information about its customer base that they don’t necessarily need human intervention.”
With more and more purchases being automated, she warned that many businesses will be cut off from their customers.
She said, “The ecommerce giants have walled gardens. It is their customer buying your products, it is not your customer buying your products. The more things go digital, the more it goes behind their walled gardens.
“The function of promotions in the marketing cycle is not so much about the message, it is about supply chain management. The moment these companies have your customer, they control your supply chain management. If you have advertiser clients which are impacted and these companies are in their purchase cycle they are going to be severely disrupted over the next 5-10 years as they lose control over their logistics.”[/private]