There is ample evidence to suggest that contact center outsourcing vendors interested in the media and entertainment sector should look at firms providing emerging content delivery mechanisms, such as video on demand (VOD) and mail-order DVD rentals, in order to augment revenues and pad margins. The market for video rental has changed dramatically, with business performance for traditional film vendors down in the current economic climate, while firms using new content delivery models are maintaining strong growth.

An obvious example of the decline of the traditional rental company can be seen in the recent annual results from global video rental chain Blockbuster, which indicate a revenue decline of 4% year-on-year between 2007 and 2008. Meanwhile, revenues of US-based DVD mail-order rental agency, NetFlix, grew 13% between 2007 and 2008. This performance was almost as strong as that in the previous year, when annual growth was 20%. In addition, Datamonitor's projections indicate that the number of VOD-subscribing households in the US and Western Europe will increase 137% between 2007 and 2012.

Considering these indicators, there could be opportunities for contact center outsourcers in the VOD and mail-order DVD rental space. However, Datamonitor cautions that outsourcing vendors need to consider that one of the principal reasons for the growth of this business model is low prices, which have invariably led to razor-thin margins. Thus, the ability to take on high numbers of customer service agents in VOD and mail-order DVD rental agencies will likely be limited. Rather, end-users are almost certain to be pushed to the web or telephone self-service for any questions, with agent-based support emerging as a last resort.

Despite these reservations, Datamonitor believes that there are still opportunities for outsourcers within this space. These revolve around blended CRM deployments and long-term CRM consulting. As mentioned above, VOD and mail-order DVD rental agencies will require frontline assistance for customers. Outsourcers with significant experience in self-service automation will be in a good position to help such prospects to automate as many calls as possible and provide a minimal number of live agents for 'last resort' assistance, thus keeping costs low while maintaining levels of customer satisfaction.

In terms of consulting, as many smaller VOD and mail-order DVD rental firms grow their customer bases, there will be potential for outsourcing vendors to assist in developing long-term CRM strategies. With end-user loyalty being front of mind for enterprises across verticals, outsourcers with backgrounds in customer management scalability could be poised to win new business.

In conclusion, VOD and mail-order DVD rentals agencies could provide additional diversification to an outsourcer's vertical mix, but ensuring CRM services that are relevant and as cost effective to the business needs of these firms will be crucial. It is clear that this sector is not one in which high-end services will gain any traction.

Peter Ryan

A service of YellowBrix, Inc.