CONTENT DEVELOPMENT & COST CAPITALIZATION IN MEDIA COMPANIES

By 

Hanish & Shivansh

WHAT IS CONTENT DEVELOPMENT?

Content development is the process of researching, writing, gathering, organizing, and editing information for publication. Content development is the process of originating (creating), editing, manipulating, and maintaining the contents in order to provide knowledgeable fillings to the users.

KEY INDUSTRY SECTORS

• Including television, film, advertising, publishing, music,  internet, videogames, radio, sports, business information, amusement parks, casino gaming, and more.
• media is a content industry that is, many media companies use content to capture an audience that can be monetized either by charging the audience directly or by charging advertisers for access to that audience. This content is the key driver of a huge market that continues to grow despite the weak global economy:
• PwC’s Global entertainment and media outlook 2012-2016 predicts the global media market will increase from $1.6 trillion in 2011 to $2.1 trillion in 2016, a cumulative annual growth rate o f5.7%. 

CONTENT DEVELOPMENT VS CONTENT LICENSING

• Content can be developed in-house or externally using third parties. When using third parties, either a fixed payment can be made for the content provided, or a usage-based royalty can be made to the third party(“licensor”)for the right to use the content.
• In the case of fixed payments or ownership of the intellectual property transfers to the new owner;
• In royalty arrangements, the intellectual property remains with the license or at the least returned to the licensor after a period of  time.

Accounting of Content Development Cost

• The accounting for content development costs, incurred either internally or externally, where the developer owns the associated intellectual property rights.
• Such content development costs are incurred, deferred, and capitalized across many media sectors eg the production of television series.
• IFRS addresses accounting for capitalization of product development costs, including guidance on the nature of costs, the timing of cost capitalization, and the method of cost recognition in the income statement as amortization.

Asset i.e a resource

(a)controlled by an entity as a result of past events

(b)from which future economic benefits are expected to flow to the entity.

KEY STANDARDS

The two key standards that provide guidance for cost capitalization are IAS 38 and IAS 2

WHICH STANDARD TO APPLY?

COST REALIZATION

• The audience is at the centre of the media companies business model.
• They aim to create properties and platforms that become a part of their daily life and lexicon. In an increasingly competitive, digitally-active world.

COMBINATION OF THESE THREE MODELS

• Maximize Ad Sales –For web publishers, the prototypical approach to using a data management platform (DMP) involves leveraging the data collected from your online presence and available second or third-party data.
• Monetize Your Data– As you collect more and more data about your audience, you gain the option to sell your data to the broader market.
• Affiliate Marketing- This approach, based on revenue sharing, involves linking to valuable brands or products and earning a cut based on the customers that make a purchase.
• Digital Subscriptions- Digital subscriptions can help you generate new revenue with the help of your most loyal readers. Digital subscriptions take the emphasis away from page views, maintaining the integrity of your articles and keeping click bait headlines at bay.

Content Customization

If you know a portion of your audience is interested in specific content, you can start to market toward them. You may find that most of the people who watched your videos recently are young males interested in sports. Knowing this tells the production team they can appeal to this audience by making more sports videos. When content is relevant to the individual, it keeps them engaged and more likely to be loyal customers.

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Disclaimer

This report has been produced by students of Global Risk Management Institute for their own research, classroom discussions and general information purposes only. While care has been taken in gathering the data and preparing the report, the student’s or GRMI does not make any representations or warranties as to its accuracy or completeness and expressly excludes to the maximum extent permitted by law all those that might otherwise be implied. References to the information collected have been given where necessary.

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