Guest post by Maureen Kerr, Partner, Arthur D. Little
The global media sector might be finally recovering from the financial impact of the pandemic, but COVID-19 has been instrumental in creating a new era for media, with both opportunities and challenges.
In the opportunity column, we have the accelerated move to online content consumption, the growth of subscription models, and the development of innovative ad tech enabling deeper consumer engagement and monetization. In the challenge column, the slow return to cinema and live events, and the practical difficulties facing production still persist. There’s also the emergence of Web 3.0 – NFTs (nonfungible tokens), blockchain, the metaverse etc – although potential new revenue streams in this area remain opaque.
In fact, if we drill down into this picture, it’s definitely not as straightforward as it first appears. For instance, the broadcasting industry is rapidly developing new D2C capabilities because of the explosion in streaming, with Connected TV advertising now the fastest-growing ad platform. But while viewing has significantly shifted towards the online space, the money is still slow to follow due to the high cost of pay TV packages.
Spending on content creation has increased by 14% ($20 billion) compared to 2020, but it’s questionable how long this kind of outlay will last, with post-pandemic subscription slowdown and a high market churn rate sure to impact investment. The cracks are already starting to show – in Q1, Netflix lost subscribers (200k) for the first time in 10 years, and it expects to lose an additional 2 million in Q2.
NFTs in post-COVID era
The hype around NFTs hype is dying down, but their potential is real, with the TV & Video sector still banking on them becoming a viable revenue source. However, uncertainties over IP ownership and tracking, and the stability of the crypto-financial system continue to raise concerns. However, expected trends in content-driven NFTs include increased interactivity and new metaverse projects.
If COVID-19 has taught us anything, it’s that we’re more connected than ever, and the media industry is no exception. Media players are increasingly global, driving greater economies of scale. And in a world driven by international hits, content creators can be big winners, whether the content is presented in the English language or not. Conversely, local publishers in all sectors are partnering or consolidating actively to defend their market advantage or adapting their local position, offering new formats and methods of engagement.
Uncertainties left by COVID-19
But there’s still a sense of staring into the unknown. When will consumers draw their purse strings and rationalize their spending? How many billions can be spent on content for niche audiences that garners awards but doesn’t generate meaningful revenue? When will heightened calls for privacy and/or cultural protectionism cut ambitious international content superhubs off at the knees?
We predict that the drama of the past two years is about to produce a third act, and that each media actor has a part to play. Our recent research report examining the current state of the media market shows multiple paths forward for the industry – including smart launches, swift acquisitions and new technology adoptions – but the one option that is sure to lead to irrelevance is sticking to the old road.
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