World Screen recaps some of the major trends that took place in the international media business last year.
The raft of media M&A activity we saw last year didn’t come as a surprise given all the consolidation we’d seen the year before. The likes of all3media international, FremantleMedia, ITV Studios and Blue Ant Media, among others, got bigger by snapping up indie producers. And there was a new federation created, Kew Media Group, which took control of Content Media Corporation and TCB Media Rights, among other producers and distributors. CBS Corporation picked up beleaguered Australian broadcaster Network Ten. Discovery Communications took control of Scripps Networks Interactive. But few could have predicted the megadeal that closed the year: The Walt Disney Company reaching an agreement for 21st Century Fox’s film and television studios, along with cable and international TV businesses, for around $52.4 billion in stock. The transaction—which is unlikely to close till 2019—leaves Rupert Murdoch with a much smaller company, focused on news and sports, and has many wondering what the future holds for James Murdoch. Meanwhile, Fox’s deal to take full control of Sky hit a snag last year with U.K. competition authorities continuing to examine the ramifications of that transaction. Another merger that hit a standstill is AT&T’s Time Warner purchase, which the U.S. Department of Justice is suing to block. All eyes will be on how that legal dispute plays out this year and what the prospects are for Disney’s Fox deal.
The year was also marked by a wave of leadership changes across the media sector—Michael Lynton exited Sony, Thomas Tull left Legendary, David Abraham stepped down at Channel 4, Adam Crozier resigned at ITV, Emilio Azcárraga handed off the CEO reins at Televisa, and in Germany, both Thomas Ebeling at ProSiebenSat.1 and Guillaume de Posch at RTL Group announced they were leaving. Sexual harassment allegations saw Harvey Weinstein fired from the company he co-founded and Roy Price ousted at Amazon Studios.
Digital platforms continued to exert their dominance last year, as “FAANG”—Facebook, Amazon, Apple, Netflix and Google—officially entered the lexicon. Apple ramped up its content ambitions in 2017, hiring a raft of television execs, among them Sony’s Jamie Erlicht and Zack Van Amburg. And Facebook unveiled its Watch video platform. This year in the U.S., Facebook, Amazon, Netflix and Google are expected to take nearly two-thirds of all new TV and video revenue, Ovum has said. The firm predicts that Netflix, Amazon Video, YouTube and other online-only services will account for 18 percent of total paid and ad-supported TV and video revenues this year.
In the U.S. cord-cutting gained momentum, especially in the wake of rollouts of live TV services by Hulu and YouTube. PwC’s Consumer Intelligence Series: I stream, you stream report found that 73 percent of the almost 2,000 U.S. consumers surveyed subscribe to pay TV, down from 76 percent in 2016 and 79 percent the year before. The same percentage of people also subscribe to Netflix. Another key finding is that 82 percent of sports fans would end or trim their pay-TV service if they no longer needed it to access live sports. It’s no wonder then that Disney (which already owns a stake in Hulu) is planning to launch two new streaming platforms, one for sports and one for movies. The Fox deal ups its Hulu stake and grants it a treasure trove of additional product for its upcoming direct-to-consumer platform.
Streaming also made gains outside of the U.S., with Netflix adding to its subs base, Amazon making a significant play in markets like India and upstarts like the buzzy iflix expanding beyond Asia into the Middle East and Africa. As the streaming space becomes more crowded, platforms across the globe will have to fine-tune their strategies. According to PwC, when it comes to what drives the success of a streaming service, respondents are more drawn to having a wide variety of content versus exclusive content, and only 35 percent said that original programming is “very important” in their decision to subscribe to a platform. “In fact, exclusive or original content might draw consumers to free trials or temporary subscriptions, but won’t necessarily garner loyalty. Services that focus on long-term brand building alongside content development can avoid situations like this. Viewers are most eager to watch—and pay for—a streaming service from a brand that already has an established presence with unique content. This reinforces the idea that powerful branding can drive success in a sea of clutter.”
Another PwC Consumer Intelligence Series report indicated that 62 percent of consumers have a hard time finding something to watch, and 55 percent are looking for a new TV show or movie at least once a week.
“Entertainment and media companies have long competed on two dimensions: content and distribution,” the report states. “To thrive in today’s increasingly competitive, crowded, slow-growth marketplace, however, they must focus on a third dimension: user experience. This industry shift favors the consumer, forcing content providers, media distributors and tech companies to improve the discovery, personalization and ‘stickiness’ of their content. Flooded by options from an ever-growing library of video content, consumers are struggling to find what they want. Add in a rapidly growing, fragmented marketplace of distribution platforms, and we’re left with a consumer that’s overwhelmed, and ‘A’ content that’s left undiscovered and unwatched.”
PwC identifies three goals for companies operating in this environment: attract as many audiences as possible and keep them “satisfied and engaged,” justify increasing content production and acquisition costs, and deliver a return on investment for advertisers.
Zenith has forecasted that global ad expenditure will grow 4.1 percent in 2018, reaching $578 billion by the end of the year, which is slightly below its previous prediction. Last year saw the internet overtake television to become the world’s biggest advertising medium, accounting for 37.3 percent of total ad expenditure. Internet technology may have significantly impacted media consumption trends over the last decade, but the pace of change is slowing, Zenith said.
Jonathan Barnard, head of forecasting at Zenith, noted, “Mobile technology has thoroughly disrupted consumers’ media habits in less than a decade. The pace of change is now slowing—at least until the next disruptive technology takes off.”
In its most recent five-year outlook, PwC stated that companies angling for a bigger slice of global entertainment and media revenues—set to rise from $1.8 trillion in 2016 to $2.2 trillion in 2021—must “focus more intensely” on user experiences.
PwC says that while the sector’s revenues are growing, “an industry plateau” is approaching as traditional, mature segments decline, growth slows in digital and the next wave, including eSports and VR, is just beginning to pick up speed.
“E&M companies are operating amidst a wave of geopolitical turbulence, regulatory changes and technological disruption,” said Mark McCaffrey, PwC’s U.S. Technology, Media and Telecommunications Leader. “Even if the macro context is set aside, these companies are facing significant pressures on growth. In order to thrive in the marketplace, PwC suggests that these companies understand and develop sustainable relationships with consumers to advance their UX [user experience]. Essentially, we’ve entered The Age of the Consumer. It’s no longer sufficient to be ‘consumer-centric;’ one must be ‘consumer-obsessed.’”
“The next era of differentiation in E&M is being defined and propelled by consumers’ increased demand for live, immersive, sharable experiences,” said Deborah Bothun, PwC’s Global Entertainment & Media Leader. “Consumers want to get closer, more engaged and better connected with the stories they love—both in the physical and digital worlds. At the same time, companies can start to empower those experiences through a number of emerging technologies.”