World Screen looks back at the biggest stories in international media last year.
A volatile stock market, uncertainty over Brexit and fears of an economic slowdown capped off another year of unprecedented change in a media business being reshaped by the growing dominance of the FAANGs and continued consolidation.
Last year saw the long-awaited AT&T-Time Warner deal finally happen, with the renamed WarnerMedia now officially a division of the telco giant (the U.S. Department of Justice has appealed the court decision to allow the merger to go through, with a decision anticipated in the coming months). After fending off competition from Comcast Corporation, The Walt Disney Company formalized its deal to take control of much of 21st Century Fox, and while it is still working through securing clearances around the world for the transaction, it has announced key leadership positions for the merged group. It lost the Fox battle, but Comcast was triumphant in its bid for pan-European pay-TV giant Sky. Australia also saw some transformative M&A activity with Nine Entertainment and Fairfax Media merging to create the country’s “largest integrated media player.” Amid a backdrop of megadeals, talk of a Viacom and CBS Corporation recombination began again, leading to a boardroom battle between CBS Corporation and controlling shareholder National Amusements. In the wake of Leslie Moonves’ exit from CBS (more on that later), a merger between the two companies seems increasingly likely.
There was plenty of M&A activity happening outside of the Hollywood majors too. Vodafone picked up Liberty Global’s operations in Germany, Hungary, Romania and the Czech Republic. Lionsgate acquired a majority stake in the talent management and production company 3 Arts Entertainment. Swedish telco Telia Company bought Bonnier Broadcasting. Entertainment One picked up the remaining 49 percent of The Mark Gordon Company, with Mark Gordon himself taking on a new role at the parent outfit. Actor and producer Will Smith teamed up with director Marc Forster to buy the German distribution outfit Telepool. The Chinese conglomerate Orient Hontai Capital (OHC) acquired a majority stake in Imagina Media Audiovisual. The likes of Banijay Group, Fremantle, all3media, Keshet International, Mediawan, Boat Rocker Media and other federations all expanded their footprints in 2018. Turkey’s Doğan Holding changed ownership. CJ ENM took a majority stake in Eccho Rights. Meanwhile, Endemol Shine Group was put on, and then taken off, the auction block.
The drive to achieve greater scale comes as the FAANGs are spending more and more money across the globe and sealing lucrative, exclusive talent deals with the likes of Ryan Murphy, Shonda Rhimes and the Obamas (Netflix); Jordan Peele and Nicole Kidman (Amazon) and Oprah Winfrey (Apple). There were plenty of reports about surging forecasts for SVOD subscriptions, and even more about cord cutting increasing in the U.S. and major Western European markets. The number of U.K. subscriptions to television streaming services overtook those to traditional pay TV for the first time last year, according to Ofcom. Parks Associates revealed that in a 12-month period, 10 percent of U.S. broadband households switched, downgraded or canceled their pay-TV service. According to Digital TV Research, global pay-TV revenues peaked in 2016 at $205 billion and are forecast to fall by 11 percent to $183 billion in 2023. But it wasn’t all bad news for the pay-TV business: research from GfK MRI found that almost three-quarters of all U.S. consumers say they have a cable, satellite or telco TV service and have no plans to drop it.
Nevertheless, direct-to-consumer was a key phrase for media companies last year and will continue to be in 2019 as Disney, WarnerMedia and others roll out their dedicated services. StarzPlay is expanding as an OTT service in key markets worldwide. In Europe, many leading media companies are joining forces to take on the global behemoths in the digital space. French broadcasters France Télévisions, M6 and TF1 aligned for an OTT platform. ProSiebenSat.1 Media and Discovery announced plans to combine their streaming assets in Germany. As the OTT space becomes more crowded everywhere, the question remains over how many services customers can handle stacking before fatigue—and sticker shock—set in.
The year was also marked by a series of protracted, high-profile carriage disputes between operators and channels. Many were resolved (Starz-Altice USA, UKTV-Virgin Media), many weren’t (Univision-Dish, HBO-Dish, StarHub-Discovery).
2018 also saw the highest-profile Time’s Up-related fall from grace in the TV business so far with Moonves ousted (and denied his severance package) from CBS Corporation. It was also a year where entertainment programming, in the U.S. in particular, was more politicized than ever. Notably, ABC canned its highest-rated sitcom, the rebooted Roseanne, following a racist comment made by star Roseanne Barr on Twitter. It was indeed a turbulent year for the Disney-owned network as, following Shonda Rhimes’ exit in 2017, Kenya Barris (Black-ish) also inked an overall pact with Netflix and Channing Dungey stepped down as president of entertainment (she, too, joined the streamer). There was also a change in leadership at NBC, with Robert Greenblatt exiting and being replaced by George Cheeks and Paul Telegdy. Nancy Dubuc left A+E Networks to succeed Shane Smith at VICE Media, with Paul Buccieri taking her place at the company. MGM ousted CEO Gary Barber. Cecile Frot-Coutaz left Fremantle for YouTube (Jennifer Mullin leads the company today). After almost three decades with the RTL Group, Anke Schäferkordt stepped down from the European media giant at the end of the year, and this month marks the end of Rohana Rozhan’s long tenure at Astro. Meanwhile, Michelle Guthrie is suing Australian pubcaster ABC for her dismissal.
Heading into 2019, the heads of major media companies around the world will continue to grapple with the shifting advertising market. The good news is that viewers are devouring content—according to Zenith, global consumers will spend 492 minutes a day with media in 2020, up from an estimated 479 minutes a day in 2018. And despite changing consumption habits, TV will still take 80 percent of global video ad spend in 2023, according to Strategy Analytics. But money is shifting online—WARC projects AVOD advertising will double by 2023—and broadcasters are still struggling to get accurate viewing figures for all the viewing taking place on nonlinear platforms.
Sports, which has long been a guaranteed draw for broadcast and cable advertising dollars, is also in a state of flux. Amazon Prime Video and Facebook have been investing in sports rights, there are upstarts like DAZN looking to upend the market and ESPN has launched its own direct-to-consumer service. Sports is also a key area for deals between “traditional” and digital platforms, such as FOX Sports aligning with Snap and Twitter for the World Cup last year and Eurosport partnering with Facebook.
Short-form content is also an emerging area of interest, most notably with Jeffrey Katzenberg securing $1 billion in an initial funding round for the mobile-first media platform Quibi from investors such as 21st Century Fox, Disney, Entertainment One, Lionsgate, NBCUniversal and Viacom.
The latest edition of PwC’s Global Entertainment & Media Outlook sees total spending on the sector rising to $2.4 trillion in 2022, up from $1.9 trillion in 2017, as digital continues to reshape the industry and we enter a phase the company has dubbed “Convergence 3.0.”
“Amid growth that is broad-based and consistent—but unevenly distributed—three imperatives are affecting every company in the industry: convergence, connecting with consumers and the need to build trust,” PwC says in the 2018-2022 edition of the Outlook. The new wave of convergence, PwC explains, is creating an expanding group of deep-pocketed “supercompetitors” and niche brands angling for the time and wallet share of demanding consumers.
“To the casual observer, it will appear as though it’s the supercompetitors that are taking over the world and absorbing all the incremental growth. But those who look more closely can clearly see space beneath the ambit of the global giants in which comparatively smaller and more focused companies can mine a rich vein of revenues.”
The report continues, “The borders that once separated the entertainment and media, technology and telecom industries are dissolving. In the process, business models are being reinvented so all companies can tap into new revenue streams and create relevance at scale. Some required capabilities include targeting fans and connecting more effectively with consumers to develop a membership mindset. Amid these changes and ongoing advances in technology, the challenge to build and sustain consumer and public trust is growing more critical and the pace of change will only accelerate.”
Christopher Vollmer, global advisory leader for entertainment and media at PwC US, noted, “To succeed in the future that’s taking shape, companies must revisit every aspect of what they do and how they do it. This means going ‘above and beyond’ in how they envision their business, generate revenues, create and organize their capabilities and build and retain trust. And given the pace and scale of change underway, speed is vital. For many companies, the models, assets, practices and capabilities that support their businesses today will simply not be enough in the future. Standing still is not an option.”