With 2021 underway, IBC365 finds out what industry experts and analysts think will be the key themes for the media and entertainment industry after a chaotic 2020.
2021 will be a comeback year for the media and entertainment sector, which faced unexpected challenges due to 2020’s coronavirus pandemic, with live sport – including growing interest in women’s sports – offering huge opportunities to broadcasters.
OTT services will continue to grow, despite an increase in competition, while traditional broadcasters – who saw good numbers due to Covid’s lockdowns but also faced a cash crunch – will benefit from the return of live shows.
These were some of the views of industry experts and analysts who spoke with IBC365 about their own investigations and expectations for the coming year.
One common theme in the analyst’s reporting was that 2020 had seen a huge amount of change across the telecoms, media and technology space, in a very short time.
Or, as Deloitte’s global TMT industry leader Ariane Bucaille explains: “There have been five years of change in five months due to the pandemic. Covid-19 has been a catalyst – an unwelcome one, but still a catalyst – for needed changes across the TMT landscape.”
Bucaille and colleagues Kevin Westcott and Nobuo Okubo go on to explain that they expect to rapid evolution in the areas of cloud, video visits, and intelligent edge networks, across 2021. Cloud computing especially saw growth, and in the business of making content, production shifted to remote or hybrid models due to lockdowns.
“Covid-19, lockdowns and work from anywhere have increased demand, and we predict that revenue growth will remain at or above 2019 levels for 2021 through 2025, as companies move to the cloud to save money, become more agile and drive innovation.”
EY Americas Media and Entertainment leader John Harrison agrees, saying strategic and operational reinvention with be “critical” for the media and entertainment industry in 2021.
He explains: “As we move into 2021, media and entertainment leaders will be operating in a landscape that has been permanently changed by the pandemic. US consumers have adopted new habits and preferences while the forces buffeting the industry have increased in intensity. Here are five trends to watch in the year ahead as we shift – eventually – into a post-COVID-19 world.”
Research conducted by EY at the start of 2020 found that around half of media and entertainment execs believed they could no longer rely on traditional business models to drive growth, but Covid has amplified that further. Read the full report here.
He adds: “Looking ahead, the sweeping restructuring actions already announced by several media majors will take hold throughout the industry. A primary motive is cost reduction, of course. Releasing cash for redeployment into growth investment is essential. However, the changing nature of the industry is forcing companies to rethink how they are structured and how they go to market with their products and services.
“The steps taken by media and entertainment companies to streamline their operating models for efficiency and effectiveness will remain on centre stage as the entire industry plots a course through disruption.”
This will pose an interesting challenge for potential consolidation. In the last few years, the industry has seen significant consolidation, with the likes of Disney acquiring numerous media companies including 20th Century Fox, while telecoms companies – Comcast and AT&T, for example – have invested heavily in media units.
“Consolidation catalysts for media and entertainment companies are clearly defined. Most notably, they include the strategic necessity to acquire content to fuel streaming growth and the tactical reality that increasing size enables efficiencies and unlocks incremental investment capital. However, the window may be closing for studios and network owners hoping to sell to larger players in media or adjacent sectors due to questions around feasibility and demand.
“Media competitors that lack the mega-scale of today’s top operators face a crucial choice: attempt to forge ahead alone through turbulent waters or move rapidly to tie up with a similarly positioned peer to improve competitive and financial positioning. In addition, they must set their strategy while navigating the uncertainty arising from the pandemic.
“In 2021, the industry will likely see further combination activity involving mid-sized and smaller network owners and studios, motivated by the need to create a bigger platform to fund the investment in content, marketing and technology required to make the pivot to a direct-to-consumer model.”
In a report from MoffettNathanson analyst Michael Nathanson, entitled “Our Virtual Visit to an Altered Universe”, the analyst said many discussions across the industry have been focussed on “further roll-ups of the smaller studios” through deals, with the likes of MGM and Sony Pictures named as possible consolidation candidates.
Added Nathanson: “Sony Pictures Entertainment also is discussed as a strong candidate for consolidation, but will likely still look to exploit its unique position as an independent not tied to any direct-to-consumer platform with its upcoming pay 1 deal and licensing to external direct-to-consumer platforms that need a bevy of content. Additionally, Sony’s parent seems to lack interest in selling, which has historically made a deal tough.”
Streaming wars continue?
2020 was predicted to be the year of the OTT, and with new platform launches and a significant growth in VOD viewership, it certainly lived up to the moniker. But will 2021 be the year of the “overlapping ecosystems”?
That is the suggestion of Omdia senior research director for TV, radio and advertising Maria Rua Aguete.
Existing pressures on advertising and pay TV have quickly increased, while in mature markets, sources of new subscribers happy to accept standalone SVOD services are close to exhausted, which is leading to more pressure on unbundled services.
“With legacy services declining and increasingly functional OTT solutions (video and other), services providers must create and retain the best possible entertainment bundles, reaching outside the traditional provision of hardline and video,” said Rua Aguete.
Pay TV has been in decline in many markets for years, but the trend seems to have been exacerbated by the pandemic. Customers have been cutting their bundles as the economic impact of Covid-19 hits spending but there has also been a shift in strategy from IP-owning channel operators.
“Content owners that traditionally provided linear channels will see an increased focus on a smaller number of ‘brands’,” says Rua Aguete, adding that the importance of channel brands is decreasing “in favour of new thematic groupings.”
“In recent years, significant subscriber growth has only occurred when services have been further integrated with major pay TV, such as the 2019 Sky and Netflix deal,” she adds, while the value of the channel is also “eroding”.
“Therefore, to build a compelling media package, a service provider will combine SVOD content with content offered by channels to form a single consumer friendly package,” Rua Aguete says. This will likely mean the major SVOD services being bundled alongside linear channels, rather than sold standalone. “Another feature that will enhance this trend will be a single search function that combines the libraries of each service agnostically as part of the front-end interface.”
With the SVOD space increasingly crowded, the streaming wars have entered a new level. Premium video-on-demand acts as a powerful monetisation tool, according to Kantar analyst Dominic Sunnebo: “Disney has skipped the big screen for blockbusters like Mulan and made it available to subscribers of its new Disney+ service for a substantial one-off fee, helping it win over 60 million subscribers in its first year of operation. Many of these developments are essentially trials, but early positive consumer reaction means they’re likely to stay.”
According to research from the consumer analytics firm, some 74% of SVOD subscribers mainly watch new series. But with content now available across multiple platforms, and a finite amount consumers are willing and able to spend, “they increasingly need to make a choice: increase their number of paid subscriptions, switch from one platform to another, or dip in and out.”
This creates space for super aggregators to take centre stage, with the likes of Sky already positioning itself in this role by striking up partnerships with Netflix and Disney.
“Partner commitments from subscribers must be carefully judged, as these often mean fewer options to chop and change; nothing drives down advocacy faster than a consumer’s needs being unmet and no easy exit. This is no longer a winner-takes-all market, and collaboration will be essential for long-term success,” adds Sunnebo.
Ampere Analysis agrees, with a new report that finds the rapid growth of streaming TV, accelerated even further in 2020 by COVID-19 and widespread lockdowns, will force a strategic shift in business models. ‘Compounding’ will impact every aspect of the TV value chain from content strategy to the structure of the supply chain, through to the way streaming services are packaged and sold to the end user.
‘Compounding’ is used in the sense of both combining and adding to, and Ampere predicts it will characterize global TV throughout 2021 as the streaming TV boom forces a re-engineering of the TV value chain and the strategies for getting TV to the end viewer.
The rash of new streaming services and choices has already led to an evolution of business models. From an industry segment characterised entirely by a single business approach—subscription—the streaming TV market evolved rapidly in 2020. Advertising supported (AVoD) streaming models were embraced widely. Then, driven by the studio direct platforms, hybrid models (combining free ad-supported tiers with paid premium tiers) became the norm and will certainly continue as a primary market characteristic as we move through 2021 and beyond, according to Ampere research director Guy Bisson.
He says: “AVoD, studio-direct streaming launches, the strengthening of local and broadcaster-led streaming, and the turbo-boost that came out of the blue in the form of COVID-19 have brought the industry to a pivot point. That pivot point will lead to a shift in thinking that will change the way content creators, distributors and content aggregators, platforms and channels think about streaming in the wider TV market. In 2021, compounding is here to stay in every portion of the streaming value chain.”
One determining outcome from the impact of Covid in 2020 is hunger among audiences for more live content – most notably sport.
Nathanson argues that “there is pent-up demand for live experiences coming out of this pandemic.” He added: “As a vaccine gets widely distributed, there is an expected ‘Roaring 20s’-style demand for concerts, theme parks and even theatres as early as the second half of 2021 and into 2022. This may impact streaming trends in the short term as people flock to get out of their homes. Yet in the long-term, video consumption is set to increasingly move to subscription VOD platforms and away from the traditional media ecosystem.”
EY’s Harrison agrees, saying that the “human need for shared experiences remains uniquely powerful”. Some sports have already seen the return of crowds – often in a limited capacity – and the industry has already innovated to enhance the viewer experience to bring that same feeling of involvement.
“Absent a fully distributed vaccine for COVID-19, mitigation strategies will be required as fans return. This will change the dynamics for events – and will potentially open innovative new channels to enhance the consumer experience.
“Business conferences will continue to utilize digital platforms to extend reach and include remote participants who remain wary of business travel. Music venues will push ahead with creative audience layouts to encourage attendance, while also promoting interactive options for fans who are not yet comfortable coming out for a show. Owners of large stadiums will utilize their vast capacity to design ticket blocks that meet social distancing guidelines. Theme parks will promote safety measures and offer attractive deals to drive admissions.
“While serving as a bridge to a full reopening, these solutions also will keep audiences engaged and establish new multi-channel, customized connections – mobile-based and powered by sophisticated data analytics – that will become part of the ongoing consumer value proposition.”
Deloitte predicts that women’s sport – already a fast-growing area of interest – may benefit further from the thirst for live entertainment. Read the full report here. This area was already growing – 993 million people tuned in to the 2019 Women’s Football World Cup on TV, while 77,868 fans attended an England Women’s game at Wembley in November of that year – a new UK record for the sport.
“Despite women’s sports impressive performance in terms of viewing, attendance and interest, we forecast revenue from women elite sports will be under a billion dollars in 2021. Contrast this with the global value of all sports (men’s, women’s and mixed) of $471 billion (£353 billion) in 2018.”
This is because of a huge disparity in the value of TV rights between women’s and men’s sports, even though audiences in the former have been growing significantly.
In the UK, the BBC reportedly paid £9-£11 million for the rights to the Women’s Euro football competition in 2021 (now 2022) being hosted in England, up from the less than £1 million that Channel 4 reportedly paid for the 2017 edition.
Also, in the UK, where BT Sport and the BBC have a three-year deal with the Women’s Super League (WSL) football franchise from 2018–2019 to 2020–2021, rights have been awarded on the basis of guaranteed coverage. BT Sport has committed to show 30 live matches per season, while the BBC is showing one live match per week via online or on-demand channels.
Deloitte’s Sports business group consultant Izzy Wray says: “2021/22 may prove to be the breakaway season for women’s sports revenues. Prior to Covid-19, matchday audiences, TV viewing figures and fan bases for women’s sports had been building at phenomenal pace. As social distancing measures lift, pent-up demand for live sporting events will collide with the growing fan base for women’s sports. Brands have a significant opportunity to seize the moment to explore new opportunities in the market, which have the potential to bring immense value, not only in monetary terms, but also as a signal for their support of gender parity.”