As we move into 2021, media and entertainment leaders will be operating in a landscape that has been permanently changed by the pandemic. U.S. 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 world.
Industry Under Renovation
EY research released in January 2020 found that 50% of media and entertainment executives believe they can no longer rely on traditional business models to drive future growth, highlighting the imperative for strategic and operational reinvention.
The impacts of COVID-19 accelerated and amplified long-running secular changes, including streaming growth, cord-cutting, fading movie attendance and an increased focus on the price-value relationship by media consumers. COVID-19 also resulted in shorter-term cyclical shocks. Lockdowns and travel restrictions walloped virtually every business that relies on the physical aggregation of people. Industry executives are responding by taking bold steps to reposition their companies to align with new market realities.
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. However, the changing nature of the industry is forcing companies to rethink how they are structured and how they go to market.
The steps taken by media and entertainment companies to streamline their operating models for efficiency and effectiveness will remain on center stage as the entire industry plots a course through disruption.
Time to Partner Up
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 mega-scale 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. They must also set their strategy while navigating the uncertainty arising from the pandemic.
In 2021, we will likely see further combination activity involving midsized 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.
Connection Has Value
Cable companies are achieving record results from their high-speed data offerings as consumers rely more than ever on fast internet connectivity for work, school and entertainment. Pay TV packages, once the cornerstone of the subscriber relationship, are being deemphasized in favor of broadband speed tiers and other connected services. According to EY’s 2020 Digital Home study, 40% of respondents purchase internet-only packages from cable companies, up 8% year-over-year, further reinforcing the market dynamics.
Going forward, cable companies will seek to expand more deeply into the household by deploying a broader suite of products that build on the core internet connection, including in adjacent “smart home” areas such as home security, a variety of connected devices – thermometers, doorbells, appliances — and potentially telehealth applications.
Embedding further into the household makes good strategic sense for cable companies as wireless providers begin to roll out 5G networks at scale.
Live Events Return, Differently
In-person events will see a robust return in 2021 as the human need for shared experiences remains uniquely powerful. We are already seeing this at selective sporting events where limited crowds are back in stadiums cheering for their teams. Even so, 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. 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 multichannel, customized connections — mobile and powered by sophisticated data analytics — that will become part of the consumer value proposition.
Gaming, Esports Level Up
Esports and video gaming will build on a user base that multiplied in size during the pandemic. When sporting events were shuttered, teams, leagues, athletes and promoters embraced esports competitions involving simulations of “IRL” [in real life] events to maintain fan engagement and fill broadcasting slots. From auto racing to basketball, to cycling and even horse racing, millions tuned into virtual events, opening a wide new consumer engagement pathway that we expect to grow in 2021.
Meanwhile, video game revenues have almost doubled over the last five years. New game launches from publishers — combined with the growth of in-game microtransactions and advertising — are leading to another record year for the industry. Upcoming releases of next generation consoles and the launch of gaming cloud streaming services will further stoke demand well into 2021.
John Harrison is Americas Media & Entertainment Leader at EY.
Success in 2021 will depend on industry leaders adapting strategies to meet unforeseen market opportunities and threats. With disruption as the constant, the only way to survive and thrive in exceptional circumstances is to build systemic agility and execute at lightning speed. In 2021 and beyond, companies will be successful not because they are better at predicting the future but because they can better orchestrate a wide-ranging ecosystem of in-house talent and external partners and pivot in a timely, confident manner.
John Harrison is Americas Media & Entertainment Leader at EY.
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