Global revenue for the entertainment and media industry is expected to grow at just a compounded annual rate of just 3.9% to $3.4 trillion from 2024 to 2028, and that growth won’t come easily, according to a new report from PwC.

That compares to the 5% growth the industry saw in 2023.

Disruption is the theme of the PwC outlook, with some segments growing faster than others and some segments declining.

Also Read: IAB: Digital Video Ad Spend Will Jump 16% in 2024

“Linear value chains are disaggregating as we move into a world dominated by digital ecosystems,“ the report said. “The content boom driven by rapid streaming growth has come to a halt. Generative AI is promising to deliver efficiency and productivity gains while powering new ways of doing business across and between multiple industries.”

All of that leads to uncertainty. According to PwC’s annual survey of top executives, 57% of entertainment and media company CEOs said their current business path would no longer be viable in 10 years, compared with 45% of all CEOs a year ago.

Of the industry’s three main revenue sources — direct consumer spending on content, spending on connections such as broadband and advertising — advertising is poised to grow the fastest during the next five years, according to PwC.

Advertising, which surpassed consumer spending in 2023 in terms of total revenue, is projected to top $1 trillion in 2026 and will grow at a 6.7% compound annual growth rate (CAGR) through 2028 — when ad spending will be nearly double the 2020 total. 

Consumer spending is expected to be basically flat, edging up to $67.7 billion in 2028 from $65.2 billion in 2023. 

Advertising will account for 55% of the industry’s growth during the current five-year span.

“For strategic reasons, all participants in the E&M industry need to become more proficient at selling ads — and more effective at making them generate value for all participants in the ecosystem,” the PwC report said.

This has already been seen with streaming services like Netflix, Disney Plus and Amazon Prime Video pivoting from ad-free to ad-supported.

Most of that advertising growth will be digital.

“Despite headwinds including limited ad budgets, discussion of regulation, and continuing geopolitical and economic uncertainties, internet advertising grew 10.1% in 2023, adding $52.5 billion in new revenues,” PwC said.

PwC expects internet advertising to rise at a 9.5% CAGR through 2028. At that point, it would account for 77.1% of total ad spending.

Internet advertising is rising especially fast in mature e-commerce markets like the U.S., PwC noted. In the U.S., PwC projects that internet advertising will rise at a 21.6% CAGR to $31.7 billion in 2028.

Connected TV is projected to double, from $20.5 billion in 2023 to $41.2 billion in 2028.

“As more consumer attention migrates away from traditional television to user-generated, short-form content, advertisers may need to follow this migration with approaches that go beyond the 30-second or 15-second spot,” the PwC report says. “These may include relying more on influencers, offering experiential promotions, and tapping into new technologies that enable creative messaging.”

PwC sees gaming as a potential area for growth for entertainment and media companies.

Global video games revenue, including esports, was up 4.6% to $227.6 billion in 2023. While a small component of industry revenues now, it is expected to be one of the fastest growing sectors, topping $300 billion by 2028, according to PwC.

Advertising is becoming a more substantial revenue stream in the gaming business, the report added..

Artificial intelligence, particularly generative AI, is going to drive reinvention in the entertainment and media industry, the PwC report says.

Its survey found that nearly half of U.S. CEOs expecting generative AI to boost profits this year, with 61% expecting it to improve the quality of their products and services.

“Thus far, much of the discussion surrounding AI in E&M has focused on reducing and controlling costs—rather than driving new revenue streams,” PwC noted.

“As we look ahead, in a dynamic that the forecast doesn’t quite capture yet, industry participants will have to focus on how this powerful technology can lead to greater value creation,” PwC said.”GenAI offers users a powerful flywheel for experimenting, iterating, and scaling new solutions and processes.”

The report added that in advertising, generative AI can be used to develop creative for different contexts and quickly iterate in response to consumer attention and outcomes.

“If GenAI can be harnessed to offer new experiences, and create new revenue streams, the growth potential is even greater,” PwC concludes.

A new report from PwC sees revenue from traditional TV continuing to erode as more viewing moves to over-the-top platforms.

Traditional TV revenue in the U.S. is seen as dropping 2% to $135.3 billion on a compounded annual rate from 2022 to 2027, according to PwC’s Global Entertainment & Media Outlook from 2023 to 2027.

Meanwhile, over-the-top video revenues are seen increasing 15.9%, compounded to $75.5 billion in 2027. Advertising is forecast to grow at 25% annually to $33.4 billion, nearly catching subscription revenue, which is seen growing at 14.2% annually to $35.8 billion.

But the growth rate is slowing, with OTT video revenue up just 4.3% in 2027, compared with the 35.3% growth seen in 2020 at the height of the pandemic.

“While most of the focus has been on the SVOD sector of the OTT market, the biggest tectonic move continues to be the rise of ad-supported streaming,” PwC observes.

“The slowdown in the SVOD space, coupled with budget-conscious consumers seeking cheaper entertainment services as household budgets were hit by inflation and the cost-of-living crunch, has led to a flurry of activity in the AVOD space,” the report said. “The commercial opportunity in tapping, or diversifying, with AVOD offerings is clear. In 2027 the SVOD market will have grown in total by $9.2 billion compared with 2022 levels, while the AVOD market in the US will have ballooned by $16.3 billion.”

PwC sees traditional TV revenues falling to $141.8 billion in 2024 from $143.6 in 2023, which is down from $148.3 million in 2022.

With cord-cutting, subscription revenue is expected to fall at a 5% clip, dropping to $61.1 billion by 2077. That’s down from a peach of $100 billion in 2017.

“Pay TV companies continue to limit the decline in traditional subscription revenue through a combination of price rises sweetened with value adds, like higher-definition TV and bundles including streaming services,“ the report said. “But younger consumers who are not wedded to traditional viewing conventions are continuing to cancel subscriptions, with older households likely to prove the core user base of the future.”

Advertising revenues will edge up almost 0.6% on a compounded basis, hitting $74.1 billion in 2027. While broadcast, cable and local advertisers are all seen eroding, online advertising in traditional TV is seen growing at a 10% rate through 2027.

The number of media and telecom deals rose about 28% this year, with 1,014 transactions valued at $469 billion, according to PricewaterhouseCoopers. The figures come as Elon Musk’s pending $44 billion takeover of social media giant Twitter and Microsoft’s upcoming purchase of video game maker Activision Blizzard for $68.7 billion dominated the landscape.

Media deals were more on the internet and software side, according to PwC, although Amazon agreed to purchase movie studio MGM in March for $8.5 billion. In its Mid-Year Deals Outlook report, PwC Deals Partner Bart Spiegel and Technology, Media and Telecommunications Deals Leader Alan Stephen Jones wrote that M&A “activity has recently slowed among some of the major media companies, after a peak driven by content and technology acquisitions to fuel expansion of streaming services.”

But PwC was optimistic that deal growth will continue in the media and telecom sectors, adding that the volume of activity hasn’t slowed despite inflation and rising interest rates. The research giant added that while the pace of deals may slow, a significant amount of cash remains in the system to get deals done. And as always, “businesses are under pressure to transform; the fastest way to do that is through M&A,” PwC said.

According to PwC, private equity players accounted for a big chunk of transactions — increasing to 42% of deals in the past 12 months from 24% in 2018. All in all, private equity deals represented $194 billion of announced deal value, of which 75% were concentrated in the internet and software sectors, PwC said in the report.

Other key drivers include the demand for sports content, as the combination of streaming, ad sales opportunities, sports gambling and other tailwinds have boosted team and league values. PwC also pointed to huge streaming music content deals for legendary musicians like Bob Dylan, Neil Young and Bruce Springsteen, as well as the shift to digital advertising and an emphasis on audience targeting and engagement tracking, as catalysts for deals. ■

Amid the sea of numbers about and sectors carved from entertainment that are detailed in the latest annual PwC U.S. Entertainment and Media Outlook is this tangy prospect: Cable TV, or an evolved version of it, might make a comeback over the next few years. 

Mix a “TV lite” version of the traditional cable bundle, a few choice streaming services, add in newer entertainment experiences like cloud-based video gaming, delivered through a broadband connection and voila, you have a possible revival/reformation of what was the most lucrative entertainment sector of the past few decades. 

“Our insights and forecasts suggest evolved packages that center around a broader definition of entertainment are in the future,” PwC’s C.J. Bangah, who is a consulting principal on TMT Customer Transformation, wrote me in an email interview from the Cannes Lions conference. “How we get from where we are today to that future is still being written. The pace at which new pricing models and packages are delivered are likely going to correlate to a few factors, including the broader economic environment.”

It’s hard to imagine the bad ol’ cable tyrants seizing back the monopolistic power they exercised 20 years ago. But what might result over the next few years could settle into a sustainable long-term business, instead of one in seemingly inexorable decline, PwC’s report suggests. 

Consumers will likely have choices even for broadband connectivity, especially if 5G fixed wireless or ATSC 3.0 deliver on their promises over the next few years. That means, the first job of the cable providers is keeping as many of the customers they already have engaged at some minimum level. 

For all their eroding consumer base, cable providers are still in 63% of American homes, the report says, and can use their broadband beach heads to amortize delivery costs for everything else they may sell. The key is maintaining the broadband/lite TV relationship.  

“This is important because it allows cable to weather the storm of cable-cutting and cord-trimming as users move to using more stand-alone TV providers,” the PwC report says. “Retaining these now lower-paying subs means that as the re-bundling of third-party services occurs, cable TV will be able to recoup these losses. Additionally, this strategy preserves the ability for cable to cater to premium subscribers who are using more expensive services like access to sports content.”

With that ongoing customer relationship, the cable companies have a chance to actually solve problems for increasingly vexed consumers overwhelmed by the tyranny of too much choice. 

The re-bundling, or re-aggregation, of TV programming is “increasingly likely,” because navigating between so many major streaming services “takes its toll on the performance of all of them. In order to grow revenue across all of these competing companies, it is necessary for a neutral aggregator to play the role of the consumer gatekeeper.” 

Yeah, that sounds a lot like traditional cable television, except it won’t be. PwC’s outlook for “traditional TV and home entertainment” is expected to continue declining in the United States, both in terms of customers and revenue, and across the rest of the continent. 

Over the next five years, the North American market is expected to drop from 44% of global share to 33%, as cable continues to grow in some overseas territories. Cable in the U.S. is expected to lose another 4.5 million subscribers over the next five years, though at a decreasing rate, but also to evolve into a different kind of platform.

“By 2026, cable distribution is expected to be nearly synonymous with broadband double-play, meaning that for many of these households there will be little difference between a cable and an effective IPTV home,” the report says.

The real advantage with selling consumers a minimal “TV lite” or “pay lite” array of cable networks is the ability to upsell, and not just, say, a three-month trial of HBO. 

Among the new services that can be differentiators is cloud-based gaming. Amazon announced its Luna service a few months ago, running on its Fire TV platform. Apple already had Arcade, with about 200 titles that, like the Fire platform, can be played with an external Bluetooth controller or mobile phone. Netflix launched its own game service last year. 

But unlike delivering video, which requires a consistent, relatively high-bandwidth signal, games need a near-instantaneous response to the player’s actions. The future delivery systems will need to ensure they’re able to keep up with all the demands on their capabilities. 

Making this transition won’t be easy even with the home-field advantages that cable providers can still claim with millions of customers, Bangah acknowledges.

Expensive battles over which platforms or services secure rights to premium live sports and other events are already playing out, with Amazon’s Thursday Night Football deal starting this season, Apple and Peacock new carveouts for MLB rights, and Apple’s 10-year deal for a standalone app with Major League Soccer.  

“There is no clear market-dominant winner for the future of entertainment and media,” Bangah writes. “We see fault lines and innovation opportunities across most segments, and while for traditional TV players there are strengths they can use to help protect and drive market share – there are also very strong headwinds they must compete against.”

The distribution platforms (Roku, Apple TV, Amazon Fire TV, Smart TV OEMs) may become more powerful than they already have, but Bangah cautioned, “There are few clear likely durable winners in the next five years.” 

So can cable TV come back? Maybe so. 

The industry has to provide inexpensive options to keep its remaining customers around, simplify their headaches with subscribing to, paying for and navigating a broad range of services, and make it easier to actually find the shows they want. Piece of cake, right? 

More layoffs are coming at Netflix amid the backdrop of a new PwC report showing a significant overall slide in U.S. subscription video-on-demand revenue, which is now growing at a rate half of what it had been just two years ago.

According to Variety, affected Netflix staffers could be handed their pink slips by the end of the week, with job cuts numbering around the 150 that were already let go last month.

Netflix has declined comment. It's unclear who Variety's sources are.

Netflix's troubles have been well documented, with the company's market cap standing at just over $78 billion -- a fraction of the $306 billion it peaked at back in October. The real damage came on April 19, when Netflix revealed it lost customers in the first quarter (200,000 of them), and that revenue had dropped to below 10%.

But the slowdown hitting the SVOD business is more diffuse than that, especially here in the saturated U.S. market.

According to PwC's just released Global Entertainment & Media Outlook, SVOD operators will collectively generate $25.32 billion in the U.S this year, up 13% from 2021.

That's a marked deceleration from the 19.5% rate the domestic SVOD market expanded at in 2021, and the 27% growth rate back in 2020.

Overall, PwC says that the U.S. remains the world's largest OTT market with a bullet, generating $29 billion in 2021 vs. $11.4 billion for the second largest market, China.

To a large extent, the research company claims, deceleration in expansion is a near-term issue related to consumer streaming habits that were distorted by a kick of nitro during the pandemic.

Transactional video-on-demand sales, for example, exploded by 32.7% in 2020. But with people leaving their houses again to go to school and work, SVOD revenue will actually contract by 8.1% in 2022, PwC says, to $6.1 billion this year. ■

The television industry’s pivot to streaming is contributing to a new talent-management headache for senior media company executives.

In addition to having to wrangle the legendary egos of actors and the high-profile producers and directors who make the hits that make the cash register ring, technology talent are the industry’s new stars, according to a report from PwC.

Traditional media companies have been downsizing and consolidating at breakneck speed as cord-cutting and COVID cut into traditional revenue streams. Outplacement firm Challenger, Gray & Christmas said the media industry shed 30,711 jobs in 2020, up from 10,201 jobs the year before.

At the same time, there is still strong demand for certain skilled positions — some of them new to the telecom, media and technology (TMT) sector — and retaining those people is a top concern, according to PwC.

“Competition for TMT talent is as fierce as ever, with more than 90% of TMT leaders reporting higher-than-usual turnover,” the PwC report said. 

Boom for Tech Workers

“More than other sectors, however, TMT workers are benefiting from the pandemic-related tech boom,” the report continued. “They’re switching jobs for higher salaries (48% of TMT executives versus 41% in all industries), top-notch benefits (30% versus 23%), upgraded career advancement opportunities (42% versus 33%) and improved relationships with managers (35% versus 20%). To compete for talent, TMT leaders are shoring up career-development opportunities (47% versus 34% overall) and offering flexible schedules (49% versus 43%).”

Mark Borao, Technology, Media and Telecommunications partner at PwC U.S., told B+C/Multichannel News that the media companies accelerated the hiring of technologists in order to launch streaming platforms. But they continue to seek tech expertise in order to increase the efficiency of both their new and legacy businesses.

Borao, who had helped media companies launch streaming businesses, noted that many legacy media companies “hollowed out” their traditional broadcast and cable businesses, putting their assets into their streaming business. 

“There’s a narrative of media companies grabbing tech folks to launch these platforms, or to enhance an existing platform that needed work,” Borao said. “That was definitely a 2019, 2020 narrative. 

“Now, what you’re seeing is now that they’ve launched these platforms, they’re looking at other processes they can put in the cloud and do more efficiently,” Boroa said.

After years of mergers, some media companies have hundreds of analog systems handling content. That industry consolidation will continue, he said. 

Seeking Heads in the Cloud

The people media companies are looking for now are digital natives who think cloud-first, he said, calling them business technologists.

“They’re people who understand this digital thinking and can lay out the processes, lay out the organization and a model that is exponentially more efficient than the analog modes,” he said. “The cloud has changed the game for them.” 

Media companies used to have to poach that talent from technology firms. Now, they are hiring away from other media companies, offering higher pay and better titles.  

“I have a handful of clients that I personally work with who all in the past 90 days have moved from one media company to another because their skill set is in high demand,” the PwC exec said. “All of them got either title increases or significant pay increases. They’re effectively cashing in on those skill sets and those accomplishments.”

Borao said these weren’t top-level executives. “I’m talking about director-
level people, senior managers. It’s one thing to have a vision. It’s quite another to be able to execute on that. What I’m seeing is a good thing. We’re seeing high demand for those operators.”

The ability to use technology to legacy processes and the ability to be forward-looking about new business models will continue to be valuable, he said. 

The global entertainment and media industry was hurt less than the overall economy by the COVID-19 pandemic in 2020 and is expected to grow faster through 2025, according to PwC’s new Global Entertainment and Media Outlook report.

After dropping 3.8% to $2 trillion during the COVID-19 impacted year of 2020, entertainment and media revenues are projected to increase to $2.2 trillion in 2021 and continue to climb reaching $2.6 trillion in 2025, according to PwC.

The pandemic, combined with changes in technology, affected the way people consumed content.

“A significant proportion of the habits accrued over those restricted periods will endure. Many of the shifts that were already in play—the move towards digital products and online sales, the relentless rise of streaming, the growing influence of gaming and user-generated content— gained momentum and are poised to barrel forward,” the report said. “The resulting power shifts will transform the industry in the years to come.”

Consumer spending on entertainment and media revenue is projected to rise to $914.9 billion, representing a 3.9% compounded annual growth rate from 2021. The stagnation of legacy sectors such as newspapers and magazines will be more than offset by rapid revenue growth from booming areas that cater particularly to younger consumers, such as video games and esports (CAGR of 5.7% to 2025) and over the top video (CAGR of 10.0% to 2025). 

Traditional TV and home video, PwC says will continue to account for the largest share of total consumer revenue. But it won’t be growing. In fact, PwC sees it declining 1.2% annually.

By 2025 online and connected TV advertising will add $22 billion to the global entertainment and media industry. 

“After a difficult decade in which broadcasters coped with declining viewership and threats from online advertising while still investing in infrastructure and technology, the sector will near a tipping point by 2025, when revenue from online and connected TV will be just $1 billion smaller than multichannel TV advertising revenue,” PwC said.

North America is the largest traditional TV and home video market with a 42.3% share of global revenues, or $94 billion in 2020. However, revenue is falling, and the region will account for just more than a third of the global market in 2025, the report says.

"Changes in consumer behavior have driven powerful shifts in E&M business models," PwC said in its report. "Foremost among these shifts is the way the streaming boom of 2020 has set the industry on a new growth trajectory. Streaming video-on-demand (SVOD) revenues will grow at a 10.6% CAGR through 2025, by which point SVOD will be an $81.3 billion industry."

PwC streaming growth will be limited by the number of subscriptions households are willing to buy and by the fact that consumers will be able to cancel OTT services with ease.

“We may be moving into a new phase of streaming growth—one that is more measured, more focused on improving the experience of customers, and more intent on retaining and creating value from the immense subscriber bases that have materialized,” the report said. “At the heart of it lies an arms race for content. A common strategy for achieving both goals—a better experience and higher retention—is commissioning large amounts of material that is recorded and viewed at customers’ convenience. This content is increasingly being produced locally and in local languages by both global and domestic players”

PwC estimates that Netflix spent $15 billion on content in 2019 and Amazon spent $5 billion.

A U.S. government more interested in enforcing antitrust rules could also affect the industry and merger and acquisition activity. 

“With he more active antitrust regime in Washington, widespread hostility to the big platforms across the political spectrum and rising consumer expectations, it’s clear that the operating environment for Big Tech is set to get a lot more challenging,” the report says.

“All of which means that sitting still, relying on the strategies that created value and locked up market share in the past, will not be the most effective posture going forward,” the report concludes. “The world is beginning to emerge from the painful shared experience of the pandemic. Amid destabilizing power shifts, those who lean in to the changes, probe the data and seek deep insights from their customers, co-workers and collaborators will maintain their balance—and be well placed to reap their fair share of future growth.”

Merger and acquisition activity in the media and telecom sector continued to pick up steam as the pandemic waned in the first half of 2021, according to a new report from PwC.

There were 410 deals announced in the six months preceding May 15th, worth $83 billion, according to PwC, up from 61 deals in the second half of 2020 and just 32 in the first half of 2020. The value of the deal is the highest PwC said it has seen in years.

“Deal volumes continue to be driven by the internet and information, advertising and marketing and telecommunications subsectors,” the report said. “Private equity deals reached a new high in terms of both deal volumes and value, accounting for 43% and 66%, respectively.”

Among the big deals so far this years was AT&T’s decision to get out of the media business by spinning off WarnerMedia and merging it with Discovery. 

“This announcement was the biggest sign yet that telecom giants were reversing course on their plans to expand into the media space,” PwC said. “It followed on the heels of Verizon’s disposal of HuffPost and Yahoo/AOL, T-Mobile’s discontinuation of its TVision streaming service and AT&T’s own spinoff of DirecTV into a joint venture with TPG Capital.”

At the same time, the streaming wars have media companies bulking up on content, The combination of WarnerMedia and Discovery is one example. Another is Amazon’s purchase of MGM Studios for $8.45 billion. 

“Players in the media and telecom sector are starting to feel the stress brought on by the enormous capital requirements needed to compete and maintain relevance during this period of transformation, leading to a wave of asset reallocation,” said Bart Spiegel, media and telecom deals partner at PwC.

Today’s entertainment industry is finding out quickly that the show must go on -- but not without safeguards. Everything from mask-wearing to limited event attendance and proof of negative COVID-19 tests, further exacerbated the pandemic’s impact on the industry. In-person events aside, COVID-19 has also been a driver of the slowdown, and in some cases, shutdown of overall production. Closing down shop to mitigate potential outbreaks on set have led to record lows in total scripted original TV series, and a shift in entertainment companies’ earnings.

We can see this new entertainment reality today; rock concerts with band and audience members enclosed in plastic bubbles. The Kentucky Derby, one-third full. A mask-free, face-to-face awards show… anxious congratulation hugs included. (source: BBC, 4/2021). 

They’re all signs of the slow return of mega-events. As COVID-19 anxiety begins to dissipate, though, there’s still hesitance to go big. After all, it’s still the case that only about one-fourth of the adult US population is fully vaccinated and virus variants continue to spread. The fanfare of events may look a bit different, but that’s just the reality of in-person gatherings this year. 

As TV production ensues and summer festivals and awards shows begin to take shape in a COVID-19-weary world, a variety of methods are being used as both safeguards and as psychological tools to reassure nervous would-be attendees: from mask-wearing to handwashing stations, to limited attendance and social distancing, to proof of negative COVID-19 tests or vaccination before entry. 

People want to be assured that anyone attending an event has been vaccinated or isn’t sick. Most events are trying to ensure that, but not everyone will get vaccinated and pre-event questionnaires aren’t fool-proof. What happens if someone who attends an event with you has COVID-19 and finds out after the fact? Bridging the gap between the safety efforts already in place and a safer reality when incidents occur requires a simpler, automated way to more precisely identify anyone who might have been exposed to illness. That way, venue managers and event organizers can quickly communicate to only those impacted, and provide a risk level that gives details without compromising privacy. 

Production sites have started giving people the confidence and peace of mind to safely return in-person with social distancing and other safety measures like on-site only contact tracing apps or devices. But as the world opens up, we want to be just as comfortable returning to the things we did and loved in the before times (remember those?). 

There is a way to get back to some sense of business as usual, when events operate with a safety-first approach and attendees enjoy the things they used to in large spaces surrounded by  people, including strangers. Here’s three ways production sites and other media-driven organizations are doing so:

1. Making tracing automatic, not haphazard

Contact tracing devices (more on why these work better than apps for events, below) can be carried on lanyard to help create a safer environment for event attendees – be it an indoor graduation, an outdoor baseball game or a daylong convention.

Contact tracing has been used to track and trace diseases throughout history and the Center for Disease Control (CDC) says it’s a good mechanism to help prevent spread of disease (source: CDC, “COVID-19 Contact Tracing for Health Departments,” 2020). But, it’s also been pretty inefficient, relying on the memories of anxious people who are sick, or exposed, to recall who else might have been exposed.

Add to this that events are inherently transient. A graduation might be a day of events with people from all corners mingling and then heading to their far flung homes. A conference may have a large venue, an exhibit hall and breakout rooms. You attend with people whose schedules and movements are as varied as yours. And that baseball game? You funnel through the gates with one group of people, sit near another group and wait for your ballpark hotdog with another group. Rather than trying to restructure an event format to minimize interaction, automatic contact tracing can identify those brief interactions and aggregate them to an overall risk score, giving individuals the confidence to go about their usual traffic patterns.

Automatic contact tracing can make the traditional contact tracing process “faster and more efficient,” (source: CDC, “COVID-19 Contact Tracing for Health Departments,” 2020). Many companies are already including digital contact tracing in their long term business continuity and disaster recovery plans, anticipating an unexpected development in the COVID-19 pandemic or another future health crisis. 

Extending this idea to production grounds, venues, events, sports stadiums and more could be a natural next step to expanding access to the things people love – and breathing new life into the badly battered conference, event and performance world. It can also provide comfort to the workers and employees within the media and entertainment industry to return work safely, revitalizing the sector once again. 

2. Helping to create safer event spaces, easily

For some situations, a contact tracing app downloaded to a smartphone and gated to just the workplace is the answer. But what if you run a factory where smartphones aren’t allowed on the floor, or have delivery drivers who need to transit a broad radius? What if you’re coordinating a college graduation for 3,000 graduates and their families, or managing a theater or concert venue with different attendees every night? Enter: automatic contact tracing. 

It works by assigning a small, physical fob (like a contact tracing device), to each attendee. Attendees wear the fob throughout the event and turn it in on their way out. Each fob uses Bluetooth LE technology to recognize the distance, duration, and frequency of exposure to other fobs, with data stored securely and privately. Attendees and on-site workers go on about their day, rooting for their favorite team or watching their granddaughter get her diploma, reassured that organizers have a plan for their safety.

A few days later, if someone at the event reports they’ve come down with COVID-19, the automatic contact tracing device data is compared to assess which fobs were in close proximity to other fobs and therefore which event attendees should be notified of a potential exposure. Only the people potentially exposed would be identified, and the designated event administrators would know who to contact to warn about their potential exposure. The event manager can then communicate risk levels to attendees based on their proximity, while maintaining anonymity for event-goers.

3. Providing peace of mind, beyond perception

Today and in the future people will be looking to find spaces where they can feel safe, knowing that those who are alongside us in-person have accepted the same “social contract” to be in this public space. We’ve already seen this play out in our lives – from the formation of ‘pandemic pods’ of people who agree to the same safety measures we do, to mask requirements inside shops, to social distancing markers and arrows in grocery stores and bank teller lines. When we see others adhering, we breathe easier.

But generally, these are situations that are necessities of everyday life. Festivals, shows, heading to the theater and other social events may not be necessary, but after months of quarantine, they sure feel like they are. These events bring a different kind of social anxiety amid a pandemic, with the question of “should I be going?” We don’t have the same perceived contract with strangers so far into our outer circles, which means it’s up to event managers and administrators to help provide that peace of mind to fill seats. When we can visually see others wearing contact tracing devices, it reminds us that we can relax because the social contract is being upheld.

For some would-be, could-be attendees (like me) who weigh privacy, peace of mind, and health alongside enjoyment, knowing that automatic contact tracing is present at an event could be the deciding factor for attending. It also is a critical part in providing comfort to those who work in the entertainment industry, providing peace of mind as they return to venues, on-site sets or the stage. For those who are less risk-averse, but socially-conscious of others’ wellbeing (like my kids), a contact tracing device – distributed prior to entering an event – is a simple solution versus app-based alternatives when built with privacy at its core. Contact tracing is a proven, effective way to help mitigate risk, and automatic contact tracing makes that mitigation more precise, simpler and more efficient while helping to give people peace of mind.

Giving people one less thing to worry about with a simple technology could be a game changer for getting to some semblance of normal – for event venues, production sites and for people itching to be in them.

David Sapin brings over 30 years of experience to his role as the Digital Leader for PwC US. Sapin and PwC Digital help PwC's clients solve their most pressing business problems by leveraging IoT and other digital solutions.

After COVID-19 slowed merger and acquisition activity in the media and telecommunication sector during 2019, deals will be driven by a shift to streaming, according to a new report from PwC.

As big entertainment companies followed consumers’ new consumption patterns, the will want to acquire or develop content, particularly as they expand internationally and require more localized content to compete.

The report noted that cloud and app-based services, digital publishers, podcasting and video game publishers have all become more attractive acquisition targets as advertising budgets became focused on digital mediums and consumers turned to at-home.

Also Read: AT&T Sells Crunchyroll to Sony for $1.175 Billion

On the other hand, businesses that rely on in-person audiences or production and traditional advertising could become takeover targets as their need for funding grows.

“While the Media & Telecom sector was able to pivot to a virtual marketplace during COVID with relative ease, there is no doubt that people miss the personal experiences generated through live events, and we anticipate a full recovery post-COVID. We wouldn’t be surprised to see legislation, regulations and depressed valuations assist in this recovery,” said Bart Spiegel, US Media & Telecom Deals leader.

There were 612 announced deals in the media and telecommunication sector worth $99 billion over the past 12 months, according to the PwC report. 

Also Read: Scripps Goes National By Buying Ion for $2.65 Billion

“Broadly speaking, the sector was one of the most resilient ones during the pandemic, with deal activity remaining largely flat when compared to 2019,” PwC said. The year was off to a fast start, but slowed when the pandemic hit.

The pandemic forced companies to reconsider their core strategies. Large companies pushed their digital strategies, including streaming, data driven advertising and building 5G networks. Those companies also divested non-core assets to generate cash.

As consumers hunkered down at home in the wake of COVID-19 shelter-in-place mandates, they turned to online entertainment, driving a surge in streaming. With content options at an all-time high and a range of new streaming players entering the field, the already multi-pronged entertainment industry seems set for yet another big transition.

But questions remain around the resilience of these trends and whether they can last. For streaming platforms, continued success will entail looking closely at what drives consumers to streaming services, rethinking production workflows in our new era of physical distancing and investing in a wide range of content to keep up with evolving customer demand.

Streaming Traffic Trends 

The increase in streaming traffic was evident early on: During the first three weeks of March, when shelter-in-place mandates took shape, consumers recorded an 85% increase in minutes streamed, per Nielsen, against a comparable three-week period in 2019. Streaming platforms are particularly appealing to consumers — with reasonable monthly rates, easy activation and a seemingly unlimited library of content that caters to a wide age range. 

However, streaming traffic is unlikely to return to pre-March levels, as consumers have demonstrated they are willing to try new streaming options. Additionally, as the economy reopens and other options — such as sports, concerts, shopping, dining and travel — resume competing for consumers’ time, expect streaming usage to level off.

That said, the strategies already deployed by streaming services to maximize viewership are still relevant. As PwC research illustrates, consumers value an experience with easily accessible shows, a simple interface and a robust content library with original programming.

Production Uncertainty 

With production temporarily halted, releasing original content has become one of the biggest challenges facing media companies today. Projects already in the pipeline have served as a buffer so far, but as this grace period draws to a close, the effects of the scarcity will become more pronounced.

One consequence will be an increased tendency for consumers to hop between platforms in search of new shows, thus fraying the edges of customer loyalty, already strained by the profusion of recent platform launches.

The stakes from the halt in production reverberate across the entire industry: Research from Microsoft and PwC highlights how the under-delivery of episodic content could result in more than $3.5 billion in lost ad revenue for broadcasters. 

The answer, of course, lies in restarting production, but that comes with its own challenges and risks. Effective contact tracing — along with strict protocols and thorough health screenings of production staff and talent — will be indispensable for safety.

In general, doing more with less — limiting the number of people on set; reinforcing protocols and resources for seamless remote production; and creating innovative workarounds for norms (such as live audiences for tapings) that are unlikely to resume any time soon — will become commonplace.

Conversely, many of these new efficiencies could last post-pandemic. In fact, CFOs in the sector told PwC the trends accelerated by the pandemic such as the shift to increased work flexibility, resilience and technology investment will increase productivity in the long run.

Content Preferences Change

From the streaming debut of popular musicals to more talk or late-night formats, not to mention content based on the pandemic period itself, opportunities for truly original programming abound. In general, the coming months will likely feature content emphasizing escapism as streaming services continue to take on the mantle of now-shuttered movie theaters, whose escapist fare has traditionally made them countercyclical to recessions.

By the same token, content can amplify and provide needed perspective on decisive issues facing society. The recent protests against systemic racial injustice have forced industries to rethink diversity and inclusion efforts, signaling that content addressing these issues will be in high demand. And that goes for content produced by and starring more diverse talent.

Even the way consumers watch their shows is now different, with many consumers gathering virtually with friends as they comply with physical-distancing guidelines. It’s a trend likely to persist post-pandemic as a way for separated groups to connect, making even on-demand content feel like an actual event. From integrating these capabilities onto their platforms to organizing these events through social media, companies now have an array of new strategies to engage viewers. 

Keeping People Watching

While the rest of 2020 will likely present more uncertainty, new challenges and even more change, these hurdles will also serve as opportunities to connect with consumers in new ways while driving increased loyalty. Getting it right means more than just navigating this period for the short term; it means laying the framework for greater success in the years to come. Ultimately, the goal is for consumers to keep calm and stream on.

Media and telecom merger and acquisition activity in the first half of 2020 fell 19% to 259 as the industry dealt with the effects of the coronavirus, according to a new report from PwC.

The value of those deals was down 37% to $31 billion, PwC said.

PwC said that M&A could help companies deal with the disruption caused by the pandemic. 

“The current economic environment will likely force companies to be a bit more introspective in identifying specific assets or businesses which they don’t believe will contribute to their earnings growth in the future. With the current crisis hitting on the heels of several years of massive consolidations, companies are sitting on various non-core assets that are ripe for divestiture,” the report said.

Companies will be looking for operation efficiencies and merging with competitors could be a strategy to help that. An atmosphere where downsizing is prevalent is likely to attract private equity investors, PwC noted. 

M&A could accelerate if the government changes some of its rules, notably the FCC’s cap on TV and radio station ownership. PwC also noted that late last year, the Justice Dept. filed a motion to terminate the decrees that prevent studio ownership of movie theaters.

The streaming wars are on! An accelerated level of intensity is now in play as new and established players jockey for their share of subscribers. For now, consumers are continuing to subscribe to additional OTT services, paying on average $76 per month for video content. As new entrants come on board, though, PwC’s analysis shows consumers will start making choices about which services to keep after the initial promotional offers end.

While market share is available for the taking — the OTT video market is expected to double in size globally between 2019 and 2023 — services that don’t offer exactly what consumers are seeking will fall behind.

How do media companies set themselves up for success in the months and years to come? In this hyper-competitive landscape, viewer experience matters most. To deliver that optimal viewer experience, invest in content that engages consumers and boosts growth while leveraging emerging technologies like artificial intelligence (AI).

Content Is Key

Licensed content has powered streaming services in recent months, especially new entrants seeking to entice potential subscribers. Many services have demonstrated a willingness to pay hefty prices to obtain the rights to popular content with an existing base of loyal viewers.

In fact, PwC research found that 56% of consumers define a good user experience as having easy access to favorite shows. New streaming entrants seeking to gain subscribers will need to combine popular content that consumers already love with nostalgic shows they want to revisit.

However, licensed programming is not the only path to a competitive edge. Original content is just as important, according to PwC’s analysis. Consumers have already told us they want a seemingly endless library of TV shows and movies. Given the limited pool of licensed programming available, original content becomes paramount.

As the cost of licensed content continues to escalate, original programming offers streaming providers a more hands-on approach to building out and diversifying content libraries. It also offers complete control of the format, whether it’s shorter, more bite-sized content that audiences are showing an increased appetite for, or mobile-first content such as vertically shot videos. With original programming, the opportunities for creativity are boundless.

As we continue to analyze viewer preferences over the years, one finding remains constant: content rules. For streaming providers, that means long-term success will hinge on sussing out the optimal balance between original programming and licensed content.

In our hyper-personalized age, consumers want easily accessible content tailored to their specific preferences. Streaming services that leverage AI to recommend personalized content based on consumers’ viewing history are already a step ahead.

In fact, some 20% of consumers told us their streaming services are better at finding content for them to watch than they are themselves. While that is encouraging, it does offer room for improvement with the 80% majority. Meanwhile, one-third of consumers said finding content on streaming platforms needs to be easier.

Certainly, as in all industries, AI will improve with time. Consumers are impatient, though. They expect algorithms that are predictive — not reactive — to allow for positive viewing experiences. And they expect those improvements now.

Streaming services need to invest in the technology to make AI more effective now, rather than waiting for the technology to catch up. The services that perfect the ability to anticipate and recommend personalized content to viewers will stay above the fray while others fall behind.

According to PwC’s annual AI analysis, integration features prominently among the top three data-related challenges:

• Integrating data from across the organization (45%).
• Integrating AI and analytics systems (45%).
• Integrating AI with IoT and other tech systems (43%).

For the improved viewer experience that consumers are demanding, data integration will be job one.

Outside of AI, expect the continued global rollout of 5G to provide new opportunities to reach mobile viewers. Ensuring a service’s infrastructure can handle the increased demands of 5G networks will become essential, especially in the entertainment and media landscape that this new technology promises to transform.

Forward-looking streaming services are well-advised to prioritize emerging technologies as a strategic investment that differentiates them, rather than as an operational cost to be minimized. To attract new customers while retaining the existing subscriber base, bold long-term vision is vital.

A Game Plan for Victory

The streaming wars are complex, presenting media companies with equal parts opportunity and challenge. To win requires bold vision, artful navigation and a relentless focus on consumer needs.

Consumers have been very clear. They want world-class content combined with a superior viewing experience.

By optimizing investment in content — the right mix of licensed and original programming — and capitalizing on emerging technologies, media companies can chart a course for success.

Mark McCaffrey is U.S. technology, media and telecom leader at PwC.

PricewaterhouseCoopers predicts that over-the-top revenue, which grew 15.2% in 2017, will rise at an 8.8% annual clip from 2018 to 2022, fueled by increased growth internationally and the focus on original content.

According to PwC’s Global Entertainment and Media Outlook 2018-2022 report, the researcher said total OTT revenue reached $20.1 billion in 2017, a 15.2% increase over the prior year. That pace should slow slightly to 12.2% in 2018, when total revenue is expected to reach about $22.6 billion. By 2022, PwC predicts total OTT revenue will grow to $30.6 billion.

While the sector is largely dominated by Netflix, Amazon, and Hulu – PwC said SVOD revenue accounted for 79.6% of OTT revenue in 2017 – niche players are increasingly making a dent in the overall business. PwC noted that anime and manga service Crunchyroll reached 1 million subscribers in 2017, streaming more than 1.5 billion minutes of content per month, while U.K.-centric BritBox reached 500,000 customers.

“Investment in original content, exclusive programming and marketing means this trend is set to grow, with the SVOD segment accounting for 81.6% of the total in 2022,” PwC said in the report. “…The challenge for OTT providers is to balance the high costs of original content production with pricing that continues to attract subscribers without squeezing margins.”

TV advertising, down nearly 3% in 2017 is expected to begin clawing back toward growth in 2017, with total revenue reaching $71 billion, according to PwC.

“TV remains a premier advertising destination for marketers, who are willing to spend large amounts on ad campaigns, and use it as the primary vehicle for new product launches and for mass audience appeal,” PwC said. “But, as audiences continue to shift to digital and advertisers pursue more multichannel campaigns, there is a need to develop new TV ad formats that are more likely to catch and keep viewers’ attention.”

Cable networks ad revenue is expected to be steady, rising to $21.5 billion in 2018 (up 2%) and reaching $22.7 billion (up 5.6%) by 2022. Broadcast networks are expected to do about the same, up 1.6% in 2018 to $18.6 billion, rising 9.7% to $20.4 billion by 2022.

PwC expects ad loads to shrink in the coming years as more consumers get used to ad-free options and pointed to Fox Sports’ six-second ad experiment earlier in the year. PwC expects advertisers and networks to continue seeking out new ways to target and measure audiences, pointing to NBC Universal’s $1 billion annual commitment in ad inventory to data-based targeting.

“As people continue to change the way they access content across increasingly sophisticated devices, more robust data is required to build a deeper understanding of consumer habits,” PwC wrote. “There will be a shift toward selling ad spots based on detailed consumer patterns rather than basic demographic data as audience- measurement and audience-segmentation tools become more complex.”

A new survey by research firm PricewaterhouseCoopers validates what many cable customer service executives have been saying for years – customers want a better experience and are willing to pay more for it.

According to PwC’s new "Future of Customer Experience" study, customers across a wide variety of industries said they were willing to pay as much as a 16% premium for better service. For cable service, respondents said they'd pay as much as a  9% premium for a “great customer experience.”

PwC surveyed a nationally representative sample of 4,000 U.S. respondents, from Gen Z to Baby Boomers, via an online survey and in-field interviews in December 2017; 11,000 respondents from 11 additional countries (Argentina, Australia, Brazil, Canada, China, Columbia, Germany, Japan, Mexico, Singapore, U.K.) were surveyed in January 2018.

Even as companies continue to automate customer service processes, consumers still crave the human touch – 74% of those surveyed in the PwC study said they wanted more human interaction, not less. And 64% of respondents said they felt companies have lost touch with the human element of the customer experience.

Whether consumers will actually pay a premium just for service, especially as over-the-top competitors have essentially gained share through lower prices, remains to be seen. Cable has gone down the premium-service-for-a-premium-price path in the past, only to find it wasn’t as important to customers as they had hoped.

In the meantime, many operators have invested time and money in improving the customer experience with shorter appointment windows, more reliable networks, and providing ways for consumers to contact service personnel and ask questions regarding their service though social media and other electronic avenues. Comcast alone in 2015 launched a $300 million effort to build new customer call centers, hire 5,500 new customer service reps and implement new technology to make the customer experience more friendly and efficient. Other operators have launched similar efforts over the years. And many OTT services have stressed their convenience, lack of long-term contracts and flexibility alongside their lower prices, which seems to be resonating with younger consumers.

“The ‘Experience Economy’ has ushered in a new B2C mindset, steering brands beyond emphasizing products and services to selling rich consumer experiences,” said PwC’s Global CxO and Experience Consulting Leader David Clarke in a statement.

But just putting a human face of the process isn’t enough. Companies have to work hard at making the experience fast, enjoyable and friendly. A bad experience, according to the survey, leads to customers dropping a service fast.

Globally, 60% of respondents said they would stop doing business with a company due to unfriendly service, 46% said unknowledgeable employees, and 50% said a lack of company trust would force them to sever the relationship. About 32% said they would walk away from a brand they love after a single bad experience.

Speed and efficiency are the cornerstones of the customer experience, according to PwC, with 52% of consumers surveyed saying they would pay more for greater speed and efficiency. About 43% would pay more for greater convenience; and 41% would pay more for knowledgeable and helpful employees. There’s also a willingness to give up personal data, especially among U.S. consumers: 63% say they’d share more information (location, age, lifestyle, preferences, and purchase history) with a company that offers a great experience.

“Brands won’t be able to solve their CX problems with technology alone – it’s just an enabler, facilitating the connection between a product or service and consumers,” Clarke said in the statement. “Instead, they must find a way to create an experience that blends consumer demand for tech with their strong desire for authentic, personal interaction. They don’t need to look far, though – employees hold the key to creating and sustaining great interactions with consumers.”

Merger and acquisition activity in the U.S. media and telecommunications industry picked up in 2017, though the value of those deals was lower than in 2016, according to a report by PwC.

Last year saw 876 deals announced, up 29% from the year before. Those deals were worth $138.8 billion, down 31%.

Related: Viacom Shares Dip 7% as Deal Fervor Fizzles

Most of the value of those deals was wrapped up in a handful of what PwC terms megadeals, worth $5 billion or more.

Those transactions were the The Walt Disney Co.’s proposal to acquire TV and studio assets from 21st Century Fox, worth $68.4 billion; Discovery Communications' bid to acquire Scripps Networks Interactive, worth $11.8 billion; and Crown Castle International Corp.’s acquisition of Lightower Fiber Networks, worth $7.1 billion.

PwC said another 15 deals in 2017 were valued between $1 billion and $5 billion.

Related: Comcast's Roberts Downplays M&A Desires

The deals come amid big changes in the media business.

“The traditional media players are refocusing their strategy as they consider what their position will be in the ecosystem and whether they will be part of the next big deal, while non-traditional media players are honing in on the next big value play as they look to have a stake in the new future of [media,]” PwC said in its report.

Bart Spiegel, U.S. media & telecommunications deals partner at PwC, said: “Given the robust deal market in 2017, we expect 2018 to be another banner year as companies look to expand on their capabilities and portfolio. Many of the deal theses underpinning 2017 M&A will continue into 2018.”

Related: The Five Biggest Deals of 2017

In its report, PwC identified trends that will drive deal making and shape the media and telecom landscape. They include the rise of artificial intelligence; the importance of creating authentic user experiences; headline-making mega deals as companies seek scale, access to content, technology and operating efficiencies; growth of internet video, internet ads and gaming; and network upgrades by telecom companies

Sports media rights deals are expected to top gate receipts for the first time next year, according to researcher PriceWaterhouseCoopers, with regional sports network deals fueling most of the growth in the next four years.

PwC predicts that sports media rights deals will attract about $20.1 billion in 2018, up 5.6%, topping ticket sales for sporting events of $19.6 billion for the year.

While most of the major sports have rights deals with broadcasters and cable networks in place through 2021, PwC said RSN deals will roll off sooner and should help drive growth.

Total sports revenue should grow at a 3.1% rate from $71.9 billion in 2018 to $78.5 billion in 2021, according to PwC.

PwC estimates that rights for 25 RSNs across Major League Baseball, the National Basketball Association and the National Hockey League will expire within the next five years. Coupled with a national rights climate that is expected to remain strong as the cycle restarts after 2021 and increasingly healthy digital rights should fuel future growth.

Overall, PwC predicts that media rights will grow at a 4.3% compound annual rate to about $22.7 billion by 2021, with gate revenue rising at a 2.3% annual clip to $21 billion in 2021. Sponsorship revenue is expected to climb 4% annually from $17.6 billion in 2018 to $19.9 billion in 2021, while merchandising revenue should rise 1.6% per year from $14.6 billion to $15.1 billion.

PwC expects that broadcast rights preservation will be a priority for the industry through at least the next cycle to avoid further potential dilution. And the researcher believes that disruptive practices like cord cutting and cord shaving will have a minimal impact on rights

“This is particularly true for major properties with incumbent rights holder carriage deals in place with major distributors through at least the early stages of the next deal cycle, along with subscriber migration away from or within the pay-TV bundle anticipated to occur over a protracted period,” PwC wrote.

But the researcher warned that lower tier properties could face some push back in the form of lower multiples and even lower fees, widening the gap between premium and other broadcast content.

“In general, next cycle deals across the property spectrum could realize shorter term commitments by rights holders, particularly if existing rights fee levels are preserved, with an increased share of market risk retained by properties, which would lead to increased volatility in future market size beyond the five-year Outlook period,” PwC stated.

Merger and acquisition activity in the entertainment, media and telecommunications industry rose in the second quarter from a year ago, although the value of those deals dropped slightly, according to PwC.

The quarter saw 232 deals, up from 216 deals a year ago but down from the first quarter's 255 deals.

Related: Viacom Pulls Out of Bidding for Scripps Networks

The deals announced in the second quarter were worth $18.8 billion, down from total deal value of $21.3 billion in Q2 2016. In the first quarter, mergers and acquisitions were worth $10.4 billion.

Big deals in Q2 included Sinclair Broadcasting Group’s $3.8 billion bid to acquire Tribune Media, RCN’s $2.4B merger with WaveDivision Holdings and Verizon’s acquisition of Straight Path Communications, worth $2.3 billion.

“Deal activity in 2017 continues to outpace 2016 as market participants look to secure their footing in the digital value chain and position themselves in anticipation of regulatory change,” said Bart Spiegel, partner, media and telecommunications deals.

Read more at broadcastingcable.com.

Overall TV revenue should decline by about 4% over the next five years, due mainly to the descent of home video sales, but cable and internet video companies should enjoy healthy gains into the next decade, according to PricewaterhouseCoopers.

In its much-anticipated Global Entertainment and Media Outlook 2017-2021, PwC believes that overall TV revenue will fall from $109.04 billion in 2016 to $105.04 billion by 2021. That decline is due almost entirely to the fall-off of home video sales, which PwC sees declining at a 13.4% annual clip through 2021.

Subscription TV, which just went through its worst first quarter ever – declining by about 762,000 subs in the period – is expected to show a slight gain to $101.1 billion in 2021 from $100.9 billion in 2016. Driving that increase is the steadying of subscriber losses in cable to about 0.1% annually from 2017-2021, compared to 2% in 2015 and 1% in 2016.

While cable’s unique broadband infrastructure is expected to keep subscriber losses at a minimum over the next five years, PwC also sees a similar advantage for cable networks. According to PwC, cable ad revenue is expected to grow by 15.6% between 2017 and 2021, from $21.8 to $25.2 billion, while broadcast ad revenue should grow by 5% to $18.9 billion from $18.0 billion.

Related: TV’s Wild New Frontier [subscription required]

In an interview, PwC US Technology, Media and Telecommunications Leader Mark McCaffrey said the ability to target ads is going to play a huge role in cable’s ability to attract ad revenue.

“They’re banking on the fact that the content will attract more viewers and that will create more opportunities for the advertisers,” McCaffrey said. “When you look at analytics and being able to align more [with] who is watching what program and the social end of it that will attract more advertising dollars.”

Internet video is expected to be the biggest beneficiary of targeting, and PwC expects near exponential growth from that sector over the next five years. According to PwC, subscription video on demand revenue is expected to rise 71% from $8.2 billion in 2016 to $14.03 billion in 2021.

While Netflix continues to dominate that space, McCaffrey said other newer entrants will also play a role.

But the PwC exec said any success will come down to how well operators and programmers serve the user.

“We’re facing the day of the user,” McCaffrey said, adding that is who will determine the ultimate direction the industry will take. “The trick is going to be to use technology to create that relationship with the user so you know where their tipping points are on certain items and you can react to it, knowing that even that same user’s views may change next month.”

Despite an uncertain regulatory environment, the number of deals done involving companies in the entertainment, media and communications business rose in the first quarter, according to PwC.

According to PwC, there were 256 deals in Q1, from 194 in Q4 2016 and 183 in Q1 2016.

However, the dollar value of those deals lagged. The first quarter deals were worth $10.4 billion, down from $125.9 billion in the fourth quarter and flat with a year ago.

Read more at B&C.

With the pace of deals not expected to slow anytime soon, PriceWaterhouseCoopers issued a study Tuesday that seeks to get to the bottom of why some deals, despite their synergistic dedication to thought leadership, simply don’t work out.

According to the PwC 2017 M&A Integration Survey, the main culprit for deal’s fizzling out or not living up to expectations is simply their complexity.

In the study, PwC said that high-performing deals – which it defines as transactions where respondents report significant success in strategic, financial and operational areas – dropped to fewer than 5% of the total in 2016, compared to 24% in 2013.

In addition, PwC says that only half of respondents that have done eight or more deals in the past three years reported strategic success, compared to 66% of respondents who did three deals or fewer.

“When it comes to meeting strategic goals, it appears practice doesn’t make perfect,” PwC said in the report.

PwC said about 151 respondents participated in the survey, wih 32% at ethe senior level holding the title of CEO , President, COO, CFO, CIO, EVP and SVP. The remainder were VPs from corporate development, strategy, sales and marketing, operations, information technology, finance and human resources.

Other survey highlights include:

         Success rates fell dramatically—from 45% to just 15%—for those seeking growth in market share.

         The percentage of companies that reported complete success in gaining access to new markets plunged from 58% to 28%.

PwC also found that companies are beginning the integration process much earlier According to the survey, 32% of respondents se their integration teams to work in the deal screening process in 2016, compared to 21% in 2013. The number of respondents that waited until due diligence dropped by more than half.

“Even as companies get better at achieving certain goals, they’re struggling to reach others—perhaps because their expectations are changing,” PwC said in the report. “Workforces are increasingly diverse and multigenerational, and most industries are undergoing some form of digital disruption. Though many business leaders judge it more prudent to buy than to build talent and capabilities they need to join the ranks of the disruptors. By definition, that may mean integrating a completely different type of organization, with capabilities far outside the acquirer’s core.”

The study suggested that companies follow these seven steps toward successful integrations: accelerate the transition; define the integration strategy; focus on priority initiatives; prepare for day one; communicate with all stakeholders, establish leadership at all levels; and manage the integration as a business process.

AT&T’s pending $ 85.4 billion (not including debt) purchase of Time Warner helped push entertainment deal values into record territory in the fourth quarter, with total transactions worth $125.9 billion in the period, according to PricewaterhouseCoopers.

Total deal volume (194 transactions) was up 34% from Q3, according to PwC, the highest deal volume for the entire year, while values were the highest in two years.

According to PwC, The AT&T-Time Warner deal may be the biggest, but it wasn’t the only mega-deal – defined as those over $1 billion – for the period. PwC counted seven mega-deals, including CenturyLink’ $25.1 billion merger with Level3 Communications and Dalian Wanda Group’s $1 billion purchase of Dick Clark Productions, making up 15% of the quarter’s total deal size.

The cable sector, which rode the wave of Charter Communication’s $80 billion purchase of Time Warner Cable last year, has eight deals valued at $3.9 billion, down from a dozen deals valued at $84.6 billion in the previous period.  

While the new Presidential administration could throw a wrench into the AT&T – Time Warner combination – President Trump has been against it in the past but sentiment is high that the deal could pass muster – PwC is confident that more content-distribution deals are on the horizon.

“We would expect content owners to continue to be highly sought after by a cross section of [Entertainment Media Communications] players and those in the Technology sector,” PwC said in its report. “Pairing the right content with unfettered access to distribution channels is being viewed as the way forward.”

Related > Viewer Watch 2017: Download the Complete Report

Though TV has long been a numbers game, hard data showing changes in the way consumers access video remains a hotly debated subject.

It’s not just that there’s considerable disagreement over how to interpret these changes among executives overseeing what Magna calls the $67 billion TV ad market and PwC describes as the $101 billion subscription pay TV business. There is also much grumbling over the kind of data that is available to answer these multibillion-dollar questions.

“I don’t think we’ve made as much progress as we should have made” in measuring the consumption of video on all platforms and devices, Turner Broadcasting System chief research officer Howard Shimmel said.

There also isn’t much agreement on how the growth in multiplatform video consumption will affect pay TV subscriptions. Some contend that the rise of over-the-top streaming options will sharply reduce the pay TV subscriber ranks; others believe the issue is much more complex.

“From its peak in the first quarter of 2012, the major providers have lost about 1.8 million subscribers,” Bruce Leichtman, president and principal analyst at Leichtman Research Group, said. “The industry is clearly saturated and in a slow decline.”

Interpreting those numbers remains controversial, in part because data on the size of the pay TV universe rests on different assumptions. Leichtman, for example, includes data from services like Sling TV in his company’s estimates, while SNL Kagan does not.

Nielsen also provides different numbers. It reports the number of homes that have TVs connected to a pay TV service, which is different than the number of total pay TV subscribers reported by operators, Nielsen executive vice president of research Glenn Enoch said.

“You have to be very careful about the numbers you use and [about] drawing a straight line from those numbers to revenue, because things are much more complicated than that,” he said.

Related > New Normal: Digital Distribution

CORD-CUTTING CALCULUS

A number of researchers agreed. The proportion of “people dropping pay TV subscriptions is now about 2.6%,” Leichtman noted, which is about the same rate as 10 years ago, when the industry was growing.

“The problem is that the number of new customers has declined,” Leichtman said. “We only see 1% [of homes] moving into pay TV. That is down from 3.5% a decade ago and it has had a real impact on the dynamics of the pay TV industry.”

The declines have been smaller than some had expected, SNL Kagan research director Ian Olgeirson noted. “We are seeing a slight acceleration in the decline in subscribers for multichannel services from a roughly 1% decline in 2015 to a decline of what will probably be 1.3% or 1.4% in 2016,” he said.

The causes of those declines are also hotly debated. “Service providers would say that a lot of those declines are driven by price” and economics, Olgeirson said. But that isn’t the whole story, as the economy has rebounded and housing starts have grown over the past two years, he said.

A recent Frank N. Magid Assoicates survey found that 75% of likely cord-cutters said the ability to watch content via the Internet and OTT platforms was a key reason to drop pay TV service, Magid Advisors president Mike Vorhaus said. Only 29% of respondents cited costs.

Research also challenges the prevailing assumption that pay TV and SVOD services are competing offerings, said Howard Horowitz, president and founder of Horowitz Research, who sees them as complementary to traditional pay TV.

Horowitz survey data shows that 52% of whites and 58% of Hispanics have both a multichannel subscription and a subscription VOD service, while only 5% of whites and 6% of Hispanics have just a SVOD service.

STAGNANT AD SPENDING

Much unease also surrounds the ad market. Brian Wieser, senior research analyst, advertising at Pivotal Research Group, said the economy faces considerable uncertainty over the next year.

“I don’t think anyone can say with any certainty what is going to happen next and that uncertainty is going to curtail advertising,” he said.

National TV ad revenue will drop slightly by 0.4% in 2017 to $44.6 billion, Wieser predicted, and remain essentially flat through 2020, when it will hit $45.2 billion.

Magna’s Letang also sees a weak TV ad market combined with bullish prospects for digital media. “In 2017, we see high single digital inflation [in pricing] but high single-digit declines in ratings,” Letang said. “National TV will be up 1% in 2017 from 2016 if you exclude P&O” — meaning the 2016 revenue from political ads and the Summer Olympics — “and down 1% if you include P&O.”

With political and Olympics spending included, Magna projects that total TV spending will drop by 4.8% to $64.2 billion in 2017, declining further to about $62.2 billion in 2021.

Digital spending, though, will continue to grow rapidly. By 2020, Magna forecasts that mobile advertising will more than double to $78.4 billion (38.2% of all advertising) and social media will hit $31.8 billion in 2020 (a 15.5% share). TV, meanwhile, will slip to a 32.4% share.

Given the uncertainty over the ad market and pay TV subscriptions, programmers and operators have been rethinking their operations.

NEED TO BE NIMBLE

The drive to adapt to new consumer habits has prompted a number of projects to make operations more nimble, Discovery Communications chief technology officer John Honeycutt said.

For example, Discovery’s recently deployed “On Ramp” project allows about 80% of the content produced by 600 production suppliers to be uploaded to the Amazon cloud, where it can be immediately available to Discovery employees and channels all around the world.

“Going from 0% to 80% makes us so much more flexible and efficient,” Honeycutt said.

Equally dramatic upgrades are occurring in the pay TV infrastructure. After ticking off a long list of new products and initiatives to deliver more content to more devices, Comcast Cable executive vice president, general manager, video and entertainment services Matthew Strauss noted that these efforts are built on major improvements to the MSO’s infrastructure.

“We are rolling out DOCSIS 3.1,” he said. “We are rolling out Gigabit speeds. We are transitioning more and more to all-IP, which will allow us to innovate and deliver more of these newer services.”

Rapid innovation has also become the norm for digital platforms. “In 2016, we launched 30 new products and made hundreds of enhancements on dozens of platforms,” Alex Wellen, senior vice president and chief product officer at CNN, said.

Much remains to be done, particularly in the area of measurement. This year will mark a notable improvement on that front, with Nielsen planning to begin syndicating its Total Content Ratings on March 1.

“But some of the networks have been saying they won’t be ready for Nielsen’s public rollout in March, and it isn’t clear if everything will be ready in time for the upfronts,” Jane Clarke, CEO and managing director of the Coalition for Innovative Media Measurement (CIMM), said. “It is a very complex process to get it implemented in the apps for every kind of player and all the devices.”

Others worry about the TV industry’s ability to maintain its share of ad spending without better data. “Measuring crossplatform video consumption is important, but it is a 2006 problem,” Turner’s Shimmel said. “Today, when we talk to advertisers, what they really care about is outcomes [such as sales] and I don’t see that kind of measurement anywhere in Nielsen or comScore’s future.”

More debates surround commonly held perceptions of the OTT market.

Michael Leszega, senior analyst of market intelligence at Magna, said that “in 2016, we have [more than] 25 million cord-cutters and cord-nevers,” and that this group will continue to grow. By 2020, he predicted, about 28.6% of all households will be outside the traditional pay TV ecosystem. “It is a sizable portion of the population that can’t be ignored,” he said.

That has prompted a number of companies to develop streaming bundles of channels like Dish Network’s Sling TV, Hulu, Sony’s PlayStation Vue and AT&T’s DirecTV Now.

“If you look at the rumors about Amazon or YouTube coming out with OTT bundles, there could be a whole bunch of them, maybe seven or eight by the end of 2017,” Steve Shannon, general manager of content and services at Roku, said.

Tony Goncalves, senior vice president of strategy and business development for AT&T Entertainment Group, described DirecTV Now “as a mobile-first-centric platform” that will deliver the kind of advanced digital features consumers expect from their mobile apps.

“DirecTV Now is pay TV as an app and it opens up a market that has not historically been addressed by pay TV,” he said.

Dish Network also sees great promise in the melding of pay TV packages, OTT delivery and app experiences, Niraj Desai, the company’s vice president of product management, said.

“TV is becoming an app,” he said. “We have been talking about that trend for a while, but 2016 was really the year TV as an app came into its own” with better TV everywhere offerings and the streaming OTT bundles such as Dish’s Sling TV and DirecTV Now.

COMPLEMENTARY PLAYS

Even better, these products open up new markets and are not designed to cannibalize traditional pay TV offerings, he added. “Sling is complementary to DBS,” he said, meaning Dish and DirecTV’s satellite-TV platforms. “Sling over-indexes with urban millennials and DBS resonates with suburban and more rural customers that are more traditional TV watchers.”

Similar views come from programmers that have aggressively targeted consumers without traditional multichannel TV subscriptions.

“We launched HBO Now with the theory that its subscribers were going to look very different from the traditional subscribers,” Bernadette Aulestia, executive vice president of worldwide distribution at HBO, said of the premium programmer’s standalone app.

HBO Now subscribers are 10 years younger than customers of HBO’s premium cable network and typically live in broadband-only households, she said.

“We look at it as an entry point to customers that are coming into the category,” Aulestia said.

The growing popularity of skinny bundles and streaming OTT offerings has also helped HBO’s premium pay TV business, she added.

“There was a time, as a premium service, that we were only sold at the top of the bundle,” Aulestia said. “The idea that HBO should be sold at every level of the bundle, and even as a standalone service, means there are fewer barriers to get HBO.”

The rise of OTT and skinny bundles has been more worrying for ad-supported networks.

“Getting more creative packaging of content to create more customized solutions for the consumer can be very challenging for content providers because you have increasingly fragmented audiences,” Joe Atkinson, technology, infocomm, entertainment and media advisory leader at consultancy PwC, said.

Atkinson and others said OTT distribution can also open up a number of new opportunities.

For instance, the growing SVOD market encouraged Turner’s recent launch of an OTT movie service called FilmStruck, Coleman Breland, president of Turner Content Distribution and president of TCM, said.

“As the bundle became tighter, we decided to go direct to consumer instead of trying to launch a linear network and push it through the ecosystem,” which would be difficult in the current pay TV environment, he said.

Turner has also been pushing to expand the content made available on all platforms both in terms of reach and quantity, with the addition of offerings like full seasons on-demand.

“We now have 450 affiliate partners for our TV everywhere products” and have seen usage jump by “triple digits” in the last year, Breland said.

TIME TO TARGET

Many of these newer products can be traced to a more fundamental change in the way operators think about their customers.

“Today, service providers have to figure out how to target different individuals in household,” PwC’s Atkinson said. “That is a tough challenge, but I think it is really the keys to the kingdom.”

One example of such a targeting effort is the development of packages targeted to consumers at different life stages. “College students have different needs than a single-family home with kids, and we are very focused on meeting all those different needs,” Comcast’s Strauss said. He said the Xfinity on Campus product has been a success in that regard.

Operators have also been greatly expanding the content sources via apps on Internet connected set-top devices such as Dish Network’s Hopper. “You can watch live TV with your Dish subscription, or recorded TV on your DVR or you can watch Netflix and YouTube all in one convenient place,” Dish’s Desai said.

Adding more choices has also been a top priority for Cox Communications, Steve Necessary, executive vice president of product development and management at the Atlanta-based cable operator, said. “We have more than doubled our VOD offerings from 50,000 to over 120,000,” he said.

Cox also has revamped its TV app to expand the content available on digital devices and speeded up the rollout of Contour — Cox’s version of the Comcast X1 Internet-connected set-top platform — from 3,000 customers to more than 600,000 in 2016.

Very importantly, such efforts are also beginning to pay off. Both Comcast and Cox are seeing some of their best video-subscriber efforts in a decade.

Programmers are also reporting strong gains from their digital platforms.

“There is a blending of content types and expansion of the platforms,” translating into some record-setting numbers, ESPN vice president of digital media research and analytics Dave Coletti said.

In year when some live sports audiences have declined, Coletti noted that Watch ESPN’s live stream of the Nov. 26 college-football game between third-ranked Michigan and second-ranked Ohio State — which went into double overtime before OSU prevailed, 30-27 — tallied 1,273,000 unique viewers, making it ESPN’s most streamed regular college football game. (The game telecast also aired on ABC.)

“Eight of our top 10 most-streamed regular season college football games have occurred this year,” he noted.

The 2016 presidential election helped CNN set a number of network records, Wellen said, including a record audience level on Nov. 9 with 77 million unique users, 83 million video starts, 483 million page views and 29 million live streams.

Equally notable was social media. CNN racked up 169.7 million video views on Facebook and 47.6 million Facebook Live views, he said.

“Those results show that it has become very important to be both a destination for content and a distributed brand,” he said. “We have apps and websites where people can access our content but, we’ve also seen that we can be very successful on Facebook Live” and other outside platforms.

Additional encouraging news can be found in TV use, Nielsen’s Enoch said. “The decreases that we saw in TV usage that really started to accelerate in the mid-2014 have lessened,” he said. “TV consumption remains at near record level.”

“We are also seeing a shift back to the more traditional way of hooking up a TV” to a pay TV service or an antenna, he added. “The universe of homes that can watch TV or can stream video to the big screen has actually grown,” reversing a trend that began with the digital transition and the 2008 recession.

That said, Enoch said the “fastest growing area of overall usage — not just video — is the smartphone.”

In the second quarter of 2016, Nielsen reports that consumers ages 18-34 spent almost as much time each week with their smartphones (14 hours and 36 minutes) and tablets (three hours and 27 minutes) as they did with traditional TV (18 hours and 27 minutes).

Less discussed but equally important are connected TVs. “TVs connected to the Internet by any device have grown from about one-quarter of all households in 2010 to about two-thirds of all households,” Leichtman said. “There are now more connected TV devices in American than there are pay TV set-top boxes.”

Said CBS Interactive president and chief operating officer Marc DeBevoise, “We are seeing explosive usage in those connected TV experiences.” He added that “time spent on connected TVs with our products has grown by more than 300%.”

As an illustration, consumers in October of 2016 spent about 347 minutes per month consuming CBS news content via desktop computers, compared with 360 minutes via Apple TV and 496 minutes via Roku, per unique viewer, DeBevoise noted.

“That is a lot of usage, and we are spending a lot of time making certain we can capitalize on that by getting those experiences right,” he added.

LINES ARE BLURRING

Connected TVs also offer much more advanced capabilities for search and discovery. For example, the Roku platform allows users to search for TV shows and movies across more than 100 apps, Roku general manager of content and services Steve Shannon said.

Advanced features are helping to blur the line between connected devices, pay TV operators and the new bundles of streaming channels.

Companies such as Hulu and Sling are increasingly bundling their subscription packages of channels with a free Roku, Shannon said. Also, Charter, Comcast and a number of other operators have either launched or plan to launch TV everywhere apps on the Roku platform so that subscribers can access a large bouquet of channels on the pay TV apps, he said.

“You have the normalization of OTT, where you are seeing massive amounts of traditional broadcast style content viewing on OTT platforms,” Shannon said.

Advertisers in the U.S. spent $17.6 billion on digital advertising during the third quarter, up 20% from a year ago, according to a report prepared by PwC U.S.

Digital spending continues to increase despite concerns over effectiveness, fraud and sometimes misleading metrics. Most forecasters expect digital spending to surpass spending on TV advertising as early as this year.

“Digital has become a critical part of advertisers’ marketing strategies,” said David Silverman, a partner at PwC U.S. “Increasing media consumption on interactive screens will surely lead to even more investment in the digital landscape.”

The third-quarter spending was also up 4.3% from the second-quarter total.

Read more at broadcastingcable.com.

A new study by PricewaterhouseCoopers says that television, mobile and online sports rights will become the largest part of the sports entertainment sector by 2018, driven by increased demand from streaming and over-the-top services.

According to PwC’s new sports industry report – At the Gate and Beyond: Outlook for the sports market in North America through 2020 – rights for broadcast, cable, Internet and mobile rights will reach $19.9 billion by 2018, outpacing revenue from sponsorships ($17.5 billion) and live gate revenue ($19.8 billion) that year. Media rights revenue growth is expected to stabilize over the next five years to a compound annual growth rate (CAGR) of about 5.5%, after a torrid pace in the past decade.

PwC believes that consumer and advertiser engagement with live game broadcasts will remain strong, keeping rights in demand with traditional sources as well as with social media and other emerging distribution partners. That already is beginning to happen, with Twitter’s agreement to carry certain National Football League games over its service.

While broadcast rights will still be a priority, so will reaching deals with new digital products to attract new audiences, deepen engagement and displace any rights fee premium lost as pay-TV moves away from or within the bundle, PwC said.

Sports properties will keep an eye on emerging technologies like personalized video, 3D video, virtual reality, augmented video and augmented reality for premium, immersive experiences with either live or archived content – but PwC believes it’s too early to determine their impact on the sports market value chain.

Few companies in the cable and telecommunications industries have escaped the cyber attacks that continue to wreak havoc on just about every layer of the supply chain.

Varying degrees of security breaches at Comcast, Cox Communications, Time Warner Cable and other cable providers have raised the red flag in the cybersecurity space and prompted a new mantra: Now is the time to raise the level of security.

“A fundamental evolution is taking place and the security implications are numerous,” Michela Menting, research director at consulting firm ABI Research, said. “Above all are the issues raised by the transition to all-[Internet protocol] networks, which are already highly exploited by threat actors and will be a boon for malicious cyber-agents — and all sectors are vulnerable.

“Investment in security services and corresponding hardware and software is not something they can ignore or put off , except at great cost to their services, reputation and client base,” she said.

Cybersecurity concerns have become so paramount that in its Charter Communications-Time Warner Cable merger order, the Federal Communications Commission required Charter to submit a plan to manage its increasing security risks during the transition.

And according to the Hewlett Packard Enterprise/Ponemon Institue “2015 Cost of Cyber Crime” study, hacking attacks cost U.S. firms, on average, some $15.4 million a year. Globally, U.K. insurance firm Lloyds estimates that cyber-attacks are costing businesses a staggering $400 billion a year.

There’s also the shaken confidence of clients and subscribers about the safety of their data. And not everyone is convinced the cable industry is prepared for any attacks.

“Cable networks are archaic in many respects, as they extend the life of existing systems, and frankly, the security posture of networks and the less time spent on security leads to a lot of holes,” Chris Simkins, CEO and co-founder of supply chain analysis and risk management firm Chain Security, said.

PricewaterhouseCoopers (PwC), a consultancy moving deeper into the cybersecurity space, believes cable companies are getting the message that shoring up their networks should be of the highest priority.

“There’s a lot going on with MSOs and we’re seeing the awareness lev el rising,” Mark Lobel, a principal in PwC’s U.S. advisory practice and Cybersecurity Technology, Information, Communications & Entertainment leader, said. “But cybersecurity is like a chess game with no kings, and trying to stay ahead of who’s across the board.”

And just who is across the board?

“There are many threat vectors,” Irfan Saif, a principal in Deloitte’s Cyber Risk Services practice, said. “There are service-disruption actors, those looking at the backbone to propagate malware and those who want to compromise customers. It’s a broad range of threat actors and companies must be cognizant of them all.”

That will require a holistic approach, Saif noted. “You must understand what behavior is considered normal and what indicates a threat of attack and what are the crown jewels that require higher-grade protection.”

Cisco Systems, another player in the cybersecurity space, concurred with Saif’s assessment.

“The best approach is a holistic look at security and where each layer builds on top of each other — firewalls, advanced malware protection, email and core technologies like conditional access, DRM and anti-piracy technology — a breadth of security,” Cisco senior product and solutions marketing manager Sam Rastogi said.

Another less glamorous threat, but just as dangerous, comes from the inside.

“Employees or vendors with access to information is a growing concern,” Rastogi sad. “Who’s accessing information and how, and is there abnormal activity? A risk-based program with alerts, authentication measures and more will give companies more insight.”

CableLabs, the cable industry’s research and development consortium, is accelerating its cybersecurity activity with two initiatives: It’s working with the Wi-Fi Alliance to ensure links to hotspot access points are secure, and it’s reaching more deeply into home managed access points.

“The level of engagement is very high and there are real questions being asked,” The mindset is changing,” CableLabs principal security architect Steve Goeringer said.

That’s a good thing, said Rick Michaels, CEO of CEA, a cable industry-focused investment bank. “It’s one thing that cable is carrying 60% of the Internet traffic, but now there are data centers and multiple services with different touch points in cable. Cybersecurity should be of paramount interest to the cable industry.”

Most cable companies are understandably reluctant to discuss their cyber security strategies. Comcast, which in March hired Noopur Davis as senior vice president of product security and privacy, offered a statement from Myrna Soto, senior vice president and global chief information security officer: “We’ve committed extensive resources with a focus on risk management and built resilient and smarter networks with many security layers that are monitored continuously. Using automation, tooling and analytics is key.”

Arris, another key equipment supplier to cable networks, said in a statement (in part): “Security remains a top priority at Arris, as it does for all manufacturers of Internet and network-connected devices” and that it “employs a variety of protective measures to help ensure the safe and reliable operation of our devices including, but not limited to, DOCSIS compliance, vulnerability scanning, and monitoring programs.” It works “actively with security organizations and our service provider customers to identify and quickly resolve any potential vulnerabilities to protect the subscribers who use our CPE devices.”

Breaches cut across both residential and business markets, added Sander Smith, president of Sericon Technology.

“It’s clear that very soon we’ll see consumers filling their home networks with IoT devices, and these devices will be rushed to market with very little thought given to security.”

Yet even with the increase in cyber attacks (PwC reported a 38% increase in 2015 vs. 2014), there is cautious optimism that with emerging cybersecurity innovations, an expanding community of cybersecurity companies and a heightened awareness among service providers, security is being strengthened.

“We’re seeing various levels of maturity in cable and telecom and a raising of awareness in those organizations,” PwC’s Lobel said. “But they can’t lose focus.”

The National Cable & Telecommuications Association is focusing its cybersecurity attention on two areas, senior vice president, science and technology and chief technology officer Bill Check said.

“We are leading the industry’s Cybersecurity Working Group and working with the FCC’s Communications Security, Reliability and Interoperability Council (CSRIC), along with various cybersecurity-related working groups,” he said. “The challenge is to anticipate current and future threats and design systems of early detection and resistance, because cyber-criminals will always look for new exploits.”

On March 31, the Federal Communications Commission (FCC) approved the latest in a string of proposed rulemakings, one which could have a significant impact on the business and operations of communications companies and edge players.

FCC chairman Tom Wheeler’s proposal to establish privacy rules for Internet service providers followed closely on the heels of the FCC’s proposal to “unlock” the cable set-top box (see "PwC’s 3things: Unlocking the Set-Top Box"). All of this comes a year after the controversial Open Internet Order (OIO), which reclassified broadband Internet access as a “telecommunication service” under Title II of the Communications Act, allowing the FCC to impose its “Open Internet” regulations.

While neither of the FCC’s two proposed rules are finalized – and the OIO is still being challenged in court – the fact is that the tide of regulatory-driven change is rising. Understanding and managing legislative and regulatory change is now a daily part of any business and has the attention of the highest levels of nearly every organization. Firms that have the ability to effectively manage – or even embrace – the impact of regulation can gain a competitive advantage.

Lessons Learned From the Wave of Dodd-Frank Regulation

Our experience with financial services firms addressing the rise of global financial reform regulation coming out of the financial crisis (e.g. the Dodd-Frank Act in the U.S.) found that the “winners” in the new regulatory environment were those firms that evolved their approach to proactively manage the impact of regulatory change. As Dodd-Frank’s proposed rules emerged, many banks took a combative stance and adopted a “wait and see” approach to preparing for the impact of the final rules. This approach left many unprepared and in a reactive mode when the rules were finalized. There was no time to think through the strategic or operational impact as they struggled to implement the required changes within the regulatory deadlines.

As banks later accepted the inevitable of the post-crisis regulatory environment and gained experience in addressing new and evolving regulations, a new model arose. Banks continued their lobbying efforts to shape proposed rules, but they also began to game plan the scenarios that might unfold.

Applying the Strategic Approach: The FCC’s Set-Top Box Proposal

The Dodd-Frank lessons learned from the financial services industry can be applied across most other industries facing regulatory-driven change. The FCC’s recent Set-Top Box proposal is a prime example. The FCC believes that the proposed rule meets their obligation under the Communications Act of 1996 to ensure a competitive market for navigation devices for live and video programming. Those opposing the proposal argue that it is unnecessary because the market is already innovating and providing customers with sufficient choices to access their content. The official 30-day comment period for the proposed rule will close on April 22, so, while late, there is still an opportunity to apply a proactive strategic approach (see graphic representation below) to address its potential impact.

At the most basic level, there are three potential outcomes for the proposed rule:

1. The rule is passed largely as proposed, so multichannel video programming distributors (MVPDs) would have to make the three information flows (Service Discovery, Entitlement and Content) available to third party navigation devices according to the rule’s requirements.
2. The rule passes but gets held up in court similar to the OIO, leaving the industry in a limbo state of regulatory uncertainty.
3. The rule does not pass, so the status quo remains.

MVPDs, technology and media companies should consider conducting an impact assessment based on each outcome. Many MVPDs are already innovating the ways in which consumers access their content through apps and other IP-based approaches or are working with third-party device companies to share content. They should be evaluating how their progress on this front could help them address some or all of the proposed rule’s requirements. At a minimum, this exercise would inform their response to, and formal comment on, the proposed rule. It may also provide them with insights that would allow them to benefit from any early adopter advantages.

With a proposed compliance date of two years after the final rule is approved, firms would have time to implement the types of strategic changes that this analysis might identify. The two-year window also makes it likely that the second scenario (legal challenge) would have little impact on a business’ strategy, other than providing an extended window for the more reactive firms to further delay potential changes to their strategy or business model. If the third scenario occurs and the rule does not pass, how would that impact the response of impacted firms? Most agree that the market for accessing video content is advancing rapidly with the evolution of Over-the-Top and digital offerings. With or without a final rule, firms will have to evolve and the analysis performed in preparing for the Set-top Box rule will help them formulate their evolution strategy.

In this era where change comes from all angles (including regulation) and disruption occurs at an accelerating pace, those firms that adopt a proactive approach and embrace regulatory-driven change can create a distinct competitive advantage.

David Sapin is Technology, Information, Communications and Entertainment (TICE) Risk & Regulatory Leader at PwC. Follow him on Twitter.

Total deal value in the U.S. Entertainment, Media & Communications (EMC) sector was up 13% to $149 billion in 2015, a 13% increase led mostly by cable transactions, and the pace is expected to continue in the current year, according to a report by research gamt PricewaterhouseCoopers.

While total deal volume was down about 7% in 2015 – to 818 announced deals from 886 in 2014 – the size of each deal was bigger, according to PwC’s U.S. Entertainment, Media & Communications (EMC) Deal Insights. Cable deals provided the bulk of 2015 deal value, while advertising and marketing goosed it. And though Q4 was one of the slowest merger-and-acquisition  quarters in recent history, PwC said it believes momentum is strong for the future.

Two megadeals – Charter’s pending purchases of Time Warner Cable ($56 billion, minus debt) and Bright House Networks ($11 billion) – accounted for 45% ($67 billion) of the total deal value for the year. And though there was a slowdown in the second half of the year, PwC said it could be attributed to an overall wait-and-see approach, as previously announced deals await regulatory approval; tightened access to debt markets; overall uncertainty around the broader macroeconomic environment; and resolution on industry-specific activities, such as spectrum auctions.

Here’s what PwC believes is in store for the markets in 2016:

Advertising & Marketing: Year-over-year deal volume within advertising and marketing increased more than any other EMC sub-sector, as underlying fundamentals in this space remained strong. However, despite a 13% increase in 2015 deal volume, there was a steep decline in deal values, down $9.7 billion from $12.3 billion in 2014 to $2.7 billion in 2015. Given the continued shift to digital and the insatiable appetite to consume content across multiple devices, those with engaging mobile and social advertising solutions are proving to be attractive acquisition targets.

Broadcasting: Deal volumes in the broadcasting sector declined for another year, down 42% in 2015 compared to 2014, following mass consolidation in the local television broadcasting space in 2013 and part of 2014. In 2015, there were only two large TV broadcasting groups making multiple acquisitions during the period, compared to six players in the prior year. Despite a decline in deal activity, deal values were up from $4 billion in 2014 to $5.4 billion, driven primarily by Nexstar’s bid for Media General for $4.6B.

While some baseline activity level is expected to continue (like Sinclair’s purchase of the Tennis Channel for $350 million in January 2016), PwC doesn’t expect significant deal volumes in this sector in the coming year due to the recent consolidation in this sub-sector over the last several years and  FCC ownership limits. Any activity will likely be driven by individual or small groups of owned-and-operated television stations The one unknown is what broadcasters  will do with capital raised from the sale of spectrum in the upcoming FCC auctions.

Cable: After a headline-making first half, deal activity within the cable sector slowed significantly in the second half of 2015. Absent the megadeals, the sector had a quiet year, which may be attributed to cable companies waiting to see if certain 2015 transactions meet regulatory approval. If approved, this could send a signal to the market that further consolidation would be necessary to maintain a competitive marketplace. PwC expects additional M&A as mid-tier cable players look to expand their footprint in adjacent geographies, taking advantage of potential synergies.

Communications: Despite a 10% decline in communications deal volume, deal value increased by 38% to $22.2 billion in 2015. The path forward centers around two very pressing topics: distribution and content. The level of 2016 deal activity may be somewhat dependent on the outcome of industry-wide events, such as the next round of spectrum auctions scheduled to commence in March 2016. PwC believes those companies whose service offerings improve the operating efficiency and capabilities of the underlying network will remain attractive M&A targets.

As the pay TV universe continues to dwindle, content providers should look more closely at offering programming directly to their consumers, eliminating the traditional distribution channel altogether, according to a PricewaterhouseCoopers study.

In Industry Perspective: 2016 Entertainment & Media Industry TrendsPwC's  Strategy& division examines the increasingly rapid transition toward a direct-to-consumer future and the acceleration that’s expected in 2016 with OTT/streaming services, smart devices/mobile apps, live events/digital engagement and the high-growth Latino market.

According to PwC, 78% of U.S. consumers already subscribe to at least one OTT service. And while currently most of those subscriptions complement an existing pay TV relationship, there is strong potential for disruption. PwC points to its own Videoquake 3.0: The Evolution of TV’s Revolution report, which showed in 2014 that 91% of U.S. consumers said they could see themselves subscribing to cable. In the following year, that number fell to 79%.

While products like TV Everywhere apps were supposed to curb the migration to over-the-top providers, PwC says low awareness, a tepid user experience and authentication problems have hurt adoption.

“Today, fewer than one in seven U.S. pay TV households actively use TVE,” PwC said in the report.

At the same time content providers have struck deals with SVOD services like Netflix, Hulu and Amazon for movies and series.

“Although these sales have driven short-term revenue gains for [entertainment and media] production companies, they have also enabled OTT services to gain a firmer grasp on the end-user relationship, monetize viewership in more advertising-free and ad-light environments, and build their brands at the expense of the networks or studios supplying the shows — and do all of this at lower prices compared with traditional TV bundles,” PwC stated in the report.   

Pay TV numbers have been on the decline, with total subscribers at the top MVPDs down by 190,000 in the third quarter, as telco and satellite began to see a decrease in additions. Cable operators have shown strong improvements in their video subscriber metrics over the past few years, substantially reducing losses. While some operators are reporting video customer gains in 2015 – Time Warner Cable said it added 32,000 basic video subscribers in 2015, its best year in nine years – the growth hasn’t been enough to offset satellite declines.

About 20% of pay TV customers could sever the pay TV cord in the coming year as frustration with the lack of choice and control over their entertainment packages could reach a head, according to a new study by research firm PricewaterhouseCoopers.

The study – Videoquake 3.0: The Evolution of TV’s Revolution – took data from a survey of more than 1,200 consumers, focus groups and social media listening.

The survey found that pay TV is losing its grip – the number of consumers that said they could see themselves subscribing to cable in the following year dropped from 91% in 2014 to 79% in 2015, which PwC says implies that about one-fifth of consumers could ditch their cable subscription in the next year.

“Consumers’ relationship with video content is fundamentally changing – and the shift shows no signs abating,” PwC said in the study, adding that content providers need to rethink their business models to remain viable. That could include repositioning the bundle to better reflect ala carte demands; redefine how they measure audiences to gauge consumer behavior across all platforms; focus on improving the user interface to allow customers to find what they want when they want it.

According to PwC, 79% of U.S. consumers subscribe to some form of pay TV, but of those subscribers, 23% said they engaged in cord trimming in the past year. About 16% of those surveyed said they unsubscribed from pay TV service in the last 12 months and 5% said they were cord-nevers and never subscribed to pay TV service at all.

The study also found that while the average subscriber receives 194 channels, they regularly watch just 17 channels.

PwC says consumers are clamoring for control – 56% said what would get them back on the pay TV bandwagon is the ability to customize their video packages to include only the channels they want. And PwC said that sentiment was not exclusive to cord-cutters – about 45% of current pay TV customers said they most preferred an a la carte package of channels they could customize themselves. 

Consumers, especially younger ones, are watching that content on multiple screens. According to the survey, 77% of 18-to-24 year olds are accessing TV content from the Internet and increasingly on mobile devices, PwC said.

OTT services also are growing, with 78% of consumers surveyed saying they subscribe to at least one OTT service. Among pay TV customers, 70% said they subscribe to a streaming service as well.

While on-demand or OTT streaming services are appealing to consumers, there’s no single catch-all solution, PwC said in the study. Netflix leads the OTT pack—nearly two out of three Americans have a Netflix subscription—but 52% of Netflix subscribers also subscribe to cable, and 55% also subscribe to at least one other OTT platform. Among Hulu subscribers, the overlap is even greater – 91% of Hulu customers subscribe to at least one other OTT platform—more than double the number of Hulu subscribers who also subscribe to pay-TV. Amazon Prime subscribers have a similar profile—79% subscribe to at least one other OTT platform, and 53% subscribe to cable. According to PwC, this means that in the battle for market share, OTT services are a threat to cable, but not necessarily to each other.

Media rights fees are expected to reach $16.4 billion by the end of the year, rising at a compound annual rate of 7.2% and making it the fastest growing segment of the sports business, according to a new report by PricewaterhouseCoopers.

According to PwC’s new report: “At the Gate and Beyond: An Outlook for the Sports Market in North America through 2019,” sports rights fees will only be surpassed by total gate revenue (at $18.3 billion) in 2015. PwC projects that media rights will pass gate revenue as the largest segment of the sports business by 2018 and reach $20.6 billion by 2019.

Local rights for Major League Baseball, the National Basketball Association and the National Hockey League will contribute to overall sector growth with more than 35% of current deals set to expire over the next five years, although on a smaller scale than the national rights deals that are predominately driving industry-wide growth.

“Segment fundamentals and base rights fees should remain strong given the popularity of sports programming with consumers and advertisers,” PwC said in the report. “However, as consumers and advertisers continue to migrate towards Internet-connected devices and ‘second-screen’ activity, it’s more likely the traditional pay-TV model will have been by the next major sports deal cycle.”

Gate receipts, an estimated $17.7 billion in 2014, will reach $20.1 billion by 2019, according to PwC. Sponsorships are expected to rise at a compound annual rate of 4.5% from an estimated $14.7 billion in 2014 to $15.3 billion in 2015 and $18.3 billion in 2019.  Licensed merchandise sales are projected to increase at a compound annual rate of 1.4% from $13.5 billion in 2014 to $13.7 billion in 2015 and $14.5 billion in 2019, says PwC.

Entertainment, Media and Communications sector deal values nearly doubled in the second quarter to $76 billion from  $39 billion in the prior period, according to a report by PricewaterhouseCoopers, driven by transformative deals in the Cable ($63 billion), Internet & Information ($6 billion) and Communications ($3 billion) spaces.

Despite Comcast’s decision to abandon its purchase of Time Warner Cable in April, Charter Communications’ decision to step back up to the plate and agree to acquire TWC in a deal the consulting giant values at $56 billion (not including debt) and Verizon’s $4.4 billion purchase of AOL.

Mega-deals once again dominated the list – the seven mega-deals in the quarter accounted for 94% of the deal volume in the period.

Despite the apparent return of the mega-deal, which PwC defines as deals valued at more than $1 billion, the consulting firm was encouraged by what it called the resurgence of smaller, ore innovation-driven transactions.

“…We continue to see innovation and transformation as key drivers of M&A in the sector,” PwC Partner, Entertainment,Media & Communications Deals, Bart Spiegel said in a statement. “When coupled with shareholder pressure on companies to deliver ongoing growth, we anticipate that M&A activity will continue to be robust as we enter the second half of the year.”

The cable sector again dominated the space in terms of total value, with four deals totaling $63 billion. Leading that sector was the Charter-TWC deal, followed by Liberty Broadband’s $4.3 billion purchase of Charter stock (which will assist in financing the TWC purchase) and European telecom giant Altice’s purchase of a 70% interest in Suddenlink Communications, which PwC values at $2.9 billion (again, minus debt assumption.)

The advertising and marketing sector, perennial champs in deal volume, continued that streak in the second quarter with 57 deals valued at $1.2 billion, followed by publishing (37 deals), Internet & Information (28 deals) and Communications (27 deals).

While volumes were down slightly in the ad sector in the period – compared to 60 deals in the first quarter – PwC said there was a rise in the number of transactions involving digital/online focused advertising companies, which accounted for more than 25% of announced deals (up from 20% in Q1’15). According to PwC’s Global Entertainment & Media Outlook: 2015-2019, Internet based advertising is projected to surpass TV advertising by 2018.

After a slow start in Q1, deal volumes in the Communications sector were up more than 50% in the second quarter with 27 deals announced – one of the biggest risers in deal volume of all the EMC sectors. While announced deal values were down compared to $16B in Q1’15, overall deal value remained in the billions as two megadeals in Q2 2015 represented almost the entire $3B of deal value.

Internet & Information services announced deal volumes fell from 42 in Q1 2015 to 28 in Q2 2015 – the sub-sector’s lowest quarterly total in recent history. While volumes lagged to 28 deals from 42 in Q1, deal value increased to $6.25 billion from $2.4 billion in the first quarter, buoyed by two megadeals – Verizon-AOL and LinkedIn Corp’s $1.5 billion acquisition of online education provider Lynda.com.

Spending on media and entertainment is expected to rise by about 5% in the U.S. in the next five years to $723 billion, as consumers continue to blur the lines between digital and traditional media, according to a recent report by PriceWaterhouseCoopers.

In its Global Entertainment and Media Outlook 2015-2019, PwC estimates that total media and entertainment spending will rise 5.1% worldwide to $2.23 trillion by 2018. PwC says the difference between digital and traditional media is irrelevant to consumers, who place the most emphasis on choice.

Still, U.S. digital spending is expected to grow at 11.1% per year over the next five years and account for 46% of overall U.S. E&M spending growth, up from 34% in 2014.

“In today’s multi-platform environment, E&M companies must take a hard look at the talent, organizational structure and alignment of performance measures with overall strategy across their entire business,” said PwC’s U.S. entertainment, media & communications leader Deborah Bothun in a statement. “While this may seem self-evident, it remains a major challenge that many companies are struggling to overcome as they transform their operations to engage today’s consumer. Mastering the user experience will be the critical success factor for monetizing consumers and sustaining growth.”

U.S. advertising revenues are expected to rise at a 3.5% annual rate, increasing from $193.8 billion in 2014 to $230 billion in 2019, according to PwC. In the U.S., Internet and video games advertising, both forecasted to grow at 11.1%, is expected to continue to dominate the landscape. Internet advertising is projected to overtake U.S broadcast TV advertising (2.5% CAGR) in 2018. Mobile and video Internet ads are expected to drive digital advertising growth, with mobile expected to surge to 25.6% growth in 2019.

The rise of over-the-top (OTT) video services is further changing advertising. As viewers migrate from traditional networks to digital alternatives, advertisers will follow, driving broadcast TV advertising’s share of U.S. total TV advertising down from 95% in 2014 to 91.6% in 2019.

In the U.S., digital out-of-home advertising revenue is expected to rise at a 9.8% annual rate.

“Amidst the proliferation of content and access options, it’s clear that consumers are demanding more flexibility, freedom and convenience regarding when and how they consume content,” said, PwC’s U.S. advisory entertainment, media & communications leader Joe Atkinson in a statement. “They want it on-demand, on mobile and are readily engaging with content experiences that they can’t get elsewhere. This has re-energized the enduring appeal of shared, real-life experiences, such as cinema and live sport and music events, which has survived during the growth of digital. In creating new offerings, E&M businesses will need to consider attributes that combine an outstanding user experience, attractive content assortment, smart discovery and a connected social community delivered through an intuitive interface that offers increased personalization and access across devices.”

Deal volumes and values in the entertainment sector should rise in 2015, according to a new report from PricewaterhouseCoopers, but cable operators, who helped drive M&A values skyward in 2014, are expected to be somewhat cautious as the new year unfolds.

In its latest report – U.S. Entertainment, Media & Communications (EMC) Deal Insights 2014 – PwC said that deal values shot up by more than 90% in 2014 from the previous year, driven by three deals:   , AT&T and DirecTV and Facebook’s acquisition of WhatsApp. Deal volumes remained steady in 2014 according to PwC at nearly 890 mergers and acquisitions in 2014, up 3% from 866 in the prior year.

In the cable sector, PwC estimates that regulatory concerns could limit deal making early in 2015, but that there remains strong incentive among operators to consolidate. Overall, M&A is expected to be active throughout the entertainment sectors.

“M&A in the EMC space will continue to be active as market participants take risks to position themselves for the future EMC marketplace which focuses on subscriber stickiness, efficient and well optimized networks and creating and maintaining the rights to compelling content,” said PwC partner, Entertainment, Media & Communications Deals, Bart Spiegel in a statement.

He added that as companies continue to reinvent themselves, particularly in the digital space, more partnerships and mergers could surface.

“Companies will continue to engage in landscape shifting deals as they figure out their digital strategy and how to remain relevant to the digital consumer,” Spiegel continued. “Simply put, they are spending time, effort and money on their strategy and relative position in the digital value chain.”

Absent any Comcast-sized deals early in the year, PwC predicts that other sectors should see increased activity, especially in Internet and Information Services. Here’s PwC’s outlook by sector.

• Cable: Two high profile consolidating megadeals in the first half of 2014 set the tone for the cable subsector and the overall deal landscape this year with a combined deal value of $94B. Absent these two transactions, cable deal volume was relatively flat, driven mostly by the consolidation of local cable TV systems. Given the regulatory attention consolidation in this market draws, market participants will remain cautious to see whether transformative deals will be approved and what impact, if any, the ultimate ruling on Net Neutrality may have on cable companies’ revenue streams and their further growth.

• Broadcasting: Announced deal volume declined 28 deals or 32% from 2013 to 2014. The overall slowdown was due to a very active 2013 market where there was significant consolidation of local TV stations. PwC expects strategic buyers – where allowable under existing Federal Communications Commission regulations – to continue to expand their TV platforms to gain leverage in retransmission negotiations.

• Communications: Amidst a dynamic M&A environment, which continues to attract intense regulatory focus, total deal volume was down 30% from the prior year – most evident in telecom equipment, telecom services and wireless deals. To overcome current market constraints, telecom players will likely: 1) acquire internationally in the face of a saturated domestic subscriber base, 2) pursue direct ownership of content to battle the disruption and 3) explore consolidation to manage the increase in mobile data consumption and rising spectrum bids.

• Advertising and Marketing: Advertising and Marketing announced deal values declined by $8.1B, however volumes picked up 21 from 181 deals in 2013 to 202 in 2014. Looking toward the future, advertisers will continue to invest in building a core competency in analytics-driven insights that connect consumers' behavior, expectations, buying intentions and media platforms. Marketers may find the most value in M&A targets that successfully link ad content with digital and mobile viewers’ interests and lifestyles.

• Publishing: Announced deal volumes increased by ~25% between 2013 and 2014, with deal values up nearly $0.7B to $1.9B for the year. With a projected slowdown in Internet advertising revenue growth, it will no longer be enough for publishers just to have a strong digital presence. Going forward, attractive M&A targets will have to embrace new advertising technologies that promote better usage measurement and explore new content marketing and payment schemes to continue to drive revenue growth.

• Internet-related/Information Services: Announced deal values increased significantly over 2013 primarily driven by two megadeals. PwC expects this sector to continue to remain active with the constant addition of web-based information sources and business solutions.

Wearable technology is expected to drive growth in the entertainment and media sector as more and more (and younger and younger) consumers adapt devices and monitors that are not only worn, but woven into the very fabric of their wardrobes, according to a recent study by PricewaterhouseCoopers.

Wearable technology made a splash a few years ago with Google Glass, basically a computer with a head-mounted display. Earlier this year Apple upped the ante with the Watch, a wearable device that is capable of receiving phone calls, messages and texts, and controlling other Apple devices.

New devices on the drawing boards include monitoring technology woven into clothing that can detect heart rates and blood oxygen during exercise, as well as futuristic communications devices like wrist phones. 

According to PwC’s The Wearable Future, companies in the entertainment and media sector could have the largest growth opportunity in the wearables market. PwC estimates that about 2 million smartwatches were sold in the U.S. in 2013, and as of March 14, 3.3 million fitness trackers had been sold in the country. That number is expected to grow to 19 million this year (for smartwatches, headsets and activity trackers) and with projections that sales of wearable devices could reach 130 million units in 2018, the prospects are enormous.

PwC, in conjunction with researcher BAV Consulting, surveyed 1,000 consumers (across age, gender income and regions) via a 25-minute online questionnaire to examine the positive and negative trade-offs of wearable technology and to gain insight on how values, attitude and behaviors will shift once these technologies become more mainstream. As a result, PwC determined that:

·                     About 73% of respondents expect wearable technology to make media and entertainment more immersive and fun, with millennials responding in the positive at an even higher rate (79%). As expected, more millennials (64%) said they would be excited to try a wearable technology product introduced by an entertainment or media company than the general population (42%).

·                     As social media becomes the vehicle for which more and more information is received, consumers want wearable technology to offer anytime/anywhere access to their favorite networks. This is especially resonant with younger viewers – millennials were three times as likely as the general population to list real-time social media updates as an important benefit of wearables.

·                     About 97% of American children ages 12 to 17 play an average of one hour of video games per day. Wearable technology is poised to offer a host of new platforms and devices to make gaming more visually and physically engaging than ever before. About 64% of consumers ages 18 to 24 say they would be motivated by this.

·                     Additionally, wearables open up more advertising inventory – blank canvases for highly targeted message placements, especially in the form of content with greater relevancy and context to the user and can also provide a meaningful opportunity to drive product sales and e-commerce.

“The media company of the future must combine insights with curated experiences, and find new ways of monetization – not merely through conventional advertising and paid content offerings. Wearables offer media companies a huge new frontier of relevance and immersive experiences, helping to engage audiences by providing the most relevant content,” said PwC’s U.S. advisory entertainment, media & communications leader Deborah Bothun, in a statement.

A former Comcast customer in California who claims he was fired from his job at PricewaterhouseCoopers because he complained about his cable service, has taken his case to court.

Conal O’Rourke, a former accountant for PricewaterhouseCoopers in San Jose, Calif., went through a months-long customer service nightmare with Comcast, complete with erroneous billing, receiving equipment he didn’t order and watching his high-speed Internet speeds slow to a crawl. He claimed that after he tried to contact Comcast corporate accounting chief  Lawrence Salva (a former PwC partner) he became the subject of a months-long internal investigation and was terminated in February.

At the time, O’Rourke said he wanted a public apology from Comcast, his job at PwC back and $100,312.50 before Oct. 14. He got the apology from Comcast senior vice president of customer experience Charlie Herrin in a company blog posting earlier this month but apparently the rest of his demands were not met. After the apology, O’Rourke’s attorney called it inadequate, perhaps telegraphing their intention to file a suit if they were not satisfied.

According to the suit, filed in U.S. District Court in San Jose, Calif. on Oct. 16, O’Rourke is claiming Comcast violated federal privacy laws by sharing his customer information with a third party – his employer – without his consent. He is also suing the company for defamation, breach of contract, intentional infliction of emotional distress and unfair business practices. He is seeking more than $1 million in legal fees and damages.

In a statement, Comcast denied playing a role in O’Rourke’s termination.

“We don’t normally comment on pending litigation and as we have said, there were clear deficiencies in the customer service that we delivered to Mr. O’Rourke,” Comcast said in the statement. “Comcast had nothing to do with PricewaterhouseCoopers’ decision to terminate Mr. O’Rourke. Once again, we apologize to Mr. O’Rourke for his service issues. We said we were determined to get to the bottom of exactly what happened with Mr. O’Rourke’s service and we are doing that. As part of this investigation, we have listened to recorded calls between Mr. O’Rourke and our customer service representatives and his treatment of them and his language is totally unspeakable. Mr. O’Rourke’s claims are without merit.”

Sports rights fees are expected to rise at a healthy 9.1% compound annual growth rate to $19.3 billion in 2018 from $12.5 billion in 2013, according to consultant PricewaterhouseCoopers.

According to its report At the Gate and Beyond: The Outlook for the Sports Market in North America through 2018, PwC believes that overall sports market will grow at a 4.5% clip annually from $56.9 billion in 2013to $70.7 billion in 2018. Media rights are expected to make up the largest part of that overall pie.

Other segments are expected to grow at healthy rates over the next five years, with gate revenue rising 2.6% annually to $19.7 billion in 2018 vs. $17.3 billion in 2013; sponsorship revenue us 4.8% to $17.6 billion from $13.9 billion, and merchandising revenue up 1.4% annually to $14 billion from $13.1 billion.

Underscoring the importance of media rights was the announcement earlier today that ESPN and Turner Broadcasting have renewed their rights deals for National Basketball Association games, a nine-year pact estimated to be worth a collective $24 billion.

Entertainment, Media and Communications Sector deals reached $74 billion in the second quarter, slightly below the $75 billion in the first three months of the year, according to a new report by PricewaterhouseCoopers.

Overall deal volume was down slightly to 218 in the second quarter from 222 in the first quarter, led by AT&T’s May announcement that it would acquire DirecTV in a transaction valued at about $48 billion (not including debt).

In the report -- US Entertainment, Media & Communications Deal Insights -- PwC said it expects deal volumes to continue to rise in the second half of the year.

Private equity took a bigger interest in the sector in the quarter according to PwC – about 21% of the deals in the second quarter had a private equity acquirer, as opposed to 17% in the first quarter. According to the report, private equity was most active in the Advertising & Media, Publishing and Recreation & Leisure sectors.  

Despite recent improvements in stemming basic video losses, cable television companies are expected to lose nearly 1 million subscribers in the next five years, dipping to 53.9 million customers by 2018, down from 54.8 million in 2013, according to accounting and consulting giant PricewaterhouseCoopers.

In its Entertainment and Media Outlook 2014-2018, PwC says new television customers will migrate to satellite and IPTV providers. PwC predicts that satellite TV customers will rise by about 1.8 million customers to 36.2 million customers by 2018, while IPTV households will grow by about 5.4 million to 16.8 million customers.

While the number of pay TV homes is expected to grow to 108 million by 2018 – mainly due to new household formation – overall pay TV penetration is expected to fall to 77% by 2018, according to PwC. That’s down from its peak of 82% in 2009. Cable household share is expected to dip to 38.5% by 2018.

That loss of market share is proof, says PwC, that cord-cutting is making at least some impact. And it leaves cable operators with few alternatives.

“With little room for organic growth, the major cable operators are likely to seek further consolidation to protect their market share through acquisition,” PwC said in the report.

That consolidation is already occurring, with Comcast’s pending merger with Time Warner Cable, a $69 billion deal expected to grow the combined company’s subscriber base to 30 million, currently winding through the federal approval process. Another big deal – AT&T’s pending $67 billion acquisition of DirecTV – will create a 26-million subscriber No. 2 and also is pending government approval.

Despite Comcast’s recent gains on the video subscriber front – it added 46,000 customers in the fourth quarter last year and 24,000 in the first quarter this year – PwC still expects DirecTV to overtake Comcast as the largest pay TV provider by 2016.