The future of media and entertainment
Media and the ways we engage with it are constantly evolving. The way we discover new media, the way we consume media, the way we share media, the way we pay for media.
From your iPod Shuffle to your Spotify subscription.
From your Motorola Razr to your iPhone X.
From your daily newspaper to your digital subscription to The New York Times.
The media and entertainment industry is going through a major transformation. For those media companies that want to not only stay relevant, but to lead, it is critical that experimentation play a role in your strategy.
In this article, we’ll take a look at the current state of the media and entertainment industry, including the shift from ad-revenue to consumer-revenue and the elevation of the user experience.
Then, we will explore how certain companies are working to better understand their users and evolve their digital experiences to meet new expectations—and how you can too.
The current state of digital transformation in media
By 2023, revenues for the global entertainment and media (E&M) industry are expected to reach 2.6 trillion (with a t).
Year after year, digital revenues account for a larger share of the industry’s total revenue. By 2023, it’s expected that digital revenues will account for over 60% of total revenue in the media and entertainment industry.
According to research from PwC, virtual reality (VR), over-the-top (OTT) video (including streaming services like Netflix and Amazon Video) and Internet advertising will see the most annual growth between 2018 and 2023.
China is expected to add the greatest entertainment and media revenue during that same time period. $83.9 billion, to be exact.
PwC also found that:
- The expected global compound annual growth rate (CAGR) for E&M revenue is 4.3% ($2.1 trillion USD to $2.6 trillion USD).
- China’s absolute growth in the entertainment and media industry is expected to exceed that of the United States for the first time ever.
- By 2023, it’s expected that media industry marketers will allocate over half of their budgets to digital advertising.
- Smartphone data consumption is expected to overtake that of fixed broadband by as early as 2020. Mobile is still growing rapidly in countries where it has not yet reached saturation.
It’s not difficult to see how digital transformation is sweeping media in all forms:
- In 2012, the time spent on mobile engaging with media was 1.6 hours a day. In 2018, that number had more than doubled to 3.3 hours a day.
- In 2018, the number of TV viewers in the United States was expected to drop to 297.7 million while the number of OTT viewers was expected to grow to reach 198.6 million.
- In fact, TV’s share of the total US media ad expenditure was expected to drop from 33.9% in 2017 to 31.6% in 2018 thanks to the rise in digital video consumption.
But remember that this is just the beginning. Some media industries have been exploring digital for the better part of a decade while others are still struggling to land that initial leap. Take online news, for example. The 2019 Digital News Report found that:
- Despite the news industry’s efforts, there has only been a small increase in the number of readers paying for online news.
- Of those who are paying for their online news, the majority only have one online subscription.
- While 50% of readers in the US now come across at least one barrier each week when trying to read news online, in some countries, the majority still prefer to spend their limited budget on entertainment media rather than news.
Media and entertainment marketers reported spending 14% of their 2017 budgets on improving their websites and online presence. According to Gartner, this financial focus is consistent with the industry-wide push to replatform websites to provide people with rich, responsive, personalized experiences.
Personalization and curation are rapidly transforming the media and entertainment industry. It’s no longer about optimizing one experience, it’s about optimizing millions of personalized experiences. That comes down to:
- Knowing your customers. What motivates them? What interests them? How do they like to consume media and entertainment?
- Staying nimble and flexible. How can you build your website to be more agile? How many other ways can you personalize the experience?
- Crafting compelling, intuitive and shareable media experiences. How can you balance the need to offer personalized experiences and mass appeal?
Crowdfunding has emerged as another popular trend in media and entertainment, from singles to feature films:
- 4,009: the number of successful music-based Kickstarter projects in 2016. They raised a collective $34 million with a success rate of 51.5%.
- 3,846: the number of successful film-based Kickstarter projects in 2016. They raised a collective $66.4 million with a success rate of 37%.
- $5.7 million: the amount raised by the biggest crowdfunded film (so far), Veronica Mars.
- 16.7%: the amount of crowdfunding campaigns that are for music, film and other entertainment projects.
TL;DR: Digital disruption is changing the way media is funded, produced and consumed. Marketers must lean into the digital transformation and be willing to experiment if they want to stay relevant.
The transition from ad-revenue to consumer-revenue
Historically, media has been monetized through paid advertising. Television commercials, full-page magazine ads, sponsored columns in newspapers, radio commercials―the list goes on.
Thanks, in part, to the rise of the subscription economy, the media and entertainment industry is slowly making the transition from ad-revenue to consumer-revenue models.
- For the past five years, the subscription e-commerce industry has grown by more than 100% per year. In 2011, the largest retailers generated $57 million in sales. By 2016, that number jumped to more than $2.5 billion.
- In 2018, 15% of online shoppers said they had subscribed to an e-commerce service in the last year. 46% said they subscribed to an online media-streaming service, like Netflix.
- At 55%, curation-based subscriptions were the most dominant category in the 2018 subscription economy. Further emphasizing the importance of personalization.
- 28% of access and curation subscribers said having an excellent personalized experience is the single most important reason they continue their subscriptions.
- Still, only 55% of online shoppers who consider a subscription service actually subscribe. This shift in the industry is still young, still evolving.
While women account for the majority of subscriptions, men are more likely to have a greater number of subscriptions:
While the subscription economy seems to have swept the industry, there’s still plenty of room to grow. Companies are still experimenting with ways to acquire, convert and retain subscribers:
Deloitte Global predicts that by the end of 2020, 50% of adults in developed countries will have at least four online-only media subscriptions. For those adults, aggregate spend on digital subscriptions they have access to, whether paid for by themselves or by someone else, is predicted to average over $100 per month by 2020. That’s over $1,200 annually on media subscriptions.
It’s not just Netflix and Spotify ruling the subscription economy, either. This shift can be seen industry-wide, including written media.
The New York Times reported $709 million in digital revenue for 2018. Their thriving subscription model, which grew 18% to $400 million contributed significantly to that impressive number. Digital advertising rose as well, but only 8.6% to $259 million. In the 4th quarter of 2018 alone, they added 265,000 new digital-only subscriptions. That boost brought their total subscriptions to more than 4 million, 3.3 million of which were digital-only. The publication aims to grow to 10 million subscriptions by as early as 2025.
Earlier this year, Conde Nast announced they would be moving all of their digital publications behind a paywall as well.
According to the FIPP Global Digital Subscription Snapshot, these media companies are not alone in their subscription success.
As paywalls become more commonplace, expect to see them become smarter and more dynamic. Artificial intelligence and propensity models can predict how likely a visitor is to become a paying subscriber. The amount of free media shown before the paywall can be determined by previous on-site behavior, for example.
As evidenced by the digital advertising growth at The New York Times, ad-revenue is far from dead. While Google and Facebook continue to dominate ad dollars because of their advanced targeting options, media advertising is still incredibly common. As with most digital transformations, expect a gradual shift.
But now is the time to start thinking about consumer-revenue, if you’re not already. What are the marketing implications? What can you experiment with to get the most out of your subscription models? How does this shift impact the user experience (UX)? How does personalization come into the picture?
The rising importance of user experience
All of these shifts and trends add up to a major digital transformation in the media and entertainment industry. According to Adobe’s Acquisition Evolved report, marketers are still rushing to get a grasp on this new landscape. First, with technology investment, though this investment is not without challenges:
Second, with data management and personalization:
Third, with measuring and optimizing the impact of their digital strategies:
While marketers in the M&E industry know data management and personalization are increasingly important, they’re struggling to quantify the impact and support those strategies with the right technology.
As companies begin to define proper key performance indicators (KPIs) and invest in their technology stacks, optimization, both online and offline, will become crucial for success.
Optimization at the conversion level, of course, but also optimization at the awareness level. The ability to attract the right audiences within the market at the right time via the right channels will become a competitive advantage—though data accuracy and literacy is still a big challenge:
Technology, data, and personalization are tools and tactics that should be in any media executive’s wheelhouse. But here’s the thing: At its core, this digital transformation is driven by increased user expectations and a (necessary) obsession with delivering the ideal user experience.
One can imagine a future where there are millions of personalized user experiences based on millions of pieces of data, with algorithms quietly at work to give people the media they want how and when they want it. But before we get too far down the rabbit hole, it should be noted that this digital transformation is still in its early years.
So, let’s figure out how to crawl before we sprint. Namely, how to shift from “let’s get the most ad clicks we can” to “let’s create the best entertainment experience we can”, from “one and done” to “curated media hub”.
This largely comes down to behavioral science and journey mapping.
Matt Wright, our Director of Behavioral Science, explains:
“Applying behavioral science to business means implementing a process for problem-solving that accounts for how humans think. This approach focuses on:
- Generating behavioral insights around customer needs and desired outcomes using data from quantitative, qualitative, and existing academic literature.
- Applying the principles of behavioral design to build solutions that flow with, not against, the psychology of decision making and behavior.
- Using rigorous experimentation to validate whether these solutions are helping customers achieve their desired outcomes and to create feedback loops for further behavioral insights.”
Simply put, investing in behavioral science means investing in a deep understanding of your audience, their motivations, their desires, their pain points and their actions.
Before you invest in an expensive technology stack and complex machine learning algorithms, make sure you’ve invested in identifying and understanding your user. Behavioral science allows you to design (online and offline) data-informed user journeys, which you can then consistently optimize through experimentation.
Marrying these two sciences together early on will set you up for success as the digital transformation in the media and entertainment industry continues to evolve. While the end goal may, in fact, be those one million plus personalized journeys, start by laying a customer-driven foundation to position yourself better in the future.
How major media publishers currently approach user experience (and monetization)
Let’s look at a few examples in the industry. HBO, home of Game of Thrones and Big Little Lies, offers online media streaming to paying subscribers:
”You had this Zeitgeist show that also happened to appeal very much so to a digital-forward generation of consumers at the same time we, as a brand, were going out and launching [a platform] so that you can watch our content in a variety of different ways. Very quickly, and very easily, it became this tentpole in the digital space.”
– Bernadette Aulestia, Executive VP of Global Distribution at HBO (via Vulture)
This structure demonstrates a simple understanding of users’ desired outcomes. There’s no one-size-fits-all approach here. The three different plans target distinct audience segments with unique motivations, desires, pain points and behavioral patterns.
There is also a section of the HBO site that streams select free media:
This section is curated to entice visitors to start a free trial, but also enables sharing. This demonstrates that initial shift from “one and done” to “curated media hub”. Sometimes the goal is not simply to get a conversion (i.e. money) as quickly as possible. Often, it’s about collecting behavioral data and positioning yourself as a media hub, a destination.
This could be where a dynamic paywall is introduced based on propensity modelling and behavioral science. How likely is this viewer to start a free trial right now? Should the CTA be shown now or 3 videos from now? Should the CTA be for HBO Go or HBO Now? In aggregate, this data can be used to inform the default journey or better define audience segments.
Fashion publication, Elle, takes a hybrid approach to media and monetization. You’ll notice paid advertising throughout the site, including within individual articles:
Modern digital advertising allows for retargeting, of course. This serves media publications both in the sense that visitors have already demonstrated intent to click and that it’s a form of personalization. If the goal is to keep visitors engaged and coming back to your publication, every little bit of customization counts.
Elle tries to engage the visitor, to shift from a “one and done” interaction. In this article, there are a few techniques at play:
First, there’s the reader Q&A format. Second, there’s the option to weigh in with your own opinion. You’ll notice that Elle has print subscription CTAs throughout the site as well:
And unpaid digital subscription CTAs:
Elle doesn’t have a paid digital subscription model like HBO, but that doesn’t mean the publication isn’t beginning to adapt to the industry-wide digital transformation. There are many different pricing models and ways to tackle this industry evolution, but all of them must prioritize one thing: an incredible user experience.
Finally, consider Medium, a text-based medium, like Elle, with a paid digital subscription model, like HBO:
Readers are given a certain number of free Medium stories per month. If you sign up for a free account, you get an additional free story.
”Currently, it’s three per month, but we are always experimenting with different numbers of stories (and different ways of presenting the meter) to understand how it impacts how much people read, and our subscription business.”
– Michael Sippey, VP of Product at Medium (via Medium)
Note that the sign up flows rely on Google and Facebook. While it’s difficult to say for certain, it’s likely that this access to supplementary personal data powers increased customization for readers.
Once you reach your article limit for the month, you’ll be hit with a mid-article CTA:
Like HBO, Medium is working to provide upfront value to readers with a layer of free content that piques interest, before asking them to subscribe.
”Medium is not unlike other digital media subscription businesses like the Washington Post or The New Yorker — or even Spotify and Netflix. We sell content on a subscription basis. Like most paywalled sites, we give some stories away for free (currently, it’s three per month). But unlike most paywalled publications, we rely solely on subscriptions (no advertising), and we have a mix of original and non-original content.”
– Ev Williams, CEO at Medium (via Medium)
All of these companies take a slightly different approach to monetization. None is inherently better than another. What matters most is that they’ve started exploring the heart of the digital transformation and addressing the root issue: identifying and catering to their unique user’s desired experience.
But that’s only the beginning. From there, the goal should be to iterate and learn through continuous optimization.
Experimentation and optimization at The Motley Fool and The Wall Street Journal
The Motley Fool, a financial content site with a premium services model, recognizes that optimization is a full funnel affair. It’s not just about acquisition and how many new customers you can get through the proverbial door. It’s also about how much those customers spend and how long they stay.
”Across teams, we’re all really focused on customer lifetime value (LTV) for every stage. Whether it’s someone’s first product with us—getting them into a higher tier. And on the product side, the more we get people to renew, the higher their lifetime value. It’s a win-win for both the customer and us: They get great stock advice and recommendations and we get to retain them as a customer.”
– Nate Wallingsford, Head of U.S. Marketing Operations & Optimization at The Motley Fool
They also prioritize learnings and insights over uplift. The strength of your optimization program, regardless of your industry, is in how much you’re learning with every single test. It’s less about how many experiments you’re running and how many of them are “winning” than most marketers imagine.
For example, The Motley Fool was experimenting with a well-known persuasion principle: social proof. They ran several experiments. Each time, adding social proof decreased conversions, despite the fact that adding social proof is a widely-accepted best practice.
Still, they persisted with iterative tests to ensure they had a clear understanding of how social proof was impacting their users. After two experiments where adding elements of social proof had a negative impact, Nate and the team decided to test removing elements of social proof. He explains:
“We ran another experiment, this time on the order page—the stage of the funnel that includes the point of purchase. In the variation, all customer testimonials [another form of social proof] were removed. This variation performed terribly, decreasing transactions, average order value and revenue per session.
That was really interesting to see. Even though we had a decrease in conversion rates across all three [social proof] experiments, they generated this insight that social proof and testimonials are huge at the point of purchase, but may need to be avoided at the top of the funnel.”
This focus on learnings and insights is especially important in the media and entertainment industry, where increasing performance KPIs (e.g. session to lead conversion rate and revenue) is never the only goal.
The Wall Street Journal recognizes how experimentation in the media industry is a delicate balance between performance and engagement.
”It really depends on what kind of test you’re running and what the purpose of your test is. For a test on our newsletter center, we would measure user engagement on the number of people who subscribe for newsletters or end up toggling on their subscription to The 10-Point (or whatever newsletter we might be pushing). For an article test, we might be looking at user engagement as number of articles per session. What we try to think is, ‘What is the most important thing that we can drive for this particular piece of real estate?’ and then measure against that as our main KPI.”
– Olivia Simon, Optimization Manager at The Wall Street Journal (via Optimizely)
Digital transformation is not something new to The Wall Street Journal. They’ve been tackling the evolution head-on for quite some time now.
Once a media organization has the initial optimization foundation in place, overall goals will likely begin to change. It should become less about small changes and more about cultural shifts, about automating and growing to the next stage of the digital transformation:
”As far as I’m concerned, the discipline of experience testing for digital businesses is akin to discovering plutonium. It’s just an exponentially more powerful way of making business decisions over anything, honestly, in the history of mankind. […] This is the only way to make business decisions in the future. This is how every business decision will get made going forward for a digital product, wherever possible.”
– Peter Gray, VP of Product Optimization at The Wall Street Journal (via YouTube)
Taking on modern media with experimentation
To avoid going the way of the proverbial radio star, lean into the digital transformation that’s sweeping the media and entertainment industry. You don’t necessarily need an expensive tech stack or sophisticated data warehouse to get started. Laying a strong foundation starts with a shift in thinking and a customer-centric strategy:
- Prioritize gaining a deep understanding of your audience’s motivations, desires, pain points and actions, often leveraging both data and behavioral science
- Marry this understanding with journey mapping. Lay out the common paths to conversion and audit them. What actions are you asking visitors to take? Are your appeals clear and distraction-free? Is it difficult to take those actions? At which points do visitors currently “fall off” in these journeys?
- Using a robust optimization process, begin systematically experimenting with those journeys. At first, on-site. Then at the activation channel level. Then layer in personalization and machine learning as you scale.
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