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The Future of Media & Entertainment: Part 1 – Rapid digital transformation

  • Behavioural Science

The digital transformation of the media and entertainment (M&E) industry is accelerating exponentially. For companies to be on the vanguard of resilience and success today and in the future, M&E marketers need first to understand the profound shifts taking place. Marketers will want to acquaint themselves with changes involving production funding and public consumption preferences. New tools and formats fuel the innovation, including subscription-based services, curation, and personalization using cutting-edge behavioural science and experience testing.

If marketers shift their mindset and lean into the digital transformation, the potential to create powerful, consistent and reliable revenue streams for M&E companies is immense.

In this three-part series, we’ll begin by looking at the current state of the M&E industry’s digital transformation and the explosion of opportunities and resilience that comes with it. In the second part, we’ll examine one of the primary opportunities: the shift from ad-revenue to consumer- and subscription-based revenue and how behavioural science and experience testing can be used to maximize sustainable prosperity.

Finally, in the third part, we will explore how certain companies are working to better understand their users and evolve their digital experiences to meet new expectations.

The current state of digital transformation in media

Year after year, digital revenues account for an increasing share of the industry’s total revenues. Prior to the pandemic, PwC predicted almost 62% of the estimated $2.6 trillion in revenues the global M&E industry was expected to generate in 2023 would come from digital sources.

Global Entertainment & Media Outlook 2019-2023. Source

More recently, of course, as a result of the impact of the pandemic on M&E, PwC adjusted its short-term estimates to a 6% decline in total global revenues for 2020. But here’s the interesting part. While traditional cinema and TV experienced significant declines, companies that embraced the digital transformation have thrived.

According to research from PwC, subscription video-on-demand (SVOD) and over-the-top (OTT) video (including streaming services like Netflix and Amazon Prime Video) are projected to surge and reach more than twice as many as the box office in 2024.

Internet advertising also held its own during the pandemic compared to print, which was hit hard. The future of online advertising also looks promising, with PwC predicting it to continue growing in the coming years.

Crowdfunding has emerged as another popular trend in M&E, from singles to feature films:

There were 4,009 successful music-based kickstarter projects in 2016. They raised a collective $34 million with a success rate of 51.5%.

There were 3,846 successful film-based kickstarter projects in 2016. They raised a collective $66.4 million with a success rate of 37%.

The biggest crowdfunded film (so far), Veronica Mars, raised $5.7 million.

16.7% of crowdfunded campaigns are for music, film and other entertainment projects.

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 opportunities for global growth are one of the gifts that digital transformation gives to the M&E industry. China alone is expected to add the greatest entertainment and media revenue growth in the next five years to the tune of $83.9 billion. In fact, the country’s absolute growth in the entertainment and media industry is expected to exceed that of the US for the first time ever by 2024.

It’s not difficult to see how digital transformation is both sweeping media in all forms but also enabling it with greater resilience and opportunities for growth. Over the last decade alone, consumers have been switching to online in droves:

  • 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.
  • By 2021, according to PwC, fixed broadband was on course to reach one billion households, with unique mobile Internet subscribers nudging 3.4 billion by the end of the year.

There is little doubt that with smartphone data consumption on the path to overtaking fixed broadband across much of the globe and mobile adoption rapidly growing in countries where the technology has not yet reached saturation, the future of M&E marketing is digital. Not surprisingly, by 2023, it’s expected that media industry marketers will allocate over half of their budgets to digital advertising. M&E marketers also 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.

And that’s a good thing because keeping up with the digital transformation of consumers is vital for M&E marketers. But while some media companies have been exploring how to adapt and leverage the increasingly digital landscape for the better part of a decade, others are still struggling to land that initial leap. Take online news, for example. The 2019 Digital News Report found that:

  1. Despite the news industry’s efforts, there has only been a small increase in the number of readers paying for online news.
  2. Of those who are paying for their online news, the majority only have one online subscription.
  3. 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.

M&E companies can leap over these hurdles, however, by using the power of personalization to grow consumer- and subscription-based revenues. In part two of this series, we’ll be exploring how M&E marketers can do this.

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