March 23th, 2021 | Business Strategy
by José A. Miranda, Luz María Ávila
The demand for new audiovisual content will open new opportunities for revenue streams.
5G will bring an enormous, expected growth of the audiovisual business over the next few years, which will multiply potential revenue streams.
On a global scale, entertainment has been one of the most dynamic sectors over the last 40 years, which has been reflected in the fact that at least three of the largest mergers or acquisitions during this period have been undertaken by large companies belonging to this sector.
Without a doubt, the development of technology and the continuous development of technological infrastructure and networks are the main factors driving the increase in data flows and the quality and quantity of the content being delivered to consumers.
Hence, the arrival of 5G is a disruptive factor that will accelerate an unprecedented change in the industry, consolidating the delivery of new audiovisual content, which in turn will generate new services and will allow doubling the volume of the global media services business over the next 10 years, according to Ovum.
This transformation of the entertainment business will be structured, on the one hand, on the consolidation of video, either through the interaction of content with consumers via streaming, or through the consolidation of video as an advertising format; and, on the other hand, on the mobile as a distribution device.
This will be reflected in an increase of up to 80% in streaming video revenues by 2025, only in the three main global markets, the US, China and the UK, with higher growth in other less mature markets.
As a result of the enormous growth expected in the audiovisual business in the coming years, new companies will appear in the market offering new services, while others will consolidate their current positions.
These new companies will improve consumer experiences in Video Games, Media, Augmented Reality and Virtual Reality environments just to name a few. And they will lead to breakthroughs in Mobility, Biotechnology, Medicine and within many other industries.
Given this new scenario, new consolidations of companies through mergers or acquisitions are expected during the next 3 years in the Entertainment and Media industries.
And the impact of this change will be evident in the distribution of advertising investments that companies will be making over the next few years.
Offline media have not been able to offer the content demanded by young audiences, making it difficult to create a monetization strategy for new revenue streams in the short and medium term.
Whereas in 2018, digital advertising investment surpassed 50% in some markets such as the UK, USA or Norway, in countries with potential for development it only slightly exceeded 35% in very specific cases – although in a more generalized basis it was between 25% – 30%. However, the Coronavirus pandemic has accelerated three years the transformation of budgets for media from the traditional contact points to the digital channels, mainly audio-visual.
In this context, although the Coronavirus pandemic increased television consumption in all its different forms, the offline channels were not able to capture and retain young (and not so young) audiences, since the content offered by the major television networks does not generate a sufficient level of attraction to this very important segment of the Media and Entertainment industry.
Furthermore, by not being digitalized, these companies have not taken advantage of this moment of massive incremental demand, so they have not gathered information from users that would allow them to better understand consumers’ interests, which overly hinders the development of a strategy to capture and monetize new revenue streams in the short and medium term.
On the other side, streaming video platforms such as Netflix, Prime Video or HBO; technology companies such as Twitch, Youtube, TikTok, Facebook or Amazon; or audio platforms such as Spotify, among others, have used this moment to capitalize on this extra demand and identify new business opportunities among their users.
This situation will see a greater commercial aggressiveness of technology companies through strategies focused on strengthening the audiovisual… and digital strategies. And, in every case, these organizations will experience increased revenues, either through subscriptions, advertising or agreements with third parties for the sale of new products or services, which will definitely change the current framework of the media and entertainment industries towards a mainly digital model.
Undoubtedly, the pandemic accelerated change, but it did not change anything that should have been initiated previously.
The key lies in the digitization of processes, which allow to collect and manage data continuously and, in this way, develop business strategies based on user demands. And the demands of these are mainly centered on the consumption of audiovisual content.
Adapting these contents to new consumption habits, i.e., through mobile devices, in shorter and more agile formats, and with greater interaction, will make possible to deliver better solutions to potential users. But this adaptation of content also includes major sporting events such as the Champions League, NBA or NFL, among others, which are beginning to decline in interest among young audiences, affecting revenues from the sale of television rights and sports sponsorships.
The time is ripe to develop audiovisual strategies, and the opportunity is immense, but not all players will be able to participate in the new revenue streams. And it is already too late for some.
José A. Miranda is Managing Partner at Naawa, Luz María Ávila is Business Solutions Partner at Naawa.
Copyright © 2021 Naawa Consulting. All rights reserved.
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