As the calendar turns to 2023, media and entertainment (M&E) leaders are taking decisive action to achieve ambitious growth plans and position their companies for future success as the industry continues its ever-evolving transformation. The business of content creation, distribution, advertising, and monetization is more fluid and uncertain than ever before, and media companies are racing to adapt. Here are major trends to watch in the M&E industry in the year ahead as competition intensifies and the stakes rise.

Streamers bundle up to brave the elements
If we’ve learned anything in the past few years, it’s that long-term success in streaming requires establishing a durable subscriber relationship. Building on the long and successful legacy of the cable TV model, nearly all media companies that are active in the direct-to-consumer (DTC) arena today are now aiming to offer consumers a bundled offering of streaming content and other services. 

Along with boosting sign-ups and reducing churn — thereby increasing subscriber lifetime value — bundles allow media companies to improve efficiency in marketing spend and technology investment. Consumers benefit by paying a lower all-in price compared to à la carte buying.

Initially, streamers offered “soft” bundles, with separate DTC services packaged together for a favorable monthly rate. Going forward, media companies will fully integrate distinct streaming services into one application, creating a true “hard” bundle of content. 

To further strengthen the DTC customer relationship and raise switching costs, media companies are looking to attach other services to their streaming bundles, replicating the success that some of the large, digital-native platforms have had linking the video subscription to e-commerce, music, fitness and other lifestyle offerings. 

Streaming companies that lack content scale today and choose not to engage in a bundling strategy risk being marginalized in a market where the consumer holds the power to cancel at any time and is being trained by the industry to seek out a good deal. Owners of stand-alone DTC services will need to double down on their niche offering and core customer base to remain relevant.

Regional sports media is changing the channel
Regional sports network (RSN) revenues are facing significant pressure as subscriber counts decline due to consumer cord-cutting and loss of carriage from pay TV operators, who are choosing to drop the networks rather than pass along pricey affiliate fees to customers. 

Professional sports teams and leagues are looking ahead to the expiration of existing RSN rights deals. They have concerns about the durability of a critical source of team income, given the financial stress in the RSN landscape. This dynamic is a major focus for teams that rely heavily on RSNs to support fan engagement throughout lengthy regular-season schedules.

To address the potential for disruption, teams and leagues are studying — and in some cases, executing on — transactions to purchase RSNs and position the business for transition to DTC streaming. RSN ownership would also enable creative bundling opportunities. Offerings could include discounted game tickets and concessions, exclusive fan experiences, team-branded merchandise, NFTs and tie-ins with sports betting — all geared to motivate fans to sign up for the DTC service. 

However, acquiring an RSN and making the pivot to streaming comes with considerable risk. DTC pricing must be high enough to offset current payments for rights fees while also being affordable enough for subscribers to discourage churn in the team’s off-season or during periods of poor team performance. This may require multiple pro teams participating in a streaming venture together to facilitate a year-round programming schedule.

Movie theaters look for more action
Despite the tangible momentum gained for the big blockbusters at theaters this year, studios and exhibitors are working through a recalibration of the movie business. Box office revenue is over 30% below annual totals in pre-pandemic years, according to BoxOfficeMojo.com. 

Studios are reviewing which genres “work” economically for theatrical releases versus a straight-to-streaming approach. Action, superhero, horror, family-friendly, rom-com and so on all bring different budgets, marketing plans, potential audience breadth and, ultimately, monetization opportunities for studios. Studios are basing release plans on a corporate agenda that is now centered on maximizing DTC — ultimately determining that some films are best suited for a streaming release. 

In response, theater owners will need to recalibrate their business and financial models to account for less film product flowing through their multiplexes while staying nimble enough to capture the returns from the mega blockbusters. Strategically, some exhibitors are restructuring their balance sheets and shrinking theater portfolios to align with current market realities. 

Studios can assist too, by managing release calendars to ensure that a steady supply of films hit theaters in the right cadence. This will help support the operations of exhibitors and enable them to deliver a positive customer experience to moviegoers.

Metaverse is on the long-range radar
While the excitement around NFTs and visions of a metaverse-driven future may have cooled in late 2022 as macroeconomic factors took center stage, media companies continue to prepare for the next age of interactivity. Investment areas include strategic planning, research and development, consumer research and technology, with a goal of maintaining optionality as the metaverse comes into view.

Media leaders are studying how consumers will access content, engage with advertising, transact and socialize within an immersive internet experience. Blockchain-based digital assets, including NFTs, are expected to be a key element of the media value chain in the metaverse, enabling digital identity, asset ownership, royalty tracking and payments, and providing offline linkages to “IRL” experiences.

Today’s experimentation will become the business plan of tomorrow and the revenue generation beyond. To execute, media companies will stay on the path of taking purposeful steps, appointing dedicated metaverse champions and supporting them with technology, finance, legal and creative talent to frame out scenarios and drive innovation. 

For 2023, all signs point to another year of excitement and change for the M&E industry. These trends — and many others influencing the industry — will require leaders to make bold moves to survive and thrive during this era of great disruption.

The views expressed in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

As we head toward 2021 with anticipation of escaping the craziness of 2020, Dan Castles, CEO of Telestream, shares some insights and predictions on the year ahead for the media and entertainment industry. 

A YEAR TO REMEMBER

I don’t need to tell you much about 2020 that you don’t already know. I will share that with all the devastation brought to the world by COVID-19, and a U.S. election season like nothing we could have imagined, we’ve learned a lot about each other for better or worse. 

For companies in our industry, it’s been a similar situation. Some have fared much better than others. Some have survived by making very tough decisions, which in the long run will make them stronger as we come out of COVID. I’m still amazed at how quickly companies were able to respond, despite all odds, and keep some semblance of normalcy. 

Shows continued to air, critical news and information got out there. And it’s no surprise that with so many viewers isolating themselves, the appetite for entertainment (binge watching) grew enormously and continues to grow even now. This created even more relentless competition for viewers’ attention, forcing media companies to streamline operations and quickly adapt their processes with many people working from home. 

This strain soon exposed the weakest links in the chain. If you didn’t have an infrastructure for remote working, or a business continuity plan in place, it showed. The pandemic created a different type of disaster in terms of disaster recovery than many businesses had planned for. Still, things got done and hard lessons were learned. Looking to 2021, I think we can all agree that we can only go up from here.

2021 AND PRESSING THE RESET BUTTON

Much of what we’ll see in 2021 was already in play, but if 2020 did anything positive, it was to accelerate the pace of evolution in key areas. 

The cloud is always a continuous point of discussion and I could say “I foresee more rapid cloud adoption in 2021” and that would be easy to get right, but it’s more nuanced than that. Telestream placed a bet on the cloud several years ago and we’ve been evolving our strategy in that direction ever since. 

Most importantly, and underlying that strategy, is the evolution of how people work together. Remote working was a good idea long before the pandemic arrived because we don’t always need people and systems in the same building and we certainly don’t need to send giant teams and supporting infrastructure to every live event. The pandemic has shown us that people don’t necessarily need to sit in cubicles from 9 to 5 in order to be valuable contributors. 2021 is an opportunity to press the reset button and work smarter and more efficiently. For some companies, this might be a do or die proposition.

CLOUD ADOPTION ACCELERATES

The pandemic has hastened the onset of remote workflows that were already beginning or even well established for some companies. Remote workflows almost exclusively make use of the cloud in some form. And while many still associate the cloud with media storage, it’s the “cloud compute” part of the equation that really changes the game. 

The compute power in the cloud allows even the smallest companies to have access to the same resources, flexibility and scalable business models as the larger players. Using the cloud in this way has the potential to “float all boats” in regard to any size and budget production being able to benefit from “pay as you go” media processing and distribution workflows. More businesses are going to take a close look at the cloud in 2021, and continued remote working will drive that. 

The security of valuable media assets is a big issue for many content owners, but the truth is that it’s hard to find a more secure ecosystem than the cloud. Cloud-based workflows are inherently more secure than on-premises equivalents because cloud-based production and distribution can utilize the robust security architecture that has been purpose-built for the cloud and is monitored 24/7 by teams of security experts. Banks and other financial organizations know this, and everyone who uses tools from Google or Microsoft or Salesforce depends on that security every day. I think 2021 can be the year that the M&E industry makes great strides in accepting that security is not an issue in the cloud.

REMOTE WORKFLOWS ARE HERE TO STAY

In 2021, I believe we’ll see plenty of teams continuing to work remotely as an ongoing, managed offering to employees. In this context, the cloud will be examined for how to accomplish this while at the same time, naturally, there will be continued focus on the economics of cloud-based computing for heavy lifting media workflows. 

A key component of sustainable remote workflows is not to move the media. If someone needs to QC a program master remotely, waiting two hours for it to download is costly and inefficient. This is one of the reasons that we developed our new GLIM Media Player that allows stakeholders to play full resolution media files remotely from anywhere they have an internet connection. Even as vaccines are made available and the pandemic subsides, if companies can save money on travel expenses by not flying every single operator, engineer and supporting equipment to events, they are going to want to do it.

OTT ADVERTISING NEEDS HELP

Monetization challenges continue to plague the distributors of content via OTT, and ads are at the very heart of the issue. Despite the revenue implications of ads not playing properly, the negative impacts on brands can be incalculable. 2021 will be an important year for the industry to solve ad problems in the OTT pipeline and end viewer frustration with ads being inserted at the wrong time or being played repeatedly. 

This will start with comprehensive monitoring and quality control processes that enable broadcasters and content owners to know where the problems are. We’ve been working hard on our new Stream Monitoring software (cloud based) to help address the need for ad markers and support the automation of this process while enhancing the ability to detect errors throughout the distribution chain. 

It’s also critical that content owners get live event content accessible to viewers as soon as possible to maximize advertising revenue. Viewers expect things to be available immediately, and the industry needs to deliver on that expectation. The technology is there, we just need to use it.

SUPPLIER CONSOLIDATION

There will be an acceleration in consolidation for the simple fact that so many companies have been impacted by COVID, their survival is based on finding a new home. You have motivated buyers who expect favorable pricing and motivated sellers who need to get a deal done. There will be management changes as new energies are needed in many cases to deal with the new reality their particular company is facing. There will be more downsizing as we go into the new year from the simple reality of how 2020 will end for many. Company cultures will be challenged, and employee trust tested to the max. The cold, hard truth is there are financial reverberations from 2020 and COVID that will take all of 2021 and beyond to overcome. 

TRADESHOWS

In our industry, the two primary trade shows are positioned at the end of Q3 and the start of Q4 this year. Getting any traction at either show will be very dependent on the successful rollout of a vaccine. When will companies feel comfortable enough to fly a large number of staff to join 30-50 thousand people in an enclosed space for almost a week? My prediction is that we won’t know until June if these two shows have any chance of being remotely relevant/effective or will even take place. 

As we move into 2022, it will be interesting to see what the “bounce back” looks like for these tradeshows, as all suppliers have had to get creative on how to message themselves and their product announcements via new methods for a fraction of what a trade show historically costs. Will vendors revert back to old habits or will there be a “new norm” with tradeshows going forward? I suspect over the next several years, tradeshows will regain some traction and for many exhibitors, the booth size may return to former sizes, but the ultimate customer attendance at these shows will be down at least 25% from the most recent pre-COVID levels. And this is beyond the 2021 shows, where attendance will be marginal at best.

CONCLUDING THOUGHTS 

The bottom line is that 2021 will be another year of transition, but this time, a transition to a new reality. I don’t believe we will get back to a new normal until 2022. 

On a very personal note, I believe that people throughout the world crave hope, encouragement and a sense of unity versus the division we have been dealing with at least here in the U.S. That said, our recent election proved there continues to exist a great divide in opinion and perspective and I think the average person on the street would hope that we can find a way to discuss our differences to find solutions going forward versus maintaining the view that each other’s opinions are 100% mutually exclusive and there exits zero middle ground. 

My prediction is that this middle ground (the 40% not represented by either political extreme in the U.S.) will gain positive traction and the collective will of this group will force the two extremes to figure out how to coexist or they too, will become irrelevant. 

2019 was truly action-packed for the Media & Entertainment (M&E) industry. The wheels of consolidation gained major momentum with several megamergers taking place—from Disney’s acquisition of 21st Century Fox to NBCUniversal and Sky merging key operations. The VoD space got a lot more crowded, with giants like Apple, Disney and others making their foray.

With all these changes shaking the industry landscape, content creators are increasingly looking to re-engineer their media supply chains for greater agility, flexibility, operational efficiencies and cost benefits. From small-time studios to international broadcasters, everyone is rethinking their technology choices and weighing their options. Here are the top five tech trends we predict will have a major impact in 2020:

1. Multicloud solutions will redefine the Media Asset Management (MAM) landscape

The need for speed and scalability along with ongoing improvements in cloud security will drive content creators to embrace MAM solutions based on multicloud architecture. These empower users with the flexibility to leverage elastic, best-of-breed public cloud infrastructure or tap into on-premise infrastructure as required. Users will be able to extend and virtualize their supply chain without having to make additional investments in MAM installation for each site. This flexibility will not only help save costs, but will also drive operational efficiencies.

2. Increasing demand for a connected media supply chain

As cost and time pressures continue to weigh down content creators, fragmented supply chains will give way to connected supply chains. The focus will be on automation, and in many cases the transition to using one, single software across the enterprise rather than multiple standalone solutions. This will make asset management far more efficient and cost effective, especially for media enterprises with an extensive global footprint. Centralization will enable them to enjoy 360-degree visibility and economies of scale by consolidating business processes. At the same time, it will provide flexibility to speedily identify, onboard and monitor best-fit global talent for managing rush volumes and time-to-market pressures.

3. AI to take the center stage of media supply chains

Artificial intelligence (AI) will increasingly become a key enabler, powering intelligent, next-generation media supply chains. AI solutions will be instrumental in speeding up content operations and reducing workloads for human operators. Media enterprises will focus on how such solutions can help solve strategic media use cases and how they can be consumed efficiently given the challenges and costs of deploying AI solutions at scale. There will be focused usage of AI solutions with microservice architecture and an increase in demand for metadata that is contextual, accurate and actionable. We believe 2020 will see AI being applied to key areas in the content value chain, including content generation, content enrichment, content preparation and content delivery. In addition, more media enterprises will consume AI as part of their MAM ecosystem, in areas such as metadata enrichment, search & discovery, localization, remastering, sports highlights, trailer creation, playout monitoring and OTT distribution.

4. VoD explosion to drive adoption of automation-led technology

The VoD universe will continue to experience cut-throat competition, as new, big-ticket entrants with massive content libraries will challenge the existing players. At the same, purchasing power limitations may lead to “streaming subscription fatigue” setting in. While the speed at which consumers demand new content will increase, the willingness to pay will limit the market, where only the best will succeed. These forces will compel content creators to focus on enhancing operational efficiencies like never before. In a bid to tap new global markets and achieve faster time-to-market, content creators will search for new avenues of automation. Business processes such as localization, compliance versioning and digital distribution will be prime candidates for automation.

5. Standards-driven approach towards metadata management

Taking cues from the manufacturing sector, media enterprises will adopt a more organized approach to managing metadata. Metadata created at different stages in the supply chain—such as production, Quality Check (QC) and cataloguing—will be captured and carried forward to avoid wasted effort and to drive efficient execution of downstream operations. Content creators will explore new ways to capture and hold the highest quality of content metadata by adopting standardized data models such as Entertainment Industry Registry (EIDR). They will also introduce best practices around data interchange and electronic metadata exchange across the content supply chain.

All in all, with a burgeoning number of content hours to be managed, 2020 will see content creators turning towards innovative, holistic supply chain management solutions to enhance efficiencies and lower costs on the back of automation, data analytics and centralization.

Chandar Muthukrishnan is senior vice president, client solutions for Prime Focus Technologies.