Major shifts are underway in the media and entertainment industry – both on the consumption and production side. In part one of our new series, we look closer at these important trends and share expert recommendations on how to thrive in the new environment.
For many years now, the media and entertainment industry has been undergoing several disruptive trends – further accelerated by the COVID-19 crisis. Users are changing their expectations and the way they experience media, with many “cutting the cord” and canceling their traditional cable services in favor of media streaming. In reaction, media players are extending and adapting their portfolio in order to stay relevant or even increase their market share.
How will video content be consumed in the future?
On the consumption side, five paradigm shifts shape how video content will be consumed:
- Linear vs. on demand: While linear video usage is stagnating, revenue from on-demand has risen significantly and is expected to grow further. This has led to an enormous increase in usage of OTT offers, with video streaming revenues tripling between 2017 and 2020, from 25 million to 52 million euros.
- Small screen vs. big screen: Users expect to be able to view their videos on any device, ranging from small screen smartphones to big screen TVs. For example, while in 2014 only around 60 percent of Germans used their smartphone for media consumption, in 2020 this number already reached TV level of around 90 percent.
- Generalized vs. personalized: Users demand personalized content, and service providers react by using increasingly sophisticated algorithms and creative ideas. This trend goes way beyond simple suggestions, giving the user the opportunity to shape their own personalized experience. One example is the film Bandersnatch, in which users could choose which scenes were shown next and how the storyline played out.
- Long vs. short time of usage: The demand for more personalized content is tightly connected with the demand for shorter content sequences. The most famous example is TikTok, whose entire experience is driven by short content snippets, optimized to serve individual tastes at a fast pace.
- Low quality vs. high quality: Viewers expect increasingly higher quality for their videos. In Germany, 40 percent of users named high image- and sound quality as important drivers behind their digital video purchases. Traditional players such as public broadcasters are in a challenging position to meet the capital needs caused by this shift.
How are media players reacting to changes in consumer behavior?
On the production side, major market players are responding with various moves:
- Linear TV and streaming come together: Following the boom in on-demand, “traditional” media companies are entering the streaming market with D2C offerings. Well-known examples include Disney+ with over 100 million subscribers and Discovery+, distributing material from Discovery’s various brands as well as other content. At the same time, various OTTs are investing in linear TV, with the aim of conquering segments currently not open to on-demand services, and reaching users that don’t want to make an active choice on their video consumption. Meanwhile, some highly popular live services, such as live sports events, help maintain the relevance of linear TV.
- Emergence of super bundles: Due to the growing pool of available streaming services, the average number of subscriptions per user has increased around the globe. In the US, 57 percent of users even have subscriptions for more than three services. However, foreseeing that in the long run users will not be ready to pay several subscriptions at once, companies are starting to integrate multiple streaming offers into one bundle. As an alternative to the classic subscription, bundling can take the form of “credits” bought by customers and used to stream content from various OTT offers
- OTT players increasing budgets for high quality original content: Demand for high-quality and original content is on the rise, and as a growing number of new players enter the market, content is becoming one of the key differentiators in the OTT space. OTT giants are increasing their budgets accordingly, in a competition which has become to be known as “the streaming wars.”
How to monetize in times of transformation?
Transformation in the market poses massive challenges to existing players as their conventional revenue streams will most likely decrease. The question is: How can they monetize their services effectively in the future?
Our Monetization Framework covers four key areas where media players can distinguish themselves from the competition, better retain customers, attract new ones, and increase up- and cross-selling to capture additional monetization potential:
1. Branding Excellence
Distinguishing your offer from others in the market requires a targeted branding strategy. This should be developed in four steps: First, gain transparency on customer needs and behaviors as well as how your brand is perceived compared to competitors. Then define holistic (multi-)brand guidelines and an aligned goal hierarchy (e.g. brand vs. financial goals), evaluating both quantitative and qualitative aspects to derive “hero routes”. In the last step, an enforced brand differentiation catalog for the marketing mix will help you achieve go-to-market readiness for your (multi-)brand positioning strategy.
2. Packaging & Pricing Excellence
Packaging and pricing are critical to attract and retain customers prone to switching offers. Focus improvements on all areas of pricing and packaging, including pricing strategy, price setting, price implementation, packaging strategy, and enablers. Then, conduct a holistic pricing audit to assess capabilities from all these areas. This will enable you to analyze your current situation and identify best practices and gaps. For example, this could be choosing price metrics and models most closely in line with customer value, or designing segment-specific packages to extract appropriate value while keeping them simple to understand. For some companies, pricing that allows smart migration to higher value content as a segment's economic status and interest increases can be another important measure.
3. Sales Excellence
Step up your game in sales to reach new customers and monetize existing ones. Optimized sales incentives, effective Key Account Management, and improved indirect sales (e.g. through partner management) can all boost up- and cross-selling rates. Especially important here is to optimize the interaction of the different sales channels via an effective multi- and omni-channel sales strategy. Start by acquiring knowledge of customers’ motives, attitudes, purchase intentions, and experiences as well as an understanding of each segment’s need for information, interaction, and service at a specific touchpoint or channel. This will enable you to define positioning per service group and offer target group-oriented services and sales per channel. And finally: Effective sales do not work without marketing excellence, so it is important to ensure consistent price positioning across channels, link them intelligently, and plan channel-specific promotions.
4. CRM Excellence
Protect relationships through effective customer base management. Here the first step is to understand the most important reasons for churn, e.g. through quantitative analysis or market research. Then, define a structured churn prevention approach, including strategic principles (e.g. proactive vs. reactive). This will enable you to identify suitable short- and mid-term measures, especially for the most valuable segments. Short-term measures can include creating a dedicated customer base portfolio for proactive base activities as well as reactive benefits such as discounts. Mid-term measures could be to create an ecosystem, loyalty programs, or new cross-industry bundles. In addition, introduce targeted up- and cross-selling activities to increase monetization of existing customers, spanning customer life-cycle planning and the introduction of convergence bundles to NBA offers and concessions.
Even though the mass of potential levers can be quite overwhelming, the general rule is: Focus on the most important levers for your company and improve your monetization step by step.
Stay tuned for part two of this series, where we will take a more detailed look at Packaging & Pricing Excellence. Until then, we are happy to support you in your journey toward new forms of monetization in the media and entertainment industry! Reach out to Jochen Krauss today!