The media and entertainment industry captures a wide variety of companies that serve to provide products and services that keep the everyday consumer engaged. There are a number of segments within the industry, each of which provides a different form of entertainment to consumers around the world. These segments include traditional print media, television, radio broadcasting, film entertainment, video games, advertising and perhaps most importantly, the manufacturers of the technology that the above segments rely on. The significance of these manufacturers cannot be overlooked when considering the industry as a whole; after all none of these segments has been around longer than the technology used for its distribution. Due to its dependency on technological developments new segments of the media and entertainment industry are constantly up and coming. To that end, the most significant technological development (in recent years, at least) for the evolution of the media industry has been the rise of the internet. This technology alone has changed how media is consumed and furthermore has created entirely new sectors and platforms for mainstream entertainment that are still in the early stages of their development.
In 2007 the U.S. spent roughly $930 billion on the media industry as a whole, with advertising spending accounting for over $284 billion.
In 2007 U.S. advertising spending was about $284 billion, nearly 31% of total spending on the entire media industry. Advertising has long been the major revenue generator for media companies. The advertising industry utilizes nearly every communication channel available to make their clients’ products and services known. Major mediums for advertising include television, radio, print media, and to an increasingly large degree, the internet. Other platforms for advertising include public advertisements like billboards (both traditional and digital) and city busses.
The development of internet advertising has had a very significant impact on the advertising industry and has created some trouble for many media companies that rely on traditional advertising platforms. With over 80 million broadband internet connections in the U.S. during 2007, advertising companies have found a new and very significant audience Major companies in the advertising industry include
Lamar Advertising Company (LAMR)
Clear Channel Outdoor Holdings (CCO)
Omnicom Group (OMC)
Companies that produce and distribute newspapers, magazines, and books are considered to be in the print media segment. Many of these companies use the subscription revenue model, which is very attractive as customers pay for product before receiving it, allowing the firm to invest the proceeds, earning a return even before delivering the product. Also, the cost structure of the publishing business is mostly fixed. The printing machinery and distribution network of a typical publisher can deliver 750,000 copies for only slightly more than the cost of delivering 500,000 copies, meaning higher volume falls directly to profits (also known as leveraging costs). This allows excellent return on capital for the larger publishers. Lastly, these firms have valuable intangible assets in the form of brands that protect their products from competition. Value Line, despite a complete lack of product innovation and no embrace of the internet, can still afford to charge a premium for their product because of it’s long standing reputation with investors.
However, beware the internet. More than any other business sector, the internet has affected the business model of media companies drastically. Once upon a time, newspapers were an outstanding business. Many had a monopoly within their city, as few cities were large enough to support more than one. However, the internet allows anyone to read news from around the world, advertising has moved online (leading to falling print ad rates), and classified ads took a hit from eBay (EBAY) and Craigslist. Keep in mind how the internet can hurt (or help) your publisher of choice.
Since the rise of the internet, print media companies have had a difficult time keeping up with the pace of the industry. Internet advertising has seen strong fast paced growth in recent years and as a result newspapers and magazines have had trouble attracting ad revenues. In 2006 there were 2,344 total daily and Sunday newspapers distributed throughout the U.S. and newspaper companies earned $49.3 in advertising revenue. U.S. Magazine advertising revenues for 2006 were $24.0 billion. Evidence of the print media industry’s struggle against internet advertising can be seen in decreasing ad revenue figures. The Newspaper Association of America reported that 2007 newspaper ad revenues were down 9.4% to $42 billion, the most significant percentage loss in the 50 years that the NAA has been reporting these figures. Companies that produce and distribute print media such as newspapers, magazines and books include
Getty Images (GYI)
McClatchy Company (MNI)
New York Times Company (NYT)
News Corporation (NWS)
Playboy Enterprises (PLA)
Barnes & Noble (BKS)
Washington Post Company (WPO)
The television segment of the media and entertainment industry includes a large number of companies that compete directly and indirectly by offering various services to consumers. It has long been a traditional entertainment segment and has evolved in many directions since its beginning. Today there are various offerings for television users including network television channels, cable networks and satellite television services. The latter two options are generally subscription based services which offer programming not available to non-subscribers. In 2007 there were roughly 112 million U.S. households with televisions, or about one third of the entire population.
As the technology supporting the media and entertainment industry evolves, television service providers are required to evolve their services in order to keep up. Television providers have had some success in keeping up with the fast paced and fiercely competitive industry though. Since the TiVo hit shelves in 1997 service providers like Comcast and DirecTVhave produced similar hardware and services for their subscribers. The popularity of the internet however, has not been such a quick fix for companies in this segment. As with print publishing, television broadcasting companies are now competing with the enormous advertising platform that is the internet. Furthermore, programming that was once exclusively available through television service subscriptions can be found (both legally and illegally) with the click of a mouse. Companies involved in television broadcasting include
• Cablevision Systems (CVC)
• Comcast (CMCSA)
• Discovery Holding Co (DISCA)
• News Corporation (NWS)
• General Electric Company (GE) (Owner of NBC Universal)
• The DirecTV Group (DTV)
• TiVo (TIVO)
• Time Warner (TWX)
• Viacom (VIA)
• Verizon Communications (VZ)
• Virgin Media (VMED)
• Vivendi (EPA: VIV)
• Walt Disney Company (DIS)
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ASSOCIATIONS & INSTITUTIONS:
Working in media is challenging and exciting. Media and entertainment workers are the first to learn the news and can help disseminate it to the public.
Many of the jobs give media workers the chance to meet and/or work with top celebrities and newsmakers. Even receptionists and office workers can encounter celebrities during their workdays.
Being passionate about your job and the field is welcome here. Many people in the film, television, and radio business have a lifelong interest in movies, TV, and radio/music/talk shows. They love creating and producing shows that entertain, enlighten, and educate people.
Some media jobs offer opportunities to travel for assignments. Broadcasters, reporters, writers, editors, broadcast technicians, and others involved in film, TV, and radio programming may need to travel regionally or internationally to cover events or news.
There can be flexibility to work in other media and entertainment fields. Some skills and knowledge are transferable from one industry to the next. For example, broadcasters can work in radio, television, cable, and Internet. Writers, editors, reporters, producers, directors can apply their knowledge to the publishing field, radio, TV, film, as well as the Internet.
Entry-level pay for media jobs is usually low. Tons of people consider this a glamorous field—everyone wants to work here so there are far more job candidates than there are jobs to fill. On the positive side, with increased skill and experience comes more responsibility and higher wages.
The work hours will be long, very long, especially for those new to the industry. The “pay your dues” attitude prevails. Everyone has to put their time in to make it in the business. It’s going to be challenging but if you can be patient and maintain a positive and helpful attitude, people will want to work with you and you’ll have more opportunities for job growth.
Some jobs, particularly in TV and radio broadcasting, have late-night, middle-of-the-night, and early-morning shifts. Workers must be prepared to adjust sleep schedules and their lives to accommodate work.
Competition is fierce. If you can’t accept the work conditions, countless candidates are in the wings ready to step in and do your job…and they’ll do it with great enthusiasm. It’s a buyer’s market for media and entertainment companies.
There’s little opportunity to settle down and get comfortable in your work because the jobs in media and entertainment are constantly evolving and being redefined. For instance, journalists no longer simply report the facts—many are now expected to post on Twitter and Facebook, and newspaper reporters often double as cameramen, shooting videos for Web sites. No matter what level they are at in their careers, media and entertainment workers need to constantly hone their skills by taking classes and knowing how to use the latest technology.
As consumers demand greater transparency about how companies are using their personal data, some companies have started making their privacy and data protection policies more stringent. According to Deloitte’s 2018 Digital Media Trends survey, 73 percent of all US consumers indicated they were concerned about sharing their personal data online and the potential for identify theft. In addition, 69 percent believe companies are not doing everything they can to protect consumers’ personal data. However, 73 percent said they would be more comfortable sharing their data if they had some visibility and control.
Regulatory changes will also continue to challenge the industry during 2019. In particular, regulatory authorities will have a key role to play in spurring 5G adoption in the United States. “Net neutrality” will be under the spotlight in 2019 as well. For example, two states—California and Washington—have passed laws that challenge the FCC’s December 2017 repeal of net neutrality rules that prohibited broadband providers from blocking websites or charging for higher-quality service or content.29 The net neutrality story will undoubtedly continue to develop over the coming year.
According to research, overhead continues to be media companies’ largest expenditure, and will account for a projected 22% of their Opex budget investment until 2020. A wide range of expenses fall into the overhead bucket—making this an area ripe for releasing trapped value.
For example, there are opportunities for organizations that operate across portfolios to consolidate functions, like HR and finance. We also see companies duplicating efforts, with duplicated advertising sales organizations for their traditional media and digital media products. Similarly, content distribution and metadata management frequently operate in multiple places across the company, despite the end goal being the same.
By consolidating and centralizing these activities, media companies can simplify the organizational structure for greater efficiency—along with the added benefits of improved performance, more focused resources and better information sharing.
Outsourcing is a possible path in the case of non-core business functions. Human resources, procurement and physical supply chain management are areas that could be explored to identify outsourcing cost saving opportunities.
Reverse declining operating margins without negatively impacting company’s short-and long-term growth trajectories.
A. Leveraged data and analytics to improve transparency of current costs and true spend.
B. Identified and quantified savings opportunities through value targeting
C. Created shared service structure to lower general and administrative work and costs
D. Developed go-to-market activities to improve sales motion and revenue growth
Preserve unique and differentiating aspects of the business while accelerating target margin, delivering accelerated growth, and increasing sustainable benefits. Client is on track to increase operating margins from 24% to 30%.
A key trend is the increasing investment in original content by streaming companies as a response to content pullbacks by media houses (such as Disney removing its content from Netflix and launching its own streaming service in 2019).19 For example, Netflix and Amazon are investing in the production of original series and films.20 Netflix’s chief content officer said that 85 percent of its $8 billion content investment in 2018 went toward original content. Amazon indicated that it would invest approximately $5 billion in video content during 2018, with an emphasis on big-budget original shows and rights to sports programming.
Massive media conglomerates dominate the global content production and distribution industry. The ability to compete successfully depends on the capacity to provide high-quality popular content, adapt to and exploit technological developments, respond to changes in consumer behavior, and achieve widespread distribution.
The explosion of digital content provided by companies such as Facebook and Netflix challenges traditional content providers to keep up.
Few technologies have been more eagerly anticipated by the industry and consumers alike than 5G. With its promise of faster data-transfer speeds, lower latency, and improved IoT connections, 5G will affect almost all aspects of the media & entertainment sector.12 It will benefit other industries as well through applications like telemedicine and remote industrial control.13
Autonomous vehicles are another technology area that will benefit significantly from 5G. With 5G as a backbone, autonomous cars could become a key platform for delivering media content and advertising.
A few other markets could emerge to a larger extent in 2019:
Connected/smart TVs are now found in nearly three-quarters of all US households,14 but to date, that adoption level hasn’t created a huge advertising market. However, that is starting to change: US spending on connected-TV advertising is expected to reach $13.3 billion in 2019, up from $4.7 billion in 2017.15 Digital video advertisers are turning to connected-TV platforms to extend their customer reach, while traditional TV advertisers are considering connected TV to tap into customer segments that prefer streaming. Advertisers who use connected TV are more likely to target consumers based on behaviors rather than demographics.16
While wearables can interact seamlessly with other devices to create highly personalized experiences, the category (including smart watches) is still awaiting its “killer app.” At present, wearables seem to be delivering the greatest value in the area of health and wellness, where they have the ability to measure users’ vital signs.
Media & entertainment executives are exploring how to apply blockchain capabilities directly to their businesses—from dynamic 5G networks, digital identity, and IoT . . . to stemming piracy, enabling micropayments, and returning more royalties to content creators.17 For media & entertainment companies, blockchain can create better and more secure content registries that quickly identify media assets and their owners.
A key trend for 2019 is the way digital is radically changing the dynamics of advertising. Spending on US TV ads fell for the first time in 2017 and was expected to slip another 0.5 percent in 2018 as more Americans move away from standard TV packages. TV’s command over US advertising revenues has given way to digital, which is expected to bring in nearly half of all ad revenue in 2018.22 Google and Facebook are carving up an ever-increasing share of the advertising pie
Too often, the budgeting process is based on last year’s performance, with existing line items adjusted for the next year. This approach ties organizations to the past—while media companies need to be focused on the future.
Zero-base spend starts with a blank slate, forcing organizations to rethink all operating expense costs and reimagine their cost structure based on what’s needed in this new, disruptive environment. It requires companies to design the right organization from scratch, rethink all operating expenses, remove past biases, and reallocate resources that do not support their distinctive capabilities or contribute to the desired outcome.
Zero-based budgeting drives out unnecessary costs and puts 100% of media companies spend in line with their strategic growth plans. Freed funds can be shifted to activities that drive sustainable growth, build innovation, and move them closer to their desired end goal.
This same zero-based methodology can be applied beyond budgeting—to areas such as supply chain, front office and organizational functions—where it can increase efficiency and agility. Released from previous constraints, companies have the flexibility to streamline activities, systems and solutions.
NASPERS needed to improve organizational effectiveness and reduce its cost base to prepare for the future amidst a rapidly changing TV landscape. Took Accelerated Savings approach focused at activity level to identify opportunities for bottom-line results. Built cost-conscious culture through strong leadership engagement to deliver bottom-line results. Delivered program at pace through Value Sprints and with analytical rigor to ensure sustainability of savings. Impact was $60M+ savings identified and committed in first six months.
Upfront technology expenses can be significant but are critical to creating an intelligent organization that can optimize opportunity and drive organizational efficiency.
Industry executives already recognize this importance, with more than 85% of those we surveyed believing that digital technologies will enable cost transformation in technology and marketing functions.
Digital-born companies are proving this. Free of the legacy advertising infrastructure that traditional media companies carry, Google and Facebook have a significantly higher gross margins than media companies.
Because these digital-born operations are built upon exceptional data and analytics capabilities, they have significant advantages over traditional businesses when it comes to measuring the business, tracking results and targeting customers. Data and analytics are essential for traditional players to stay competitive in the future—and advanced analytic capabilities also provide an enormous opportunity for Human + Machine enhancement to unlock value now.
The industry’s landscape will continue to be reshaped in 2019 by mergers and acquisitions—particularly as media companies attempt to strengthen their content libraries, quality, distribution, and value. Mega-mergers will ultimately allow a smaller number of big-name companies to control a greater portion of TV shows and films, potentially expanding their content libraries.24 Changing consumer mobile-data and streaming behaviors are the primary drivers of media companies’ aggressive M&A deals and strategic repositioning.
In addition to M&A activity, another key theme in 2019 will be the continued convergence of content and telecommunications networks. The rise of subscription streaming services and demand for original digital video content are pushing telecoms to incorporate digital content into their offerings. Telecoms increasingly want to own and monetize this content along with transporting it over their fixed and mobile networks. As with bundled services, many telecoms are achieving media/content integration through M&A deals, as well as partnerships. For example, T-Mobile US is planning a pay-TV offering using its acquisition of Layer 3. AT&T, meanwhile, is integrating assets of Time Warner (including HBO) in its own media offerings. Verizon, which is planning to launch 5G with a residential broadband offering, has partnered with YouTube and Apple to provide a network/content bundle.25
Meanwhile, stricter data privacy and protection regulations have forced digital advertisers to rethink and reinvent their ad-targeting strategies. The EU’s General Data Protection Regulation (GDPR), for example, gives consumers more control over their personal data and forces companies to inform consumers of breaches within 72 hours.26 It also states that personal data can be used only if a company receives explicit permission from consumers.