Trends and Opportunities in the M&E Market


Media is expected to grow at a CAGR of 12.0% between 2015 and 2020 while entertainment will reach a record of 13.8% CAGR. Combined, the US media and entertainment industries will spend $7.34 billion on paid online and mobile media advertising in 2016, according to Emarketer.

Big Data and IoT

Today’s Media and Entertainment (M&E) organizations focus not only on delivering content to multiple devices, but also managing the data they collect from these devices. Increasingly, these organizations are not only gathering data from the devices on which the media is consumed, but they are also looking to use data from other connected devices to supplement this data. According to a recent Tata Consultancy Services survey, per-company global spending by media and entertainment organizations on mobile and IoT (Internet of Things) devices will reach $73 million by 2018. Much of this activity will be monitoring consumer data via mobile phone apps, entertainment devices and IoT devices for such business objectives as targeted advertising, personalized recommendations and media development.

By leveraging IoT data, the media and entertainment industry can use various forms of data to create unique profiles and deliver personalized content and advertising. In the future, the number of screens and platforms relevant for delivering content will grow substantially. Media will be delivered to self-driving cars, across kitchen appliances, as in-flight entertainment, on wearables, and many other possibilities as the IoT market grows.

Multi-Device Delivery

A major shift in the Media and Entertainment industry has been multi-channel delivery and the increase in content consumption on digital devices such as game consoles, streaming devices, connected television and mobile devices. Due to multi-channel delivery, the number of device connections that must be managed is rising. Time spent on smartphones and game consoles is eclipsing traditional devices such as TV and AM/FM radio among the 18-24 age group at 1,730 minutes and 1,735 respectively. Considering this age group and those that follow will continually spend more time on new screens and devices, media and entertainment industries need to be flexible to meet the challenge of serving their increasingly connected consumers.

graph

Number of minutes spent weekly per device in the US in Q1/2016 (Source: Nielsen)

Over-the-Top and Video on Demand (VOD)

OTT viewership grew over 62% in 2016 and will continue to claim market share from subscription TV. Last year, OTT accounted for 8.1% of viewership and the options are expanding in 2017 to include Sling, Playstation Vue, and DirecTV Now. NBCUniversal found that connected TV viewing of prime-time shows were as high as 24% – well beyond the 8% across all platforms and up from 4% two years ago (this includes all video on demand, such as Hulu and NBC’s sites and apps)[1]. For some prime-time entertainment shows, NBCUniversal has found digital viewing to account for as much as 30-40%. Which is why it’s not surprising that according to the Wall Street Journal, cable TV is losing nearly 300,000 subscribers per quarter.

The number of devices and wireless connections is changing how content is produced and distributed, driving more consumers towards on-demand content. For instance, more than 78% of U.S. consumers subscribe to an OTT service.[2] This is largely driven by the demand for video, which according to PwC claims the most revenue of any M&E sector at about $420 billion globally. As the demand for video continues to grow, more consumers are choosing to stream video through OTT services that deliver film and television without the need for a pay-tv subscriptions.

To slow the growth of OTT, the industry has offered “TV Everywhere.” However, adoption of TVE has not gone well. Statistically, less than one in seven U.S. pay-TV households use TVE. Meanwhile, media and entertainment companies have been selling their content to OTT services such as Netflix, Amazon and Hulu. While the sales help short-term revenue, in the long run, they have only helped to enable and strengthen consumer demand for cord-cutting services.

graph

Advertising

Digital advertising sales grew by 17% to $178 billion in 2016 according to Magna Global, and are projected to overtake TV as the largest advertising category. In 2017, digital spending will surpass linear TV spending with 36.8% of US total media ad spend coming from digital and 36.4% allocated to TV. Meanwhile, this is the first year that desktop ad sales did not see growth, and in 2017, desktop ad sales will be in a permanent decline.

Not surprisingly, much of the digital ad growth is driven by mobile and video. Global smartphone users are expected to reach 6 billion by 2020 and mobile advertising will increase to $215 billion, or 72% of total digital budgets. Mobile budgets require data to target ads efficiently, and marketers are beginning to leverage first party data to target potential customers and decrease wasted ad dollars.

Even as mobile continues to dominate, it is no longer a siloed environment. Cross-device marketing is on the rise as a way to combine digital data with offline data. This blended approach is part of the reason that more traditional and linear methods of advertising are eroding.

RECOMMENDED READING:

[1] https://www.wsj.com/articles/more-ads-are-being-delivered-via-connected-tvs-1481626802
[2] http://www.pwc.com/us/em/outlook