Catalysts for change can emerge from the most unlikely quarters. Prior to the pandemic, new “digital” media was supposedly meant for the youngsters while the elderly struggled with even basics like downloading apps, leave alone complicated content discovery. However, today, they don’t even blink twice before logging onto Netflix / Hotstar to see new content or even Zoom to witness their grandkids performing at a virtual music concert. Changes precipitated by the pandemic have been widespread, impacting industries, companies, and consumers.
For the M&E industry, the pandemic has accelerated the shift to digital media – it has not only expanded the consumer base but also altered the consumption patterns and behaviors. To put the acceleration into perspective, time spent on digital media consumption in India has more than doubled in the last 5 years. For example, short-form video apps (think TikTok, etc.), have witnessed a 9X increase in Monthly Active Users (MAUs) in the last 5 years and now comprise approximately 18% of the overall digital media time (almost 2x growth). The change has also been stoked by the multiple initiatives (pricing, marketing, increased spend on micro-genre content etc.), taken by the industry in addition to some macro tailwinds like improvement in digital infrastructure.
However, given the pace at which this industry has evolved in the past – execs are still trying to grapple with questions like:
- Trends that are likely to accelerate in this shifting landscape? What’s the next big thing?
- Trends that are seasonal and will probably fizzle out as we go back to life as we knew it?
- What should be the action plan to survive and thrive in this new normal?
Peeking into the crystal ball, we would call out a few imperatives as critical:
- Gearing up to take a higher share of the fast-growing digital advertising pie: In 2020, digital advertising increased its share of the ad market to 29% compared to 21% in 2019 and grew despite an overall decline of 23% in the Indian ad market during the year. As media ad spends recover from these lows, digital advertising is expected to become almost 2.5x its current size in the next five years. However, a large part (~75%) of this ad spend is currently cornered by the 2 internet giants – so, grabbing a slice of this pie is not going to be easy! Traditional media companies need to shift focus from merely selling ad inventory to creating customized products and solutions for advertisers with a solid win-win proposition.
- Riding the (affordable) subscription wave: OTT video subscriptions reached 53m in 2020, more than doubling from 2019. This growth is expected to continue over the next few years, creating a big opportunity and demand for bundles and super aggregation. For media companies, the key aspect is to figure out how to acquire, retain, and establish direct relationships with subscribers. To achieve this, they must realize that cookie cutter solutions are now becoming relics of the past and accordingly create highly personalized and curated content for individual subscribers. Globally, players like Disney and New York Times have successfully transformed their businesses by leveraging their core brand and shifting focus from primarily a traditional distribution model to direct-to-consumer subscriptions.
- Aggressive, yet ROI positive, investment in content: Investment in original content by OTT players has increased by more than 3x between 2017 and 2021 and is now touted to be $650m+. Apart from premium content (originals and sports), there is also more focus on user generated, niche, regional, and vernacular content to tap into the “new consumption patterns”. Even though this trend is likely to continue, media companies need to be mindful in shaping their investment strategy. Firstly, more is not always good and there is likely to be consumer exhaustion from an overdose of content when discovery becomes even more challenging. Secondly, this leads to basic economic issues like more pressure on profitability, which is now becoming increasingly important, in addition to revenue growth. Thus, companies need to strike a profitable balance between high-and low-cost content. This means having to revisit their content budgets and strategies, optimally leveraging technology, and envisaging better means to monetize through a 360° IP franchise.
- Increasing focus on technology and digitization: To reinvent themselves, media companies must fully utilize technology and digitize their value chains. As a part of this reinvention, they must optimally leverage Artificial Intelligence (AI) and Machine Learning (ML) tools to augment not only things like advertising effectiveness but also historically “creative things” like content creation. 21st Century Fox, for example, uses ML to analyze movie trailers frame-by-frame to predict how viewers will react to titles. Media companies are no longer only story-tellers – they are technology companies as well!
- Rethinking the partnership model: Given the dynamics at play (large # of players, increased content spend needs, etc.), consolidation seems inevitable. In the coming years, M&A activity is expected to increase as the market continues to develop and players shift their focus from just top-line growth to sustainability. With their revenues under pressure, most traditional media companies need to become bolder and double down on a few things. In order to accelerate their growth trajectories and diversify business portfolios, companies should seek M&A and partnership opportunities in their core business and explore new growth vectors such as eSports and podcasting. Traditional media companies are already consolidating and collaborating globally to take on the might of digital/tech giants in terms of scale and investment.
The Indian media industry is etching out its own series with the right mix of masala, a twisted plot, and a bevy of actors. With a trailer so captivating, picture toh blockbuster hone hi wali hai! As the series unfolds, get ready for a great experience that will take you through a range of emotions and provide you with the best entertainment that is yet to come. At the end of the day, the consumer is the king!
-By Mandeep Kohli, Managing Director and Partner, BCG and Mallikarjun Vaddi, Knowledge Expert & Team Manager, BCG
