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Media and entertainment – the year ahead

Marty Borcharding

In this post, I’m going to take a look at what we might expect to see in the media and entertainment (M&E) sector in 2019 – and while there may be a few surprises along the way, I’m sure the general direction of travel isn’t likely to shift. Indeed, I’d say the pace of current change in the sector will continue to accelerate, with more consolidation, greater application of smart technology, and more new players driving disruption.

Content is still king

In 2018, AT&T completed its purchase of Time Warner, and early in 2019 the Walt Disney Company is set to acquire 21st Century Fox. Major M&A activity such as this is often about scale, but in these cases, it’s scale that comes with content.

The 2018 deal gives AT&T access to the content generated by Time Warner’s Turner, HBO, and Warner Bros. brands; while Disney’s acquisition will deliver Fox’s many major original film successes.

Why is this happening? Because content is the principal product in the battle for consumer attention. It’s a product that Netflix, in particular, has marketed to good effect, and its competitors are working hard to catch up. This has increased the pressure on Netflix to raise its own game, and it is investing even more heavily in its own original content, mindful of the possibility that market consolidation elsewhere may limit its access to third-party material. The net result is that content creation and availability is growing faster than ever: Netflix’s content budget is measured in billions.

Deepening the understanding of customer preferences

Of course, it’s not entirely about content. It’s also about how you provide it. There’s been a proliferation of technology advances that enable customers to enjoy a growing variety of content in a multitude of ways. Cable cutting has and continues to add fuel for companies to focus on direct to consumer models. Netflix has proved adept not just at managing its estate in the cloud so as to reduce costs, but at managing and segmenting vast quantities of data. By establishing a deep understanding individual preferences and not just broad demographics, it has improved its content, its customer targeting, and the overall customer experience in terms of how content is consumed, thereby driving greater revenue with the anticipation of more profit.

Competitors are hurrying to catch up. Traditional media organizations such as Sony, HBO and Disney have launched or are launching their own streaming services; Facebook and Apple are leading the field in online content delivery and customer analytics; Amazon of course has Amazon Prime; and this year YouTube launched YouTube Premium.

They’re all competing with one another – but in addition, they’re also competing with more traditional forms of experiencing content, and in particular, more traditional ways of watching movies. This year, Netflix has on some occasions released movies simultaneously in cinemas and online (e.g., the widely-acclaimed “Roma”), and on others it has consciously timed its online premieres to coincide with competitors’ major theater releases.

This hasn’t always gone down well: a recent article[1] by Peter Bradshaw in The Guardian in the UK  mentioned the French cinema chains who have argued “that the big screen was all-important, and that people who consented to watch films on laptops and tablets were despicable, soulless content-zombie freaks.” Hollywood directors have made a similar case. Bradshaw noted, “The objectors had forgotten, perhaps, that the first time they watched films was on their humble telly [TV] at home, and that was where they learned to love cinema.”

What’s interesting about Bradshaw’s point is that the television at home is no longer all that humble. In fact, it’s contributing to the trend: large high-definition flat-screens and high-quality sound bars are bringing the domestic movie experience closer to that at the local multiplex. TV technology is increasing the momentum behind streaming services – and that’s yet another reason where we’re going to see more content moving in this direction, and more market consolidation as a result. What will be interesting in 2019 will be to see which traditional studios are subsumed next.

Lean and keen

What effect is all this having on business models? It’s pretty easy to extrapolate. When content is king and when the customer relationship is paramount, cloud-based service models come into their own, and other standard functions such as finance, administration and HR need to be streamlined as much as possible. The emphasis is on leanness, on more automation, and on greater efficiency.

That’s why so many of the major players in this big and lively market are turning to service providers who can help them shape themselves to face their challenges. At Capgemini, we’re pleased to have become market leader in M&E business services. In fact, we count as customers all five of the major Hollywood studios.

So, then. Where will the surprises be in 2019? The answer is in individual cases: in the M&A activity, in the possible movement of major franchises, and in the development of more and better content – content that is based on a better understanding of individual experiences. What won’t be a surprise is that content creation will remain king and consumers will drive more change through what they consume and the ways they consume content.

We’re all set for a lively ride – and unlike that ancient Chinese saying, on this occasion I see the words “May you live in interesting times” not as a curse, but a blessing. Especially for those of us looking to be entertained.

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Marty Borcharding is a professional accountant with over 30 years of operations experience. He helps organizations in the Media and Entertainment sector transform their F&A business through leveraging Capgemini’s Digital Global Enterprise Model (D-GEM), our offerings and services.

[1] The Guardian, UK, 20 December 2018: ‘This was the year Netflix took on the cinema establishment and won’