What does the global reset mean for TV and media?
Several ‘new normals’ point to the strategic future of the TV and media industry. Trends include a quest for talent, industry consolidation, evolving business models, and integrating innovative technologies like AI and blockchain-based offerings.
The World Economic Forum’s theme for 2021 and 2022 is "The Great Reset."
HSBC Global Private Banking CEO Annabel Spring participated in the organisation’s core 2022 event, eloquently summarising the central themes:
“Technology has accelerated, and people’s expectations have changed. The economic outlook is fundamentally different from what it was two years ago.[…] We will now see a great reset, which will produce bigger winners, bigger losers, and greater volatility.”
This also applies to the TV and film industry, which has undergone momentous shifts in a few short years. As a result, business models and operations have been upended.
In BDO’s TV and film hotspots, we chart the current situation throughout the globe’s premier locations for TV and film production, investment, and consumption. They provide insight into how the developing trends can impact the future of the TV and film industry.
Evolving business models
Netflix viewership surged through the pandemic. However, the first quarter of 2022 revealed a drop in subscribers for the streaming giant.
Since then, it has cut staff, looked to limit account sharing and is considering launching an advertising-based plan.
It is a testament to the increased, diversifying competition in streaming between a growing number of deep-pocketed companies and their content fiefdoms. Many streaming platforms are looking to build out business models to boost revenues. For example, through new services or advertisement and endorsement deals. Another tactic is shoppable media, where interactive content enables real-time online shopping while viewing streaming content.
The size and reach of the likes of Netflix, Disney+, Apple TV, and Amazon Prime mean that they often look to team up with content producers capable of handling all aspects of production – sometimes including the areas mentioned above.
Content producers are building out their offerings to include pre-production, production, access to specific groups of creatives, production teams, post-production, localisation services and more to meet such demands.
Continued growth in content
A part of the evolving business models is content’s core role in attracting and retaining audiences. In the US, a mature streaming market, churn rates are often around 35%, showing how important a continuous pipeline of quality content is for monetising the streaming business models.
Furthermore, merging and overlapping content strategies are gaining traction. Examples include the overlap of TV and social media through TikTok’s increased presence on smart TVs and Roku's US$1 billion budget for original content.
Simultaneously, the appetite for international content continues to grow. The reason is two-fold:
- Audiences are increasingly open to – and interested in - international or foreign-language content, illustrated by films like Parasite, TV series like Money Heist, Lupin, and the performance of Japanese Manga.
- National or regional content increases streaming companies’ ability to gain or maintain traction in different markets.
Perhaps the best example of international contents’ potential is Netflix’s surprise hit series Squid Games, which cost US21 million to produce. Viewers have enjoyed more than two billion hours of viewing – and the series is thought to be worth US$900 million to Netflix.
Disruptive technologies change the industry
AI's potential across industries is vast - so too for film and media.
The immediate low-hanging fruits include automating routine business processes such as billing and paperwork. However, the scope is much broader.
One example is variable product placement. For example, imagine drinks bottles in the background of a film of TV series that change to local labels depending on where the content is viewed.
Speech-to-text captioning is another area where AI is far along, as is next-gen image compression.
AI can also assist creatives by taking over repetitive, laborious chores, allowing more time for creative tasks. This includes visual effects and colour grading.
At the forefront of developments, we find AI voice actors.
Another example is the blockchain-based nonfungible tokens (NFTs). Content creators can use NFTs as a digital way of engaging directly with viewers and adding additional value for the content producers and their fans.
For example, British filmmaker Dan Hartley has made all 130,000 frames of his film Lad: A Yorkshire Story available for purchase as individual NFTs.
Continued hunt for talent
Although AI and other technologies promise to cut work hours and production times, film and TV remain people and talent-intensive industries.
Much has been written about the “Great Resignation,” but for film and TV, the correct term may be ‘The Great Recruitment.” Competition for available talent is increasing, and companies are exploring novel approaches to fill talent gaps.
Simultaneously, the pandemic has changed how the TV and film industry collaborates and communicates.
Film photography has been prepared over Skype, directors and digital editors have collaborated over Microsoft Teams, and production has increasingly spread across the globe.
It is hard to imagine the changes evaporating, and remote work options will likely become a permanent fixture. Hybrid models are likely to dominate, mixing in-person and home-based work and using localised filmmaking tools and cloud-based solutions.
One of the upsides is that this increases the incentive and possibility for simultaneously engaging with several industry hubs as one big talent pool.
M&A plays a leading role
Across all media sub-industries and company sizes, including film and TV, mergers and acquisitions are central to meeting the new realities.
M&A includes blockbuster megadeals like Amazon acquiring MGM and WarnerMedia’s merger with Discovery Inc.
Large-scale companies will look to off-load non-core businesses and corporate assets that do not fit their growth strategies. This makes asset divestitures a key trend in 2022.
Consolidation is another driver for ongoing M&A activity. Bolt-on acquisitions of smaller studios, localised content producers, and IP assets are particular active spaces. Building out content, capabilities, and scaling to partner with the big content buyers and reap financial and operational advantages are often the strategies behind such M&A moves.
Content remains the kingmaker, including for streaming platforms, making IP libraries a strong deal driver. This can give instant access to treasured content and dedicated fan bases. Netflix’s acquisition of the Roald Dahl Story Company is a prime example. Similarly, buying up IP for future development remains popular.
Simultaneously, more investors are interested in film and TV than ever before. This includes Private Equity, which is increasing activity.
Consequences for TV and film hubs
Companies in the world’s TV and film industry hubs may already be feeling the consequences of the developing trends mentioned above. More effects are likely to spread in 2022 and the future.
To best take advantage of the possibilities created by the trends, companies may consider various strategic and business operations opportunities:
- Business models: Evolving business models open new opportunities for both large-scale and smaller companies in the TV and film industry. Companies may want to investigate their options for adding new revenue streams and services to their portfolio.
- Content: Developing innovative and appealing ways of telling stories has never held greater potential than today. Looking at ways to take content internationally, localising international content, and cross-platform approaches are likely core to succeeding in a competitive market.
- New technologies: Finding the optimal ways of integrating innovative technologies will be core to futureproofing operations and profits. Identifying areas where such technologies can have the largest immediate impact may be a good starting point, but do not forget long-term planning.
- Talent: Attracting and retaining talent requires a keen eye on company culture, remuneration benchmarks, and reward strategies. These are core ways of keeping scarce talent locked in. Exploring overseas collaborations and diverse production strategies are other strong tools.
- M&A: Adding extra capabilities through acquisitions remains a solid strategy to bolster continued business development. Deals must be conducted optimally to reach the best possible outcomes and achieve cost savings and future growth.
In short, the global reset brings new challenges and opportunities to TV and media companies. To succeed in an evolving market, companies must combine flexible, innovative strategies for attracting talent and implementing new services and solutions with robust business operations and a keen understanding of new initiatives’ financial implications, including tax exposure and audit requirements.
BDO assists companies across the media industry with the areas mentioned above and all other aspects of business operations. Contact us to hear more about how we can assist your company.