Despite a challenging year for the global economy, the media sector remains strong as it takes an evolutionary step towards being more thoroughly tech-enabled and suffused with digital capabilities and tailored data skills.
Following the launch of our October 2022 MEDIAtalk report, we share 10 key trends to watch out for in the remainder of 2022, and heading into 2023.
Corporates will trade portfolio companies
Next Fifteen Communications’ acquisition of Engine’s British operations and Brandtech Group’s plans to buy Jellyfish from Fimalac are just a couple of examples of recent trophy transactions in the marketing services space as groups refine their focus and purpose in the market. Expect more.
Marketing services share prices will carry on falling
Listed marketing services companies have seen diminishing stock market returns, with mid- and small-cap firms now holding less than 60% of their June 2021 value. This trend looks set to continue, potentially giving private equity an opportunity to acquire undervalued companies.
Quality will weigh heavily in valuations…
As the market turns bearish there is likely to be growing reticence for acquisitions of marginally differentiated targets. But those that can demonstrate quality in areas such as the management team, diversity and inclusion, or environmental performance will still be highly sought after.
… and deals will die in due diligence
Conversely, a hardening attitude to risk among investors could see transactions falling through if issues crop up in due diligence. This could be particularly the case in the mid-market, where substantial sums of money are in play.
Consulting firm splits may create appetite for bolt-ons
EY’s plan to split its audit and consulting businesses has yet to be emulated by other Big Four players. But if others do go down that route, there could be a rush to acquire marketing units as newly independent consulting firms look to bulk up their client offerings.
New weapons will emerge in the fight for talent
As marketing and media firms continue to struggle with staff retention, there is a growing sense that generating loyalty will require more than a good pay package. Employers may also start to lean on factors such as sustainability and diversity as a lure to keep talent on side.
The definition of ‘global’ will change
In the past, having global coverage meant being in as many places as possible. Recent geopolitical events are leading to a more nuanced view, where marketing and media groups may be increasingly circumspect about operating in major markets such as Russia or China.
Subscription models will come under pressure
The idea that a streaming platform subscription was essential may have been true during coronavirus lockdowns, but as inflation starts to bite one of the first things that many consumers could give up is their Netflix or Prime Video memberships.
Quality content will rule the roost…
A proliferation of streaming services has led to a deluge of content—much of which is not very good. The runaway success of standout series such as Stranger Things shows how viewers are becoming more discerning in taste, forcing producers to focus on quality rather than quantity.
…and be offered in small doses
In parallel, growing competition means streaming platforms will be tempted to keep viewers hooked over the long term. Hence a return to weekly instalments instead of whole-series-in-one-go packages.
For a more detailed view of these and other market developments, speak to our experts.