Media C-Suite Week No. 3, Issue No. 41

The Week in the Media C-Suite Issue 41 Week 3 2024

A Week in the Media C-Suite 

It’s Sunday, the 14th of January, 2024.

As of the third week of January, this year looks set to become a time of shake ups and shake outs.

Last week we discussed the global Media & Entertainment industry’s record US$2.5 trillion revenues in 2023.

Despite the (absurdly) impressive receipts, 2023 wasn’t a great year for the industry, particularly in the US. The US remains the industry’s most lucrative consumer market and, given the bumper year, one would think Hollywood had a lot to celebrate.

But, not really:

  • Strikes and resulting global media production roadblocks didn’t help. But there is still a lot of content out there. Perhaps too much;
  • The big media conglomerates continue to suffer a post-pandemic streaming hangover;
  • On-line publishers have had to deal with buyers’ regret and either tighten belts to responsible levels, lean far into generative AI or fold;
  • For broadcasters, declining audiences have resulted in declining ad-revenues and have accelerated a general decline in content quality.

So, how do media investors and media entrepreneurs around the world turn these observations into actionable intelligence?

Lock-Step

It’s an odd term, but relevant to any analysis of the core problem in our industry and its potential solutions.

For much of the past century, the US consumer audience has been in lock-step with television broadcasters and Hollywood studios. The reason for this is that both broadcasters and studios maintained absolute control over distribution. This means control over what content audiences were given. In other words, control over choice.

Audiences, particularly in the United States, were in lock-step with television and movie executives. They had to be. There was no choice. We watched what we could. We watched it because it was on.

The problem with this scenario is that the innate human need for entertainment and shared experience drove audiences to what was on, not necessarily what they wanted to watch.

Television executives and Hollywood studios began to make decisions based solely on the success of television shows and films that they had previously selected. They created an echo chamber for decision-making. For executives, the process of feedback became filled with only their own voices.

One definition of, “lock-step” is: “a mode of marching in step by a body of persons going one after another as closely as possible”, or, “a standard method or procedure that is mindlessly adhered to or that minimizes individuality”.

The executives tasked with acquiring television shows and films were soon in lock-step with themselves rather than with the consumer audiences that attracted advertisers.

The result is that for producers of commercial content today, the “audience” is composed of distribution executives and commissioning agents rather than the consumers intended to ultimately experience that content. To be successful within this system, producers must cater to the echo chamber rather than create content for their true audience.

In analytical circles, the logical conclusion to this process of decision-making is an increasing concentration of similar content and a diminishing return on investment.

We recommend the following articles for more background:

Shaking It

Echo chambers are fragile environments.

They are also environments in which those inside become increasingly isolated from those outside.

For senior executives tasked with commercial strategy and financial results, the echo chamber can lead to increasing distance from reality. This is particularly true when those within the echo chamber begin believing their own press. For example, news reports that a dramatic down-turn in ad revenues to traditional media is a result of a loss of confidence in general economic conditions are directly contrary to the fact that ad spend by advertisers is up, substantially. Its just not being spent at the traditional broadcasters or publishers.

The term, “cord cutting” is another misnomer. Yes, many cable subscribers are choosing not to renew their cable packages. However, a far greater number of people within measurable consumer audiences have never subscribed to them in the first place. The consumer audience for legacy, linear television, run by the same people who ran it ten years ago, is simply aging out.

But revenues have, in fact, increased across the board and around the world.

One reason may be that there are simply more people, a lot more; and they are far more connected as content consumers than ever before. A human population of 8.1 billion offers a statistical consumer audience with access to broadband internet at an estimated 5.6 billion people. The global population growth rate is estimated at between 1 to 1.3% per year. We gain approximately 80 million people a year.

Despite more people, the legacy media conglomerates are loosing audiences, and share value, at an alarming rate.

Our Take

It is said that, “Content is King”.

Perhaps.

We at the Media C-Suite see it differently. From our perspective, the audience rules.

The US$2.5 trillion in revenues to the global Media & Entertainment industry is based on consumer audiences of entertainment content.  The vast majority of that revenue comes from two distinct sources:

  1. Spending by consumer audiences to access the content that they want to experience; and,
  2. Spending by advertisers for access to the most relevant consumer audiences.

Consumer spending is up.  Advertiser spending is up.

The value of legacy media conglomerates is down.

What has changed?  That is the US$2.5 trillion question!

Today, audiences have choices that the legacy media conglomerates do not offer. So who does?

The answer to that question is where the opportunity for media investors, media entrepreneurs and the legacy media conglomerates will come from.

The executive power word for this coming week: Choice.

Just Catching Up?

We’ll help you get up to speed.

Creative Energy

In physics, the theory goes, energy cannot be lost. It simply goes somewhere else.

Creativity follows a similar law.

So, when the creative mind behind one of US television’s most successful shows laments the end of an era in US television, media investors and media entrepreneurs might look to see where creative energy will go.

This last week, David Chase, the creator of The Sopranos, marked the 25th anniversary of the HBO series topping most lists of the greatest TV shows of all time.  On the Writers’ Guild of America’s list of the 101 best-written TV series, The Sopranos is number one. At the time of The Sopranos, US television saw a surge in highly-creative, novel and hugely popular television series, including Breaking Bad, The West Wing, Mad Men and The Wire.

Twenty-five years ago, the largest television and VOD platforms exercised a near monopoly on distribution of high-quality television content to the most lucrative television market on Earth. They raked in the cash.

Now, times have changed.

As pressure mounts, the natural human reaction is to become more conservative; more risk averse. Today, 25 years after The Sopranos debut, the legacy media conglomerates that own (and bank on) television networks and VOD platforms are under intense pressure.

“I’ve already been told to dumb it down.” The New York Times reported Chase as saying of efforts to pitch new content ideas to television and streaming execs today, “something is dying.”

“That was a blip. A 25-year blip.” Chase, 78, said. “[There are] a lot of other hugely talented people out there who I feel increasingly bad for.”

Rather that celebrating the last 25 years, Chase suggests that, “maybe we should look at it like a funeral.”

What It Means

An end of one era means the beginning of another.

What our new era in M&E will be like has yet to be written. But the laws of physics, economics and creativity don’t change.

What this means is opportunity. Creativity is what attracts consumer audiences to content. That attraction results in consumer spending on access to content and in advertisers spending on access to that audience.

If the legacy media conglomerates cannot offer content creatively enough to attract audiences, then someone else will. For creatives like David Chase, and all those he feels bad for, alternatives are out there.

That is opportunity for both media investors and media entrepreneurs. Those legacy media conglomerates able to glance outside their echo chambers, and with enough capital reserves, might just see opportunity as well.

Looking Forward?      

Preparation is the Key.

Here are a few articles to get you moving in the right direction.

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