11 minute read
Review of Sessions
Media Finance FOCUS 2020
CONFERENCE ROUNDUP
The world is facing a mound of troubles, but Media Finance Focus 2020 unearthed positive changes and opportunities ahead. The second part of our conference review will appear in the Nov./Dec. edition.
Gold in the Hills
BY PATRICIA ANDREWS-KEENAN
Morphing Trends and Technology
SHIFTING CONSUMER MEDIA HABITS AND THE WAYS
companies can markedly improve their competitive edge were very much on the minds of two keynote session speakers – Deloitte’s Kevin Westcott and Sinclair Broadcast Group’s Brian Bark.
Video subscriptions accelerated markedly after the COVID-19 crisis arrived, noted Westcott, who is a vice chairman, principal and the U.S. telecom, media and entertainment lead at Deloitte. “Rather than purchasing a bundle of content, consumers now have complete control over what they want in their households and on what devices,” he said.
Before the coronavirus reached epic proportions early this year, the average American household had 12 media and entertainment subscriptions, three of which are paid. Afterwards, the number jumped to 17, according to Deloitte.
The company’s findings also showed: ■ 32% of all consumers added at least one paid video service since the crisis; ■ 15% of consumers added gaming and/or audio services; ■ 73% of households had streaming services before the pandemic, and that number is now 80%.
What’s more, the average number of paid subscriptions per household moved from three to four, which Westcott said is a huge financial boost to the industry.
Media companies will need to figure out how to retain and engage these consumers moving forward, he noted. Original, exclusive content is the No. 1 driver of both acquisition and retention, according to Deloitte’s research. The data also indicate that most families are price sensitive, so free and discounted offers will be key.
Competition from technology Goliaths was very much on the mind of Bark, who is the senior vice president and chief information officer at Sinclair.
Quoting data from 2017 Forrester Research, Bark said that Facebook, Amazon, Netflix, and Google would take over $1 trillion from the market. And while gross domestic product was growing between 3% and 4%, these companies have grown at a rate of nine to 10 times over the last three years.
All four have reorganized their management structures around supporting a data-driven workforce. They’ve also acquired artificial intelligence (AI) startups and begun using AI as a common feature inside their products. These socalled FANG companies, along with Microsoft and Apple, have a total market cap of $5 trillion, Bark said.
Big data analytics are clearly key to the future health of media companies. Machine learning offers a huge opportunity, Bark noted. Some companies are using it to detect unknown patterns. Others are formulating predictions based on machine learning and then incorporating them into automated software or AI-driven actions.
While blockchain is still a developing technology, its ability to solve fraud and inefficiencies could reengineer business relationships and workflows, Bark said. He cited predictions that the technology will generate about $3.2 trillion in revenue for blockchain-enabled companies by 2030. Today blockchain is being used most efficiently in the financial and telco industry, with the media industry just a bit behind them. Security is a strong selling point because transactions are encrypted.
Bark also touched on public cloud infrastructure, which continues to expand and is big business for companies like Amazon and Google. Private clouds are expected to grow in popularity. “A lot of companies are transitioning to a hybrid, multi-cloud capability,” said Bark. “It is the right mix, but a lot of analysis has to go into running the right workloads with the right levels of performance and quality.”
After the pandemic hit, the average number of paid subscriptions per household moved from three to four, according to Deloitte data.
Deloitte’s Kevin Westcott
Sinclair Broadcast Group’s Brian Bark
MORE CONFERENCE ROUNDUP ON PAGE 24
A List of Predictions
In a conference session on the future of media two partners at the consulting firm A.T. Kearney offered up some predictions. Michael Felice and Leslie Parker expect that in the next five years:
■ Netflix will be an acquisition target. The streaming service is morphing into a standalone production house and will need distribution muscle to survive.
The buyer will have deep pockets, but it won’t be The Walt Disney Co. ■ The streamers Disney+, HBO Max and
Peacock will have more than 100 million subscribers each. ■ More than 25% of the content on overthe-top (OTT) will be user generated. ■ There will be three to four content super aggregators that help consumers sort through the options. ■ Only three newspaper publishers will be profitable, and there will be a push to hyperlocalism. ■ There will be significant merger and acquisition activity within media, driven by the acquisition of niche services like the short-form content platform Quibi. ■ Most national and television advertising will be targeted directly to the household. ■ There will be deep collaborations between traditional media and the
FANG four: Facebook, Amazon, Netflix and Google.
Gaming’s Explosive Growth
“GAMING IS BIGGER THAN MUSIC, BIGGER THAN FILM, YET MOST
people don’t know how it works,” said Joost van Dreunen in a session that covered how the video games business has mushroomed.
Van Dreunen is a startup advisor and co-founder of SuperData Research, which specializes in digital games intelligence and was sold to Nielsen. In the session, van Dreunen traced the evolution of the industry from games like Super Mario Brothers and consoles from Nintendo, up to the present-day esports phenomenon Fortnite and Microsoft’s Xbox. The industry now ropes in some $30 billion a year.
The transition to mobile gaming and the popularization of smartphones opened up the industry in a big way. People on both the supply and demand side entered the space because of the lower barrier to entry via mobile, he explained.
Gradually game companies moved from a product-based to a service-based model. Players no longer go to a GameStop or WalMart to buy disks for consoles or PCs. Rather they are going online. With more digital distribution platforms and bandwidth, “we can download a greater number of titles in a reasonable amount of time,” van Dreunen said.
The distribution of free, third-party content from independent game developers paved the way for monetization. “Consoles are important again as well, driven by free titles and more accessibility,” van Dreunen said.
Today titles like Minecraft and Pokémon Go are played by hundreds of millions of diverse consumers. Then came the incredible success of Fortnite, which is a tremendous attractor for audience attention and consumer spending, said van Dreunen. “Much like its cousins in Hollywood, it is an overnight success 10 years in the making.”
Tech companies are in the gaming business for the long haul said van Dreunen. Amazon acquired Twitch in 2014 for $1 billion from Google. Facebook is now reinvigorating its gaming efforts. Apple develops games for its MacBook. Microsoft continues to grow its Xbox division. And 27% of Sony’s revenue comes from the video games space alone.
As with legacy media, content is clearly king in the games business today, van Dreunen concluded. But monetization is key.
“Much like its cousins in Hollywood, [Fortnite] is an overnight success 10 years in the making.” —Joost van Dreunen
MORE CONFERENCE ROUNDUP ON PAGE 26
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Blending in Digital
TRADITIONAL MEDIA IS FAR ALONG IN ENTERING THE DIG-
ital advertising space, but companies are still searching for the best ways of integrating the newer revenue stream into the larger financial “universe” with special processes and outside solutions.
That was front-and-center during a panel session featuring Bob Parrish, director of business development at Emmis Marketing (an agency within radio-focused Emmis Communications); Darrin McAfee, executive vice president of digital sales at the radio company Point Broadcasting; and Carmen Reyes, director of order to cash and accounts receivable cash management, U.S., at WarnerMedia.
Moderating the discussion was J.B. Ozuna, senior director, digital strategy at the software solutions and services company Marketron.
Technology solutions can only go so far. “As easy as things can be made using technology, we’ve got to have human eyeballs on the process to ensure sales is engaging with the right potential clients,” McAfee said.
Organizing a media company’s staff to effectively handle digital revenue needs is key. Parrish suggested that financial leaders identify a subject-matter expert, who might be in management or in a sales strategist role. At WarnerMedia, Reyes works to develop subject-matter expertise in house through internal learning processes.
McAfee said that a detailed roadmap is crucial to effectively engage a sales team. He created a “digital bible” for Point Broadcasting’s sales teams that covers everything from the products and sales training to billing and finance. His goal is not just to acquire or retain a digital client but to also make sure the company does not lose a broadcast client due to missteps. For Reyes, communications is key right from the point when an order is placed so that her team can troubleshoot issues that might arise at the time of invoicing. For example, she wants to make sure her people know specifics concerning how a client wants their billing handled. The internal information flow between sales and billing is critical, said McAfee. An order-management system that can facilitate it is vital. As part of that, sales teams need to communicate effectively with the business side on their commission set-up, he added.
While digital revenue may be lower now, that’s going to change. Looking to the future, digital could make up 55% to 60% of a client’s marketing and advertising buy, said Parrish. So it’s important to keep sales reps incentivized.
A View From the Top
“CRISIS HELPS YOU FOCUS. IT NARROWS
down your priorities very quickly,” said Darrell Brown, president of Bonneville International during a Media Finance Focus 2020 keynote session. He joined Ken Solomon, chairman and CEO of The Tennis Channel, and Randy Pitchford, president and CEO of gaming-focused Gearbox Software, in discussing the changing media landscape and assessing the impact of COVID-19.
Needless to say, with the majority of their employees working from home, many companies have increased demands on technology. Brown viewed this is an opportunity to double down on corporate culture and better communicate with employees, using technology to keep everyone in the loop.
With more people at home, Pitchford noted that the demand for video game content has spiked. People are looking for “joy and happiness,” he said. Entertainment is a great vehicle for that, and it works to the advantage of those companies that provide ways to experience it more efficiently.
Speaking of priorities for media companies overall, Solomon said: “Most of all we need to innovate and monetize.” After The Tennis Channel’s in-person competitive events ended, it created a new set of tours all over the world captured by drones and lockdown cameras.
Pitchford said Gearbox is continually looking at ways to customize its products and monetize them. A lot of gamers personalized their gaming avatars in recent months by having them wear COVID masks. All the money that Gearbox generated from the avatar masks has gone to charities actively engaged in fighting the pandemic. That’s something that affects mindshare while bringing in revenue, he said.
Tennis Channel views mental health as a national security issue, and their on-air contributors are showing people all over the world how to stay fit. Among them is tennis star Kristie Ahn, who showed how she combines exercise and cleaning her house in one segment on the channel.
Patricia Andrews-Keenan, chief strategist of The Tallulah Group, provides public relations services to MFM and BCCA. She may be reached at pkeenan1@comcast.net or (312) 206-2821.
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