Media and Entertainment Industry: The changing landscape

The world is changing - the world of media and entertainment. With technology the traditional landscape has undergone a complete revamp.

Innovations in technology has blurred the boundaries across industries. Leaders from ancillary and even unconnected industries have bulldozed their way into this segment. Looking at the value chain, there are three main segments. Content producers, broadcasters and distributors.

Let’s look at the dynamics of each segment –

Producers are the creative institutions such as Balaji Telefilms, etc. Which produce and develop . For the purpose of this article, let’s focus on the next 2.

Distribution comprises of MSOs such as Hathway, Den (a B2B biz) which engage LCOs to reach the end subscribers.

In India, with the advent of DTH and OTT (Over The Top or streaming) players such as Box TV, Bigflix, this segment will soon become a B2C business.

The major infiltration has happened here from other B2C businesses. Amazon through online B2C portal, Netflix through DVD business, Google through Social networking (Youtube, Android), Apple through well, all its products, etc. have all come riding in on robust tech platforms and a strong suite of loyal customer base and can provide content as an additional service. It’s only a matter of time before FB joins the bandwagon. There are huge cross selling opportunities for these players and with increase in broadband penetration and through network speed improvements via 4G players, etc. will only accelerate this infiltration.

That’s not the whole story though.

 The distributors need content to sell. This content is in fact provided by the broadcasters such as Zee TV, Sun TV, etc. who are aggregators of various content programming and are recognized brands.

Couple of major shifts have happened in this industry – 

1. Digitization
2. Rise of on-demand programming

Far higher revenues will now be realizable compared to earlier i.e. the revenues that were earlier not declared by LCOs. Thus ad revenues which forms about 65% for broadcasters will gradually become ~50% with the share of subscriber revenues going up proportionately. Secondly, through rise of on-demand programming, ARPU has increased as subscribers may pay higher prices to skip unnecessary ads lowering ad revenues further. Subscribers have thus become much more important for broadcasters.

The challenge is that Broadcasters which were typically B2B businesses dealing with either distributors or Advertizers have to deal with consumers more directly now.

This means that now they have to reorganize and become more nimble, make faster decisions, hire people or teams that understand consumer behaviour and develop analytics capabilities among other things. This is aided by better ability to get registered subscriber information because of digitization.

Since technology has changed the nature of the industry to more consumer facing, the power has shifted to tech players. These new entrants are not stopping at distribution. Netflix, through better understanding of consumer behaviour has been able to commission blockbuster shows such as House of Cards that suits its subscriber base’s taste.

Thus the only way for broadcasters to defend their position is to attack by going down the value chain. They should invest in evolving technologies (organic will be too time consuming), launch OTT services like HBO Go, etc. and investigate other means of engagement directly with consumers such as Mobile apps, games, etc.

There are exciting times ahead for the industry and the next few years may radically change the landscape