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Five major trends to emerge next year as overall streaming
growth decelerates and willingness to pay for premium
content peaks. Developments in AI utilization, local news,
wholesale distribution, ad spending, and M&A will drive
industry trajectory.
The media and entertainment industry is bracing for accelerated
disruption in 2024 as multiple platforms, digital networks, and
channels compete for a share of consumer discretionary spending and
advertising dollars, according to a report released today by
AlixPartners, the global consulting firm.
Customers, frustrated by a complex web of streaming services and
programming options, will likely demand simplified distribution
models while continuing to move away from Pay TV options. Viewers
prefer streaming but are overwhelmed by the proliferation of
platforms, rising prices, and disparate billing sources. This opens
the door for “streaming bundle wars” to heat up in 2024,
according to the AlixPartners 2024 Media
& Entertainment
Predictions Report.
Today, according to the report, customers stand to save 20%-50%
with bundled streaming services vs. à la carte. Meeting
market demand for better pricing and less confusion will force
operators to introduce new products within bundles, pursue
crossbrand partnerships, and make strategic decisions regarding the
long-term viability of Pay TV models, says the report. Bundles will
constitute one-fourth of global subscriptions by 2028, it further
states.
Advertisers, meanwhile, have backed away from pre-pandemic
spending patterns, instead adopting a more measured pace, says the
report. Over the next three years, it says, the global ad market
will stabilize at a modest 5% CAGR – but this spending will
AlixPartners General not be evenly spread. The report expects
traditional channel spend will remain depressed, with advertisers
preferring digital platforms.
Consolidation is inevitable says the paper: The marketplace
– cluttered by more than 80 global streaming players today
– will be governed by a winner-take-most model, with four to
five players prevailing. Overall dealmaking will be slowed by
regulatory scrutiny and restrictive capital markets. However,
legacy carve-outs in traditional media will drive M&A
activity.
“Change is the only constant in a media and entertainment
industry that is a poster child for creative destruction,”
said Jeffrey Goldstein, Americas co-leader of the media and
entertainment industry practice at AlixPartners and a partner and
managing director at the firm. “Digital disruption is testing
tried-and-true business models as emerging technologies, new
entrants, and shifting consumer behaviors accelerate.”
As we approach a new year, the AlixPartners report says these
five predictions will determine the trajectory of the industry
going forward:
- Wholesale distribution will fuel subscriber growth for
streaming services
The “emulate Netflix” fad of the late 2010s is over. Now
operators and streamers are being brought closer together in the
search for the long-term replacement for the Pay TV model. - Artificial intelligence upending the operational and
competitive landscape
AI has great potential to enhance the creative process and user
experience, but integration is dependent on the level of disruption
that consumers, writers, talent, and producers allow. Humans will
remain in the driver’s seat, gaining an advantage via
deliberate use of generative AI. - Advertising spend is moderately recovering;
mid-single-digit growth likely
While there has been a return to growth in recent months, the
outlook is underpinned by volatility. Advertisers will allocate
budget to digital channels, including social media, search,
streaming video, and the vibrant connected TV category, leading to
a difficult reality for traditional players. The analysis estimates
a roughly $10 billion-$20 billion reallocation to digital from
linear TV, print, and radio. - Regulatory scrutiny and high cost of capital
influencing M&A
High interest rates will persist in 2024, providing a considerable
headwind for securing debt financing. Regulatory actions aimed at
curbing anticompetitive practices are also poised to intensify, the
report predicts, resulting in blocked deals. However, legacy media
will force consolidation and carveout activity in the immediate
term. - This will be a year of reinvention and reinvestment in
local news
Expect transformation and renewal over the next 12 months, with
networks and outlets focusing on high-quality, relevant, and
engaging programming.
“The traditional media business model is suffering, but not
yet dead,” said Grace Lee, Americas co-leader of the media and
entertainment industry practice at AlixPartners and a partner at
the firm. “Media and entertainment are ripe for evolution with
a greater emphasis on hyperlocal and personalized content to foster
strong connection in local communities.”
“Legacy media businesses with broadcasters, publishers, and
traditional advertising channels historically extracted a
significant share of value from media profit chains, but now they
must adapt to this evolving ecosystem to survive,” Mark
Endemaño, EMEA coleader of the media and entertainment
industry practice at AlixPartners and a partner and managing
director at the firm, said. “Emerging players must vigilantly
defend their competitive moat in an increasingly crowded
environment.”
The full 2024 AlixPartners Media & Entertainment Prediction
Report can be found here.
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