Media: New offers and suppliers change business from scratch

More and more, media use is currently understood as a location-, time- and device-independent option with the possibility of personalisation and interaction. Thus, television viewers, who were previously condemned to passivity, now have the option to compose their own programmes and watch at times convenient to them.

Digital technology and convergence are blurring the formerly strict demarcation between broadcast, the press, IT and telecommunications services. More and more, media use is understood as an option wherever, whenever and with whatever device the user wants; it can also be personalised and interactive – especially the mobile device. Thus, previously passive TV watchers can now create their own programming from the various offerings of the different free or paid (streaming) platforms and watch it whenever they like. Furthermore, viewers may disseminate media content of their own all over the world – if they want to.

Digital technology and convergence also mean that content is decoupled from a physical medium and a specialised receiver. For some time now, audio and video content have no longer been received solely via a TV or radio exclusively made for this purpose. Instead, desktop computers but increasingly also mobile terminals (i.e. smart phones, tablets, notebooks) are being used. Here, the media-suitable devices may take on many functions and serve as a TV, game centre or even the control centre of the smart home.

With all these new possibilities and gadgets, the media market is currently re-inventing itself completely. Thus, it is not only the demand from media users that is undergoing change but also the revenue situation of traditional media corporations that is changing completely. This is particularly obvious e.g. in the development of advertising revenues. According to estimates by the international consultancy A.T. Kearney, global advertising revenues in online/ social TV will double in the next four years (corresponding to an average annual growth rate of a respectable 25%) and could quickly catch up with stagnating turnover in the traditional television segment.

 

In light of these challenges in their core business, established media corporations are feeling compelled to press ahead with restructuring their business models. To this end, they are widening their businesses horizontally especially in value-added depth. Companies are developing their business models depending on the expertise and capital at their disposal either independently or allied with other firms along the value chain. Correspondingly, many media companies are currently trying to be successful in the market not only via the content of their core business but also via complementary offerings, such as technical distribution platforms. Again and again, efforts targeting proprietary offerings are observed. With these offerings, users are to be retained and market shares thus secured. However, such a strategy is anything but a success guarantee. On the one hand, proprietary offerings may deter in advance. On the other, experience shows that proprietary offerings have always been replaced quickly and fundamentally by innovative solutions.

But the fundamental changes in the media sector are not restricted solely to the traditional media companies themselves. Instead, many companies from previously separated segments of the value added chain establish themselves with their content in the media market – in many cases also based on comprehensive international strategies. Here, the large telecommunication and internet companies in particular are currently the new stars. Coming from their respective core businesses, these increasingly want to participate in the lucrative media market with comprehensive innovative offerings. Just like the incumbent media firms, the firms that are new to the media market are pursuing a strategy that straddles the value chain with comprehensive bundled offerings for the end-consumers. These bundled offerings comprise e.g. traditional linear television, streaming applications, internet access, telephony, gaming, social media and also mobile devices. The dynamics of this development are closely related to the evolution of transmission networks. For instance, with the expansion of a high-performance transmission network, which covers wide geographic areas in a finally meshed way, attractiveness should rise again.

In the foreseeable future, competition will quickly become fiercer. This means that e.g. the providers of communication and TV cable networks will increasingly enter the market with offerings of the three segments neighbouring in the value-added chain, i.e. consumer electronics (stationary, mobile), technological platforms and media content (from video to games).

In addition, with the personalisation and individualisation of content, the very lucrative advertising market is likely to change. In a favourable environment, this could benefit the advertising companies, their marketing agencies and also media users. If media content with coordinated information exactly meets the interests of the media user, it is likely to be perceived as welcome information rather than an obtrusive nuisance. This change in objective and perception should also be reflected in economic success and thus prices.

In this extremely dynamic situation companies focus their strategy on their brand name, if possible. The trademark serves as a seal of quality. With this seal, the media offer is to stand out from the complex mass, provide confidence and orientation and in addition awaken customer interest. After the current period of segmentation, concentration in the media market is likely to pick up again. In the future, however, a new constellation of companies will scramble in the restructured media market. Here, we will probably find some brand names that we already know from other links of the value chain.

*Read the original report here.