2019 ended with dignity in December with the multi-billion dollar acquisition of Entertainment One by Hasbro. The massive takeover of Time Warner by AT&T and the nearly equal acquisition of Fox by Disney are still fresh in our minds. Of course, these mega transactions have everything to do with the rapidly changing media landscape, in which the battle for the consumer predominates. This dynamic is the prelude to fundamental changes in the next decade, which is already announcing itself as the Roaring Twenties.
A number of developments that are already observable will come to fruition in this decade. The first and most fundamental is that the consumer and not the provider will determine the media business. The distribution options will be (literally) broader in the coming years with all investments in fiber and 5G. Anyone who manages to reach the consumer with the right content in these times of oversupply will be the winner. This makes effective marketing, according to Meindert Landsmeer, my colleague and analytical anchor, fundamental in the media business. An example is the new role of the traditional program director, who will increasingly function as a marketer, that transformation will be complete by the end of this decade.
Streaming and broadcasting will increasingly become intertwined. Broadcasters are going to set up streaming activities en masse, streamers are increasingly getting involved in broadcast activities. Amazon's deal in Germany, where it snatched some of the Champions League rights to Sky, is the harbinger of what lies ahead. Media companies, whether of digital or analogue origin, will become all-round. Predecessor Netflix will be part of an integrated media company in 10 years' time or has taken over other types of media companies, perhaps large content providers. The consolidation trend that has been going on for so long will lead to the emergence of a small number of media companies in the next decade to dominate the international media world.
The global advertising market, so important to commercial television, will be increasingly dominated by online. The question is whether this will also lead to a shrinkage of the traditional television market. It seems logical that this will happen in the longer term when the TV shy youth of the moment becomes the most important target group for the advertiser. The panels will then undoubtedly continue to move online, a development that, according to the British research agency Ampère, will lead to strong growth of AVOD in the short term. In any case, broadcasters and pay TV providers will have an even harder time and will have to diversify or merge. It will be a true battlefield in the field of commercial television.
How will public broadcasters fare? Many will think that by the end of the Roaring Twenties, many public broadcasters will have ceased to exist. I don't think this will happen: in this case the consumer is not about it, but politics. If independent and multiform journalism and locally produced content continues to be important, the position of the European public broadcaster, in whatever form, will be maintained.
It will be a very interesting media decade!
It is by now extremely clear that Big Tech is forcing the media world to change. Google and Facebook have been conquering the advertising market at an unimaginable pace for a decade, and Netflix in particular has shown the way to the new way of television viewing. The consequences are enormous, and that awareness is all too present in the boardrooms of media companies today. The example of the music industry, which has finally re-established itself after many years of crisis, speaks volumes. Under pressure everything becomes liquid, and that means that the media companies are prepared to take very drastic steps.
After all, almost all 'traditional' media companies are under pressure. The broadcasters (whether they are public or commercial) have to fight for the young viewer, who increasingly ignores television. The commercial broadcasters have to fight for their advertising share, because digital/online is growing fast, while television is stagnating. And at the ever very profitable cable companies, dark clouds are also starting to loom in the sky: cord cutting is already an important phenomenon in the United States and the first signs of this are also surfacing in Europe. In short, all traditional players see their activities threatened.
The way in which this is responded to is different. The online VOD initiatives of media companies tumble over each other: from Disney+ to Peacock, from Videoland to Streamz, from Joyn to Discovery+, from Viaplay to Paramount+, the number of new initiatives is almost over the top. Public broadcasters are also involved in the fight with mostly local initiatives. But by far the most important development is that media companies will defend themselves by working together on a large scale; the merger initiatives fly around our ears.
Amazon's acquisition of MGM is of course of a different nature, but it does indicate that the panels are definitively shifting. The biggest news this year was that AT&T decided to divest Warner Media, which had just been purchased a year earlier, and merge with Discovery.
Super interesting is also what happened in France. The eternal rivals TF1 and M6 decided to merge. This is the ultimate signal that things-are-a-changing, because until recently the leaders of these companies were still competing heavily. In apparently perfect harmony, a groundbreaking deal was forged, which was undoubtedly sanctioned by the top of French politics early in trial in the Elysée Palace. L'exception Française isn't it? Soon thereafter, the merger between Talpa and RTL in the Netherlands was announced. There is no doubt that a similar exercise is on the cards in Germany, which would really be significant.
The conclusion: consolidation in the media world is starting to gain pace. The threats of Big Tech have led to a new phenomenon: the development of Big Media!
The COVID crisis hit many parts of the media sector hard over the past year. It was no different in the field of sports rights, which involved enormous amounts. It is logical that sports organizations do everything they can to organize major tournaments such as the Olympic Games and the European Football Championship a year later: one simply cannot afford to let the enormous rights income flow once. This income forms the oxygen or perhaps also the opium for sports organizations and clubs.
It is no different in the regular competitions, especially in the field of football. Whereas in the Netherlands the media revenues still represent a relatively modest part of the turnover of the sector, this interest has grown enormously in the 5 major European countries. The pressure to finish competitions was therefore enormous. This was not possible in France, so rights holders negotiated substantial discounts on the agreed amounts. In England, Germany, Italy and Spain the competitions were still played out and the damage was not too bad.
However, the COVID specter does affect media rights: new deals appear to be significantly lower than the old ones at first glance. Initially, the flag went out in France when the amount of rights more than doubled when La Ligue (the umbrella organization of French football) switched from Canal + to the Spanish Mediapro. It soon became apparent that Mediapro could no longer afford the rights, after which La Ligue had no choice and again tendered the rights. Canal + has recaptured the rights for a fraction of the original rights amount until the end of this season. But as is the case, the French clubs had already invested on the higher amount of rights: French professional football is therefore in a major financial crisis.
It is no different in Italy. The current rights deal will expire at the end of the season and the bids from Sky Italia on the one hand and the consortium DAZN and telecom company TIM on the other still leave something to be desired. It is the first time that DAZN, which likes to advertise itself as the Netflix of the Sport, is fully bidding on the rights at the highest level. It is a break in the trend that the new rights deal seems to be closed lower than the previous one. After all, the trees of pay-TV no longer grow to the sky, foreign consumers seem to have become accustomed to lower prices for digital video.
It is extremely interesting to see what the future development of supply and demand in the sports rights market will look like. New digital players such as DAZN and Eleven Sports have entered the arena and Amazon is also participating a bit. History shows that new entrants make the current parties (usually Pay TV providers) nervous and still drive up the price for sports rights. It only takes 2 to tango and the rights holders are warm again!
Most people in the media world are happy that 2020 is over. The COVID crisis hit employees and employers hard in the past year, apart from a few. Fortunately, there has been some recovery in the last two quarters, which seems to have been the worst. The advertising market recovered and productions could be restarted, albeit with restrictions. It is time to look to the future again and then 3 trends stand out in particular.
First of all, the "traditional" media companies defend themselves by setting up VOD initiatives themselves. Global players such as Disney and Discovery do this by coming up with their own SVOD proposition, which is complementary to what Netflix and Amazon have to offer. Both companies did this by putting + behind the name and behind this there are very ambitious plans. Disney uses its extensive kids catalog and does not hesitate to use major films such as the Star Wars series. Discovery positions itself as a factual expert, and in some regions (such as Europe) also focuses on Sport. It is almost impossible for both initiatives to be very successful this year. Broadcasters also start up national VOD activities, whether or not in a mix of AVOD and SVOD. I have already skewed about that in my column in October last year.
The second trend is a very striking one: Studios are about to stop premiere films, but to introduce them directly on their own SVOD platforms. This makes the need (after all, going to the cinema has been banned worldwide for months) into a virtue: big, new titles continue to attract a large audience. Disney has embraced this strategy, but the most aggressive player appears to be Warner Media, which has shifted many premieres to its SVOD platform HBO Max. Only time will tell if this is a wise strategy, because the international box office has been a cashcow for blockbuster films for decades. At the end of the year, we will be able to assess whether this bold strategy has been successful.
The third trend: local governments are very concerned about the increasing importance of Big Tech. In addition to the initiatives to divide these companies into pieces (which will take a long time), national governments are increasingly looking at how to protect their own media industry. On the one hand, this will be done by allowing scaling-up in the media. It is not without reason that Thomas Raabe, the CEO of RTL, bombarded the competition authorities with the idea that advertising markets should be viewed as a whole. This could pave the way for national media mergers. The British government is also engaged in a consultation (called Small Screen, Big Debate) to see whether the BBC should be given more opportunities in the online field. I would not be surprised if in the future this debate also started to erupt in the rest of Europe, which would be good news for every European public broadcaster.