Media & Entertainment: The Landscape for 2023 by Imogen Carter
The World Bank is predicting a global recession in 2023, expecting GDP growth of only 1.7% which would be the slowest growth rate since 1993, outside of the 2009 and 2020 crises. Whilst there is likely to be stronger growth in some developing countries, economists anticipate the US and Europe to struggle. Increases in interest rates and the cost-of-living crisis will continue to greatly affect the lives of consumers. It is not surprising therefore, that discretionary consumer spending will drop, leading to many media companies losing revenue from consumer subscriptions and from advertisers.
But it’s not all bad news for leaders in the Media & Entertainment space. We expect to see trends around digital and mobile continue to accelerate. This will give media companies the opportunity to double down on investments in new technology, new data and new ways to monetise content in order to win against competitors.
Advertising
Despite many media agencies expounding the benefits of maintaining a company’s marketing spend during a recession to keep your brand recognition and increase market share, there is no doubt that the pace of growth in advertising spend will drop in 2023. But digital advertising will continue to play an integral role in the strategies of media & entertainment companies with a rise in video advertising and AVOD streaming services.
Across the media & entertainment industry diversification of revenue streams is on the minds of business leaders. Future plc continues to go from strength to strength having pushed growth in subscriptions, affiliate marketing and ecommerce, whilst making several strategic acquisitions in the US. Many publishers are looking at Future plc as an example of success. If you review Future’s 2022 results, there is an increase of 26% in affiliates and 24% in digital advertising. Video advertising has grown, now making up 13% of total digital advertising revenue globally for the business.
2023 will see media companies look for further opportunities for revenue diversification and monetisation. Broader industry trends such as the intersection of content and commerce and consumer demand for video advertising will support this. Plus, regulation changes that are opening up the US sports betting market will contribute to the growth of affiliate marketing as sports content providers such as Oddschecker Media Group and FootballCo expand State-side.
Data
Marketers, agencies and media companies will be focused on better targeting and measurement. With the inevitable cut in media budgets that will occur this year, increasing emphasis will be placed on investing in the right activity and demonstrating improved returns.
Advanced analytics and technology platforms are enabling broadcast and streaming companies to scale audience-based campaigns with better addressability and privacy for consumers. For example, Snowflake’s recent investment in OpenAP to join existing owners Fox, NBCUniversal, Paramount and Warner Bros Discovery, will see the acceleration of the platform’s future development. As streaming giants like Netflix try to increase customer retention and launch new ad-supported tiers, using data to create premium viewing and advertising experiences for consumers will be important.
The topic of how to best collect and monetise first party data is going to dominate discussion in the Boardrooms of media companies. Publishers and broadcasters will be dealing with the conundrum of balancing personalisation with privacy. Google has yet again delayed the complete phase out of third-party cookies up to 2024, however it is only a matter of time before this happens and media companies need to invest in the technology and capabilities for other types of data gathering and analysis now. As such, it’s likely we’ll see more media & entertainment companies bringing in new skills to the top table. Greater importance is going to be put on the role of Chief Data Officer and a deeper understanding of technology needed to fulfil the requirements of that position, with many businesses looking outside the sector to find best practice knowledge from other industries.
Gaming
In 2023, we expect to see intensifying excitement around the gaming space. New advancements in cloud, the metaverse and Web3 will start to take shape. Cloud gaming has had mixed success over the last few years with Google shutting down Stadia as of 18th January 2023, whilst on the other hand Microsoft continues to see growth in its Xbox Cloud Gaming and is navigating the competition authorities for its proposed acquisition of Activision Blizzard. The roll out of 5G communication networks will accelerate the growth of mobile and cloud gaming through significant improvements to network speeds and the gaming experience. It will also enable the use of virtual reality and augmented reality.
There will be increased investment in the metaverse and Web3 for the future of gaming. A 2022 report from McKinsey estimates that the metaverse will have a $108-125 billion impact on the global gaming market by 2030. The metaverse is arguably the obvious next progression for consumer gaming, shopping, e-learning and more. It plays into the trends we can already see across the media industry bringing together digital and physical experiences for consumers, such as Snap’s partnership with Live Nation that will elevate performances at concerts and festivals for fans through immersive AR via the Snapchat Camera. Gaming in the metaverse will create a new type of immersive and social experience for users. Web3 through a foundation of blockchain and NFT technologies will provide a new monetisation model based on the principles of decentralization and interoperability.
In Summary – Outlook for 2023
Despite the gloomy economic outlook for 2023, new technologies are going to allow businesses across the Media & Entertainment landscape to focus on long-term growth opportunities. Data will underpin a lot of these changes and will be a key differentiator for companies that succeed. The right leadership team who can set a compelling vision for the future and inspire teams to deliver in difficult market conditions will be critical.
To learn more about H.I.E.C’s global Consumer, Digital & Media practice, please click here.
You can contact Imogen Carter directly via her email icarter@hiec.com
