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MediaTech Radar: Scarcity & Resilience

Wed 06, 07 2022

MediaTech Radar is a bi-weekly newsletter put together by IABM’s Head of Knowledge Lorenzo Zanni. It focuses on a spotlight topic in MediaTech and reflects on a series of past, present, and future business developments in the industry. In this edition, our spotlight topic is Scarcity & Resilience.

MediaTech Spotlight: Scarcity & Resilience

A spotlight topic in MediaTech.

  • In a previous newsletter, I singled out scarcity as one of the major trends in the industry ahead of my trip to NAB Show 2022. In April 2022, we published a Briefing delving into the effects of scarcity for MediaTech businesses, including the increasing importance of resilience.
  • The origin of scarcity was the impact of the pandemic, which drove increasing demand for some resources (components, talent, energy, etc.) while disrupting their supply. This scarcity has been recently exacerbated by the conflict in Ukraine, which has further strained global supply chains and pushed up inflation. Below, I have included a graphic showing the major forces driving scarcity:
  • The Briefing provides some numbers on the impact of scarcity on MediaTech, including the effects of supply chain disruption on the cost of components as well as the upward trajectory of salaries due to the Great Resignation.
  • The most recent force driving scarcity has been conflict. This is exacerbating salary inflation by eroding the purchasing power of workers through the price increases in necessities ranging from food to energy.
  • Inflation is also having an impact on consumers’ willingness to pay for entertainment. A recent article by the Financial Times (requires subscription) citing research from Ampere Analysis argues just that: “In the two weeks after cancelling their subscription to Netflix, 87% of subscribers had not signed up to a rival service.
  • While it is not possible for businesses to control macro trends such as supply chain disruption and inflation, it is indeed possible to design strategies that make them more resilient to these shocks – for example, localizing supply chains might be part of this effort, though this might take some time to implement.

MediaTech Watchlist: Videndum, Netflix, Trade Shows and more…

A watchlist of selected past, present and future business developments in MediaTech.

  • In May 2022, The Vitec Group rebranded as Videndum. The press release announcing the rebranding reads that: “Videndum means ‘That which must be seen’ or ‘A must see’ and better reflects our purpose and opportunity in the multiple market segments of the exciting and growing content creation market in which we operate.” This reflects Videndum’s intention to target new user segments that have grown significantly due to the pandemic. One of these is the creator economy, dubbed the “Influencer/Vlogger” segment by Videndum, and only representing circa 10% of its Imaging (now Media Solutions) revenue as of FY 2021.
  • Netflix could introduce an ad-supported, lower-priced subscription by the end of the year, quicker than originally anticipated. This follows Disney’s move announcing an ad-supported,  cheaper tier for Disney+ earlier this year. As reported above in the MediaTech Spotlight, consumer inflation might be one of the most important factors driving churn for Netflix. Conversely, consumers may be more willing to put up with ads due to the erosion of their purchasing power.
  • In a previous newsletter, we reported that Netflix was working on addressing password-sharing, a long-standing trend restricting its growth potential. According to this article citing research conducted by non-profit news organization Rest of World, this is not going well. The test conducted in a few South American countries (though the research was done in Peru) was met with confusion due to a lack of understanding over the meaning of the word “household.” Different rules were applied to different Peruvian consumers (as this was an exercise test different features), exacerbating their confusion. Although Netflix is set to reap a significant sum from tackling password-sharing, this occurrence demonstrates that it is not an easy issue to solve.
  • TVBEurope published an interesting series of three articles reporting MediaTech businesses’ views on the latest trade shows – this is the first article of this series.
  • In 2022, the pendulum has swung back from growth to value stocks. Streaming maturity has led to a crash in the valuation of OTT stocks, and most notably in Netflix’s, while scarcity has resuscitated the performance of energy stocks that were battered during the pandemic years. After a brief analysis comparing two stock indices (one made up of 11 OTT stocks and another made up of 19 energy stocks) for the period 2017-2022, I have spotted a -60% correlation between them – i.e., an inverse relationship – confirming the pendulum argument. Will this trend continue? I’ll look at streaming maturity more in my next newsletter.

Thank you for reading this newsletter. If there are topics you would like me to cover, or have information/ideas you’d like to share, please get in touch with me.

Lorenzo Zanni

Head of Knowledge

IABM

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