MediaTech Radar is a monthly newsletter put together by IABM’s Business Intelligence Unit. 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 the State of MediaTech, our strategic report prepared for NAB Show 2024.
MediaTech Spotlight: State of MediaTech
A spotlight topic in MediaTech.
- Our State of MediaTech report is based on extensive research combining data from our MediaTech Industry Tracker survey, a wide range of expert interviews and a literature review. Key insights of the report are discussed in the context of three major trends – profitability, consolidation and efficiency – affecting investment in MediaTech:
- Profitability: Business confidence in MediaTech is down from 2023, driven by a more pessimistic outlook caused by cost concerns. 2024 has started off with a big number of cost reduction initiatives such as massive layoffs by Sky, Paramount Global and Channel 4 to manage costs as they struggle to become profitable in the streaming space.
- Consolidation: Strikes in Hollywood last year accelerated media businesses’ move to hybrid business models. Increasing consolidation (in the form of M&A activity and joint initiatives) is helping media businesses to improve their hybrid offerings and target new markets with bigger content catalogues. For example, last month, Disney and Reliance agreed to merge their Indian operations, while Canal+ made a bid for Multichoice to expand its footprint from French-speaking Africa to South Africa.
- Efficiency: Macroeconomic pressures have pushed media businesses’ tech budgets down in 2024, whereas investment in AI continues to grow – this reflects companies’ focus on efficiency and need for “doing more with less”. Our latest data shows that efficiency, ROI and revenue generation have become more important drivers of technology investment in 2024. Some companies are also outsourcing investment to cut costs and focus on the core.
- (Gen) AI: The rise in (Gen) AI spending is driven by media businesses’ efficiency targets and the proliferation of hybrid business models, requiring ever-improving data analytics. Big public cloud service providers are now offering media businesses a “plug-in” testbed for Gen AI as a Service through pre-trained ML models. The rise of Gen AI is also making the biggest cloud players invest in their own AI chip production to diversify supply chain risks and enter the lucrative, highly concentrated AI chip market, currently dominated by Nvidia.
- Cloud: Cloud investment and importance are down, whereas cloud adoption is up in 2024. While the move to the cloud continues, the buzz around the cloud has decreased as high cloud costs are making media companies adopt a hybrid model. One large technology supplier told us: “There is more realism to it now compared to 1-2 years ago, when we all thought cloud could solve everything and that all the production would be eventually possible to be moved into the cloud. Now there is the understanding that it will be a hybrid model. Potentially, the move to the cloud is picking up again, because there are advancements around AI and 5G applications. These advancements are now providing some advantages and it simply took time to develop them.”
- Content Supply Chain investment: Create and Monetize have become the fastest-growing segments, reflecting the development and interest in cloud-based solutions in Create such as Camera-to-Cloud (C2C) and Gen AI-based data analytics in Monetize.
- Convergence: Convergence was under pressure in 2023 due to macroeconomic pressures, but it is back on track in 2024 as media businesses seek new ways to diversify (and grow) their revenue streams and engage with new generations. In 2024, convergence initiatives will continue to be mainly in live sports and gaming. On the supply side, our data shows that MediaTech suppliers already derive about half of their total revenues from parallel markets such as corporate. Growing demand from brands and the creator economy is increasingly making professional and “prosumer” technologies converge, democratizing content production.
- Interactivity: As we mentioned in our previous newsletter, Disney’s investment in Epic Games is another sign of convergence. Having retreated from the Metaverse, Disney is now focusing on combining gaming with its own animated world and sports betting. Its investment in Epic Games also provides Disney with access to Epic’s Unreal Engine tools, its game sales platform (with a direct billing system) and its massive existing gamer community.
- Talent shortage: Talent shortages remain a huge challenge for MediaTech companies, even though recent tech layoffs may have improved the situation in the short term for some businesses. However, the structural long-term challenges like salary inflation remain unsolved. One technology supplier said: “There’s a huge talent shortage on both [broadcast and cloud] fronts. There is a gap, because there are no schools anymore teaching broadcast engineering. On the cloud, automation and data side, some of our customers are paying huge salaries to cloud architects over $300k per year. Many customers are filling the job gaps by using Amazon expertise and tools now.”
- Geopolitical uncertainty: Our latest data shows that geopolitical tension ranks as the third most important barrier to growth, reflecting increasing tensions stemming from the on-going conflicts in the Middle East, Eastern Europe and Africa. At the same time, supply chain disruption has improved, making MediaTech suppliers gradually reduce their inventories. However, increasing geopolitical tensions in several continents and the global chase for AI chips may lead to new supply chain risks in 2024.We will be talking about all these topics and other industry challenges at our State of the Industry Briefing in Vegas.
MediaTech Watchlist: Paramount Global, MotoGP, Peacock and more…
A watchlist of selected past, present and future business developments in MediaTech.
- At the start of April, Paramount Global entered exclusive merger discussions with Skydance Media, following a $27bn offer from a private equity firm Apollo Global Management. The companies established a 30-day window for exclusive deal talks, putting on pause any other discussions with other bidders such as Warner Bros. Discovery, which has been in the epicenter of rumors around a mega merger with Paramount Global over the past month. The new bid for the entire Paramount Global came after Apollo’s earlier offer of $11bn to buy Paramount Pictures alone in late March was declined by Paramount Global’s board of directors. These consecutive bids signal the role of premium content production studios as the core asset in a post-strikes era, when media businesses are shifting their content focus to quality over quantity. Earlier in March, Paramount Global sold its minor stake in Viacom18 to Reliance for $517mn shortly after Reliance and Disney had announced their $8.5bn deal merging Viacom18 with Disney’s Star India. This exemplifies how media companies continue to cut costs to improve profitability and focus on their core business.
- Liberty Media announced the acquisition of rights to MotoGP for $4.5bn in April. Since its acquisition of Formula One rights in 2017, Liberty Media has systematically focused on growing Formula One’s popularity in the US (now hosting three races in Miami, Austin and Las Vegas) by making races available on streaming platforms and investing in related sports content like the Liberty Media-produced Netflix series “Formula 1: Drive to Survive”. The deal confirms the trend toward streaming of live sports, increasingly complementing linear distribution to drive digital revenues and improve monetization of viewer engagement.
- In late March, NBCUniversal – the owner of the US media rights to the Olympic Games through 2032 – announced that it is selling the 2024 Paris Olympics programmatically on Peacock for the first time ever, opening up Peacock ads for advertisers for all streamed 329 medal events. The move highlights media companies’ increasing reliance on hybrid business models and investment in streaming of live sports to engage new audiences, attracting new smaller advertisers (and digital revenues). A few days later, NBCUniversal announced that it will start using Gen AI in its programmatic ad sales to generate “emotion-based, AI-powered audience segments” to match hyper-personalized ads to viewers. Another announced offering – Virtual Concessions – seems to be NBCU’s baby step to retail business: Virtual Concessions will enable viewers to order food, beverages and other items for delivery while watching live sports from Paris. John Feldman, CMO at NBCUniversal said: “We have research that shows two out of three people who are on Peacock streaming are ordering food or beverages during live sports or movie programs. We know we have a super engaged audience at this point.” We expect to see other creative initiatives by media businesses to monetize viewer engagement during the Olympic Games.
- In our last newsletter, we talked about layoffs in the technology industry. In April, AWS announced having cut several hundreds of tech, sales and marketing roles as part of a reorganization to streamline AWS’ operations after a slowdown in growth in 2023. This is in line with our latest data showing that cloud investment and importance are down in 2024, reflecting a more realistic and rational view on cloud usage in the industry. Earlier in mid-March, AWS and NVIDIA announced that they will extend their AI supercomputer collaboration, using NVIDIA’s latest GH200 Grace Hopper Superchip. This is yet another sign of the rise in (Gen) AI spending, driven by big public cloud service providers.BBC and Disney+ announced the global premiere date for the next “Doctor Who” season, making it the first-ever season to debut simultaneously on Disney+ and BBC iPlayer. Produced by Bad Wolf in collaboration with BBC Studios for BBC and Disney Branded Television, the new season is an example of increasing collaboration between global streamers and public service broadcasters, many of which are seeking a relief from the financial constraints caused by decreasing license fee revenues and public funding. The partnership with Disney will bring new investments for the BBC, deepening the pockets of BBC Studios, whereas Disney – securing distribution rights to “Doctor Who” – gets to acquire yet another well-established franchise to its content arm. Other similar examples of collaboration between PSBs and big streaming players include the BBC’s co-production deal with Amazon Prime Video for “Good Omens” and Atresmedia’s partnership with Netflix for “Money Heist”. These deals signal a slight change in public broadcasters’ strategies, which have typically focused on collaboration with other public broadcasters. However, continuous cost concerns and the need to attract younger audiences are making global streaming platforms increasingly appealing partners for PSBs, allowing them to expand the reach of their content and content budgets.
- Salto – the joint streaming platform of France Televisions, TF1 and M6 launched in 2020 – ceased its operations in March, following the announcement that the abandonment of the proposed merger between TF1 and M6 had made Salto’s ownership structure too complex to operate and attract distribution partners – most internet service providers had refused to distribute the platform, TF1 Group reported in its press release. The shutdown of Salto illustrates media companies’ struggle to be profitable in a streaming world, particularly in Europe where numerous public and private broadcasters are offering plenty of local high-quality content free-to-air, making domestic SVOD services less attractive.
Thank you for reading this newsletter. If there are topics you would like us to cover or have information/ideas you’d like to share, please get in touch with us.
The IABM Business Intelligence Unit