Partner & Managing Director, Boston
Five major trends to emerge next year as overall streaming growth decelerates and willingness to pay for premium content peaks. Developments in AI utilization, local news, wholesale distribution, ad spending, and M&A will drive industry trajectory
NEW YORK (November 28, 2023) – The media and entertainment industry is bracing for accelerated disruption in 2024 as multiple platforms, digital networks, and channels compete for a share of consumer discretionary spending and advertising dollars, according to a report released today by AlixPartners, the global consulting firm.
Customers, frustrated by a complex web of streaming services and programming options, will likely demand simplified distribution models while continuing to move away from Pay TV options. Viewers prefer streaming but are overwhelmed by the proliferation of platforms, rising prices, and disparate billing sources. This opens the door for “streaming bundle wars” to heat up in 2024, according to the AlixPartners 2024 Media & Entertainment Predictions Report.
Today, according to the report, customers stand to save 20%-50% with bundled streaming services vs. à la carte. Meeting market demand for better pricing and less confusion will force operators to introduce new products within bundles, pursue cross-brand partnerships, and make strategic decisions regarding the long-term viability of Pay TV models, says the report. Bundles will constitute one-fourth of global subscriptions by 2028, it further states.
Advertisers, meanwhile, have backed away from pre-pandemic spending patterns, instead adopting a more measured pace, says the report. Over the next three years, it says, the global ad market will stabilize at a modest 5% CAGR – but this spending will not be evenly spread. The report expects traditional channel spend will remain depressed, with advertisers preferring digital platforms.
Consolidation is inevitable says the paper: The marketplace – cluttered by more than 80 global streaming players today – will be governed by a winner-take-most model, with four to five players prevailing. Overall dealmaking will be slowed by regulatory scrutiny and restrictive capital markets. However, legacy carve-outs in traditional media will drive M&A activity.
“Change is the only constant in a media and entertainment industry that is a poster child for creative destruction,” said Jeffrey Goldstein, Americas co-leader of the media and entertainment industry practice at AlixPartners and a partner and managing director at the firm. “Digital disruption is testing tried-and-true business models as emerging technologies, new entrants, and shifting consumer behaviors accelerate.”
As we approach a new year, the AlixPartners report says these five predictions will determine the trajectory of the industry going forward:
1. Wholesale distribution will fuel subscriber growth for streaming services
The “emulate Netflix” fad of the late 2010s is over. Now operators and streamers are being brought closer together in the search for the long-term replacement for the Pay TV model.
2. Artificial intelligence upending the operational and competitive landscape
AI has great potential to enhance the creative process and user experience, but integration is dependent on the level of disruption that consumers, writers, talent, and producers allow. Humans will remain in the driver’s seat, gaining an advantage via deliberate use of generative AI.
3. Advertising spend is moderately recovering; mid-single-digit growth likely
While there has been a return to growth in recent months, the outlook is underpinned by volatility. Advertisers will allocate budget to digital channels, including social media, search, streaming video, and the vibrant connected TV category, leading to a difficult reality for traditional players. The analysis estimates a roughly $10 billion-$20 billion reallocation to digital from linear TV, print, and radio.
4. Regulatory scrutiny and high cost of capital influencing M&A
High interest rates will persist in 2024, providing a considerable headwind for securing debt financing. Regulatory actions aimed at curbing anticompetitive practices are also poised to intensify, the report predicts, resulting in blocked deals. However, legacy media will force consolidation and carveout activity in the immediate term.
5. This will be a year of reinvention and reinvestment in local news
Expect transformation and renewal over the next 12 months, with networks and outlets focusing on high-quality, relevant, and engaging programming.
“The traditional media business model is suffering, but not yet dead,” said Grace Lee, Americas co-leader of the media and entertainment industry practice at AlixPartners and a partner at the firm. “Media and entertainment are ripe for evolution with a greater emphasis on hyperlocal and personalized content to foster strong connection in local communities.”
“Legacy media businesses with broadcasters, publishers, and traditional advertising channels historically extracted a significant share of value from media profit chains, but now they must adapt to this evolving ecosystem to survive,” said Mark Endemaño, EMEA co-leader of the media and entertainment industry practice at AlixPartners and a partner and managing director at the firm. “Emerging players must vigilantly defend their competitive moat in an increasingly crowded environment.”
The full 2024 AlixPartners Media & Entertainment Predictions Report can be found here.
AlixPartners is a results-driven global consulting firm that specializes in helping businesses successfully address their most complex and critical challenges. Our clients include companies, corporate boards, law firms, investment banks, private equity firms, and others. Founded in 1981, AlixPartners is headquartered in New York, and has offices in more than 20 cities around the world. For more information, visit www.alixpartners.com.