Digital Transformation Trends 2021 in Media & Entertainment

Top 5 Digital Transformation Trends Disrupting the Media and Entertainment Industry in 2021

Although the media and entertainment industry has been proactive in preparing itself for tomorrow’s digital shifts since time immemorial, the COVID-19 pandemic’s onset has further reaffirmed its optimism towards change. 

As the COVID-19 pandemic spread its deadly clout on a massive global scale, more and more people started to stay at home, resulting in them turning to over-the-top (OTT) streaming services seeking solace from their mundane routine lives.

The COVID-19 acted as a catalyst to accelerate and amplify the consumers’ behavior, pulling forward digital disruption and causing an uptick in demand for media and entertainment software solutions.

While the long-standing business models get reshaped, at the macroeconomic level, analysts are debating about the shape of economic recovery: U-shaped recovery, L-shaped trajectory, or a rapid V-shaped bounce back. However, the consensus seems to be with a K-shaped bifurcated recovery for the media and entertainment industry. 

According to the Global Entertainment & Media Outlook 2020-2024 by PwC, while the M&E industry will post a 2.8% compound annual growth rate (CAGR) through 2024, some industry segments will expand quickly, experiencing three years of anticipated growth in a single year. 

Modern-day agile consumers, responding to the new reality with enthusiasm, are compelling the media and entertainment market players to offer them new bundles and environments and D2C models with all-you-can-eat access to digital content, including music, videos, and games.

Among the most profound digital media and entertainment trends in the post-COVID-19 world have been the phenomenal rise in content consumption and the emergence of new market players, retracting from video content aggregators like Netflix to stream their content direct-to-the-consumer (D2C).

In the face of the new reality, existing market players or content providers such as over-the-top (OTT) companies, well-positioned to meet the customers’ existential demands, managed to thrive. However, others facing strategic headwinds are realigning themselves to accelerate their digitization plans by looking for a reliable media and entertainment software development partner.

Here Are Top 5 Digital Trends Poised to Reverberate through the M&E Industry in 2021 and Beyond

  1. Direct-to-Consumer (D2C) Video Streaming

    The initial phase of the lockdowns imposed across geographies led to a spike in demand for internet services, with people streaming meaningful and high-quality video content.  As a result, the US’ pay-TV subscription suffered a jolt, owing to the cross-platform compatibility offered by platforms like Netflix and Amazon Prime.

    However, on the flip side, OTT platforms are giving a run for their money to each other to gain a market foothold. Disney was the first to retract its content from Netflix and offer it through its own platform Disney+, based on the D2C model. This development led to a domino effect causing other market players to follow suit and hit third-party content aggregators. 

    This trend raises another debate on whether the end-users are willing to subscribe to multiple OTT platforms and pay for them. According to a study by Deloitte, consumers have over 300 video streaming platforms to choose from. Over time, such a saturated ecosystem would be challenging to sustain due to increasing content fragmentation. 

    One way around this problem is to reorganize content and offer multiple formats such as videos, music, and gaming on a single aggregated platform. Content providers need to form strategic partnerships and offer content based on a shared revenue business model. Content fragmentation is a major source of frustration for the consumers as it makes content discovery difficult and leads to app congestion on the users’ devices. 
     
  2. Delivering Personalized Content

    In today’s content marketplace, customer relationship management is pivotal for retaining subscribers. Millennials and Generation Z happily subscribe to a streaming service that offers them content personalized to their tastes. Almost every OTT platform uses Artificial Intelligence and Machine Learning algorithms to provide content recommendations based on user behavior and demographics data. 

    Understanding the audience and serving them with relevant content has become a key differentiator for an OTT platform’s success. While the first phase in the OTT landscape saw an increasing market penetration with affordable data plans and smartphones, the next phase will see the growth of AI/ML-based personalized recommendation engines. Personalization works on all the four pillars of success of an OTT platform, namely content, User Interface (UI), User Experience (UX), and discovery to help overcome challenges such as:

    •    High Customer Acquisition Cost (CAC)
    •    Making relevant content discoverable
    •    Increasing average user content consumption
    •    Converting freemium users into paid subscribers 
    •    Retaining the subscriber base
     
  3. Ad-Based Business Models

    What initially drew the audiences towards online streaming was that they could watch content on-demand without sitting through advertisements, a viewing experience that traditional TV failed to offer. But now, with top studios and global media conglomerates foraying into the media streaming space, ad-supported content remains the only option to achieve economic viability. 

    Streaming ad-supported content is a means of keeping the subscription fees competitive. YouTube was the pioneer for introducing the AVOD (advertisement-based video-on-demand) monetization model. The consumers patiently wait for an ad to finish on YouTube before they watch their desired video. The AVOD model works perfectly well for YouTube as a survey indicates that YouTube users do less multitasking during advertisements than traditional TV viewers.

    From the advertisers’ standpoint, too, OTT is an appealing alternative giving them the best of both worlds – the engagement of traditional TV combined with the precision and direct targeting of digital web advertising. According to Nielsen's research, an average OTT viewer is younger and more affluent. Another study by a freewheel. tv has found that OTT holds a clear advertising advantage as highly engaged OTT subscribers complete 98% of all video ads.  
     
  4. Ecosystem-Based Business Models

    The convergence of technologies such as 5G has led to the boundaries of industries blurring, procreating cross-industry ecosystem collaborations, like for example, telecom giant AT&T acquiring media behemoth Time Warner Inc.

    Media and entertainment companies continue to adopt a mix of ecosystem-based business models depending on the industry context, capabilities, and business strategy. Ecosystem-based business models operational across the media and entertainment industry are:

    •    Smart Content Providers

    M&E companies falling under this category are inward-focused and harness multiple facets to maximize business outcomes. Smart content providers leverage next-gen technologies such as AI and machine learning to offer bundled content as their core service offerings. Such companies use standardized APIs to provide media content and services seamlessly. Examples of this business model include New York Times and Reuters.  

    •    Value Aggregators

    This business model focuses on building a portfolio of services adjacent to their core offerings. Value aggregators look to retain their existing customer base while at the same time targeting a broader customer base by offering differentiated services in an agile manner. Value aggregator media companies offer hyper-personalization by harnessing the capabilities of third-party entities through APIs. OTT platform Netflix is an example of the value aggregator model. 

    •    Value Creators

    The value creator business model goes a step beyond the value aggregator business model by forging cross-industry partnerships and marketplace collaborations. Google and Amazon are examples of the value creator business model. Value creators provide software-centric platforms that other ecosystem players can leverage. 
     
  5. Emerging Technologies to Drive Innovation in the M&E Industry 

    New technologies and improving infrastructure will act as an enabler for novel business models in the media and entertainment industry. In amalgamation with consumers’ readiness to adopt digital media experiences, emerging technologies will open up new ways to reinvent and present efficient and faster growth opportunities. Here are a few technologies at the forefront of driving innovation in the media and entertainment industry.    
  •  AR/VR: Although AR/VR technologies have seen much hype, their adoption has lagged. However, with most smartphone models supporting AR/VR content, these technologies will start to realize their long-heralded potential in media and entertainment. With venues such as cinema theatres and sports stadiums closed or restricted due to COVID-19, AR/VR technologies can help deliver immersive 360-degree experiences.
     
  • 5G Network: According to GSMA Intelligence, by 2025, 45% of the world will be covered by 5G, connecting over 1.7 billion devices, leading to the proliferation in the number of on-the-go consumers using high-speed mobile data to access video, audio, and gaming content.
     
  • AI: Artificial Intelligence (AI) is fast making its presence felt in homes, with a growing number of people interacting with digital assistants. According to the Outlook forecast, by 2024, there will be over 540 million smart speakers across 20 countries, mainly in the Asia-Pacific region. Another critical use case of AI in media and entertainment is hyper-personalization in delivering content. 

Digital Transformation in M&E Is Far From Over

The transformation of the media and entertainment industry is far from over. While the lines between print and digital, pay-TV and OTT, and social and traditional media continue to blur, companies operating in the M&E space are re-envisioning every aspect of how they offer and deliver their services. The answer lies in leveraging the right technology to provide premium content personalized to the audiences’ preferences cost-effectively.

As we look ahead to 2021, the media and entertainment industry’s sentiment, although challenging, remains nearly positive. As the M&E navigates through the troubled coronavirus seas, consumers are incorporating many of the industry’s products and services into their daily lives. This era will, in all likelihood, go down into the pages of history as the golden age of M&E, where COVID-19 had the effect of accelerating digitization and changing behavioral patterns.