5 Predictions That Could Shape The Future Of The Entertainment Industry

With stories aplenty around super brands forming in the film and entertainment world, here’s just a few reasons why evolution is essential and only the bravest brands and marketers will be left standing

1. Amazon will buy a cinema chain

Cinema exhibition is stale. The steam has run out and it's the entertainment line of business most in need of transformation. It requires a pivot of epic proportion, understanding how to monetise its real estate in full and how to unlock a more fruitful partnership with content owners. This is an opportunity for a new player in the market and Amazon would be a perfect partner to acquire a cinema chain. Bricks and mortar is the future of Amazon and a way to use ‘warehouses’ to store product and reduce postage costs, shipping product from the nearest location. Amazon is vested in content, vested in bricks and mortar locations (see recent investment and trial of Whole Foods Market) and are inspired by pivoting tired businesses with incredible opportunity (such as supermarkets). Cinema’s could be an area to showcase Amazon products, create more pick up locations for sold product and build loyalty and more customer data. If you want another Amazon prediction, I could see them acquiring IKEA in a bid to own home furnishings

2. Apple will buy Disney

Not too much of a reach this one. The relationship goes back many years. In 2006 Apple CEO Steve Jobs sold Pixar for $7.4 billion of Disney shares. Disney Chief Executive Bob Iger is on Apple’s board of directors and Disney was the first studio to sell television shows and movies on iTunes. Despite owning the best content and ancillary businesses that outcompete every other player in the market, Disney is falling behind. AT&T have acquired Time Warner and Comcast have acquired NBC Universal. Disney require a partner to take their business to the next level giving them stronger distribution for its content as consumers increasingly turn to their mobile devices and Apple are openly looking for content partners. With Apple’s market cap at $878bn and Disney’s market cap at $160bn (though they would cost a reported $237bn) they can certainly afford it. It would make them by some distance the number one player in the market

3. Disney will buy Netflix

This is not an either or for me. I believe Apple (or Facebook) will buy Disney irrespective, but will Disney make a cheeky acquisition prior to purchase in order to increase their value, make a strategic play for the group AND resolve the Bob Iger succession planning issue. Iger’s contract is up mid 2019 and it looks like he is going to be running for office or at the very least chancing his arm in politics. He has a good chance too. Sheryl Sandberg has been talked of as a potential successor (Facebook could be the other suitor for Disney with a market cap of $522bn), even Barack Obama was rumoured! But I’ve always liked Reed Hastings as a successor and Disney (and Apple’s) ownership of Netflix would give them an unparalleled position in the OTT market, also allowing them to sell live sports packages to Netflix customers. With potential decline on the horizon for Disney’s core TV business, Netflix would also give Disney a robust platform for its premium content on a global scale and give Iger one last acquisition before bowing out gracefully

4. The rest of the market will look to consolidate

The film industry unquestionably needs to see more market consolidation. The lower end of the market, the independent distribution space is being squeezed out. The mid market (eOne, Lionsgate, Studio Canal) forever feel like they are one step away from being in a position to challenge the majors and some of the majors are awash with rumours from Fox through to Sony and Paramount. This business is not getting any easier with new players coming in to the market (Netflix, Amazon, YouTube and soon to be Apple and Facebook), content is more valuable than ever with more buyers and deeper wallets than ever before. Put simply, unless you have a content pipe and ancillary revenue streams (mobile, consumer products, theme parks, media networks), a brand or franchise strategy and synergy between all those ancillary businesses, it’s very difficult to make money in this game. The cinema business is not in good shape no matter what anyone tells you. The market is flat and any growth we are seeing is fuelled by screen count growth, large format screens and growth in Asia. Once that levels out it’s hard to see how the industry can continue to grow especially with the core cinema going audience opting to use their precious time and disposable income elsewhere. That, in my view, is a marketing issue and one I talk about regularly at industry events. So with all that in mind, I expect we will see imminent consolidation with the view that the whole is great than the sum of its parts

5. The film industry will (HAS TO) move away from box office

Metrics in this business are completely out of date. How many (successful) businesses quantify their metric of success as top line revenue? The industry simply has to move away from box office (vanity) and towards a net margin metric (sanity). Only then can smarter decisions be made around cost control and investment. Box office is a label that the industry is addicted to. It reports against it publicly and internally and it drives most if not all of the investment decisions, especially around marketing. It is the classic don’t look over here, look over here, and it prevents the industry from asking the important questions. The data drivers that support investment decisions such as tracking are designed to predict a box office result and therefore huge investments are made if tracking comes in low. There doesn’t seem to be any interest in understanding whether investing more money will actually vastly reduce your net margin. In time, this will have to change

So plenty of change ahead of us. I for one will be watching with a large box of popcorn