A Gambit for Media & Entertainment Leadership

For leaders in the media & entertainment industry, it’s clear that it’s a content, content, content world – all in the service of maximizing the attention span of viewers. And the industry’s evolving so fast (seemingly in real-time), it’s easy to feel like a laggard. Even for the leaders.

Consider: While it wasn’t long ago that pundits said Disney+ was late to the direct-to-consumer game, it has already attracted more than 100 million subscribers to the service, surpassing its goal of 90 million. At its December 2020 investor conference, Disney announced 105 new movies and TV series, with 80% earmarked for deployment to Disney+. (En garde, Netflix).

Even the late-to-the-party M&E sector of publishing has seen examples of a digital revenue renaissance in the last few years as a direct consequence of paywalls and content packaging. For example, as of 2018, The New York Times pulled in an estimated half of its revenues – $500 million – through online channels. In the words of NYU Stern School of Business professor Scott Galloway, the Times became a pacesetter by “launching podcasts, video products, and built a data journalism team that makes data sing with infographics that set the standard for all media.”

Steps like this seem more astute today than ever. Key to the strategy: Double-down on digital, stop being transactional and move to subscription-based, recurring revenue bundles (what Galloway and his fellow “Pivot” podcast co-host Kara Swisher have called “rundles”). In Britain, The Spectator made similar moves; it was so successful over lockdown that it handed furlough cash back to the UK government. It is now consolidating a digital-first strategy (e.g., Spectator TV, podcasts, the new GB News, etc.).

When it comes to the direct-to-consumer strategy of Disney specifically, investor Michael Nathanson put it like this: “The sheer size and quality of the content tsunami headed to Disney+ was mind-blowing and frightening to any sub-scale company thinking about competing in the scripted entertainment space.”

Although it’s a huge company (with a huge back catalog of content), how did Disney get here? By acquisition, brick-by-brick, of major-league sources of enduring, high-quality, watch-it-again, binge-worthy content, like 21st Century Fox, Lucasfilm, Marvel and Pixar. This strategy has also changed the company’s operating model, with special emphasis on producing content for Disney+. And it’s likely we’ll see Disney+ continue on this path for the foreseeable future, with three content units stewarding the production and delivery of content, with the primary focus being the company’s streaming services.

So, when it comes to Disney’s digital mastery, it’s pretty clear that its direct-to-consumer game is “Disney-to-consumer.” Better late than never.

The Crucial Move? Mastering M&E M&A

A likely near-term impact of the industry disruption is that M&E companies will see lots of M&A activity – in other words, the big will likely get bigger through rampant merger and acquisition activity. Witness newer entrants to the streaming game like Paramount. The company’s recent “Paramount Mountain” campaign for Paramount+ underscores that it’s really just an agglomeration of unrelated properties (yet you know you’ve got a weird, if not wonderful, amalgam when Dora the Explorer meets Beavis & Butt-Head – all under the aegis of the competitive differentiation afforded by the brand).

As innovations like digital personae in gaming or digital twins fuel part of an ever-broadening M&E business-to-business value chain (B2B2X), the stakes here really are higher. Looking further into the future of the diversification sweepstakes, is it conceivable that a player like Twitter, Disney, Spotify or Netflix buys a cable company? (We might say “stranger things could happen,” as seemingly weird moves like Square buying a majority of Jay Z’s Tidal start to feel reminiscent of the head scratching that first accompanied the announcements of Amazon buying Whole Foods and The Washington Post.)

It’s worth noting that M&E organizations that have traditionally grown organically – and even those that lately have done so through acquisitions – still find themselves structured in silos. Given the importance of streaming, it’s become a competitive must to restructure (and engage in risk-taking) to amplify innovation and experience-based offerings. Historically, studios have never been direct-to-consumer, as they were always wholesalers. Change management has never been more important for traditional M&E businesses that are now going head-to-head with digital natives such as Netflix.

In order to fully compete, it’s essential to invest in disjointed content to attain bundled content and recurring, subscription-based revenue streams, but at a quality and cohesion of experience that audiences find irresistible. Viewer experience closely correlates to audience retention and needs to be brought into strategic planning early on – aspects like curation, recommendation engines using AI/ML, all done through the lens of human experience. The future of media and entertainment will offer a world of opportunities, but to advance to new levels of the chessboard requires substantial steps and boldness.

In the words of Beth Harmon, the lead character in Netflix’s The Queen’s Gambit, “I analyze games. What actually happened, not what could have happened.” Similarly, digital mastery of the M&E chessboard today and tomorrow requires situational awareness, patience and bold moves.

To learn more about your next moves if you’re a senior executive in M&E, please download our new whitepaper, “The Work Ahead in M&E: Scaling a Three-Dimensional Chessboard” at www.futureofwork.com.