By David Elms, Media Partner
The standout issue for media companies is preparing their organization for major business model change. At 42 percent, this is the top-rated priority in the sector, dwarfing the 24 percent consensus from the total population of respondents.
It isn't surprising. This is a sector that is coping with the switch from analogue to digital and which is embracing new and constantly evolving platforms and channels. Business models are in flux as companies reengineer the way they operate.
The economic environment is also exerting pressure. For 39 percent of respondents, changing business operations to realize cost efficiencies is a priority. But even without the cyclical impact of the downturn, a more pressing structural dilemma is presented by reduced customer yields due to the switch from analogue to digital. Quite simply, media companies are having to achieve more with less.
Worryingly low is respondents' attitude to addressing risk ― down in 13th place, compared with sixth place for the total population. Risks like cyber crime and fraud continue to present significant threats to this sector ―particularly in the new digital world.
Innovation, of course, ranks highly. New internet-enabled distribution platforms, and content on the move via tablets and smart devices, are changing the way that consumers view content.
And with this mobility comes greater potential to monetize content, say 88 percent of respondents. The appetite is definitely there, with consumers spending more, month on month, on content and apps over mobile devices while shunning payment mechanisms over the fixed-line internet.
The whole issue of paywalls is emotive. To me, it comes down to the nature of the content or how consumers want to view it. Some content lends itself to a pay-to-view model; others work well on a ‘freemium’ basis, while other sites can be purely advertising-funded.
Media companies need to be flexible in their approach and more than half of respondents (55 percent) expect 'freemium' models to be more effective than rigid paywall subscription models.
But consumers are also becoming choosier about the type of content they trust, say 82 percent of respondents. The proliferation of content via social networking media is making them question editorial integrity, which may play well into strategies on how to make money out of content.
Views are split on consolidation within the sector across Europe. To some extent, economic conditions have led to caution. They make management ensure that their existing business models are robust and intact before committing to transactions.
However, over the past three years, many companies have clarified and focused their strategies and sought to strengthen their balance sheets. Those companies are now well positioned to make strategic acquisitions. Nonetheless, scarcity of good assets means that prices for the best businesses remain relatively high.
Europe is not the only target destination. Media companies continue to look to fast-growing economies, such as Asia Pacific, as core parts of their expansion strategies.
