As we look to the year ahead, there are some key trends I predict will drive the media sector in 2023 and beyond:
Increased cost pressures on the media consumer, due to economic conditions
- As consumers continue to feel the pressure of rising prices and persistent inflation, we expect to see additional impact on their media and entertainment spend. This may result in belt tightening on everything from movie tickets and concessions to live events, and result in a bumpy year ahead for streaming churn. According to streaming researcher Antenna, a record-breaking 32 million U.S. consumers canceled their streaming service in Q3 2022.
- A 2022 KPMG consumer survey reinforced that entertainment isn’t recession proof, with 20 percent of consumers indicating they have already canceled at least one streaming service due to inflation, and another 37 percent would cancel if prices of other goods continue to rise.
Continued consolidation within the streaming space, both intercompany and intra-company.
- After years of strong consumer demand and numerous streaming launches, the market has become saturated. 2023 will mark a year of significant consolidation as streamers shift their focus to a different set of KPIs, including ARPU, churn and profitability.
Advertising markets will be challenged, with predicted growth far less than last year’s pace.
- Many media companies are dependent upon advertising as a significant revenue stream, but slower growth will lead to some business model challenges.
- We expect growth in the ad market to slow appreciably from 2022 levels, but the result will be uneven, and there will be winners and losers. Companies that are positioned in areas of growth, for example CTV and digital video, may fare better than those that are more anchored to categories that are forecast to decline.
- In 2023, overall ad spend is projected to be up 5.9% YoY from 2022, according to a recent iab survey. This is down from the 9% YoY ad spend from 2021 to 2022.
Sports teams will continue to be a vibrant market, with an active M&A market combined with the emergence of direct-to-consumer sports offerings as well as niche sports proliferation.
- More premier franchises will change hands in 2023 compared to prior years, and some big brand names are up for sale.
- Additional leagues and teams will offer direct to consumer services, a trend that is already gaining greater traction.
- Niche sports will continue to pop up on the mainstream radar
Media companies will refocus on profitability.
- We are seeing a mindset shift that will continue well into 2023. Media companies are emerging from an era of driving growth, and their focus has quickly shifted to profitability.
- Given market conditions including persistent inflation, increased labor costs and a potential economic downturn, media companies will take a defensive stance around operating models.
- Companies will conduct strategic reviews of assets, product and customer profitability, in order to streamline operations and be able to still invest in growth initiatives.
These are just a few of the many predictions and observations we have about the media landscape. I look forward to seeing how this highly dynamic market develops in the new year.