NEXT GEN CMI

A Three-Way Approach for Media to Rebalance Revenue Streams During COVID-19

 
June 16, 2020

The massive global business disruption fueled by COVID-19 has had far reaching impact on the media industry, posing an existential threat for the already struggling traditional media companies. The pandemic has dried up ad revenue streams due to shrinking global tourism, reduced commercial travel, canceled live games and events, delayed film trailers and reduced lock-in of ad spots. According to a UBS survey, digital ad spending is down by nearly 50%, national TV nearly by 40%, and print by nearly 20%. In fact, amidst the lockdown the failure rate of SMBs is expected to be around 30%. This is a growing concern for digital advertising giants such as Facebook and Google who depend on advertising revenue from SMBs for nearly 45% to 55% of their income.  In fact, for the first time in the history of the United States, there is a chance that we will simultaneously see the highest level of media usage and the least amount of advertising. Some of the key challenges for the media segment include:

  • Higher viewership for subscription services resulting in increased cost at no incremental revenue
  • Cord-cutting trends will accelerate due to lack of live sports programming
  • Lack of sports programming resulting in elimination of pay TV subscription
  • Reduced advertising resulting in job cuts for the newspaper industry while the demand for news continues to grow
  • Vanishing car rides impacting the already-troubled radio sector with IHM and Cumulus Media stocks down 70%
  • Suspension of commutes decimating outdoor billboards.

How media and digital advertising can reimagine business post-COVID-19

Mitigating the COVID-19 impact on digital advertising requires media companies to create new revenue streams to accelerate the transformation journey and boost business resilience. Here is a three-way approach:

  • Reimagine the business model: In the post-COVID world, digital will be the new normal.  This means replacing the online-also model with the online-first model for enhanced B2C and B2B interactions. However, this will require heightened technology adoption and increased reliance on virtual and digital networks.
  • Leverage existing IP: Media companies will have to create new revenue models to accelerate business recovery. For instance, subscription-based service providers such as Netflix, Spotify, and broadband can create consumption-based tiered subscription models similar to telcos. This will help protect margins and capitalize on increased demand. Ad supported broadcast, cable networks, radio, newspapers, and magazines can adopt new subscription models and provide freemium offerings and curated premium content in the form of micro-transactions and paid value-added services. This will help accelerate the B2C transformation journey and reduce over dependency on ad revenue.
  • Boost virtual audience engagement: In the post COVID-19 world, sports and other events will resume with zero or limited live audience engagement. Case in point 2020 NFL draft. Adopting cutting-edge AR and VR technology can help improve virtual audience engagement, creating a revenue stream with unlimited remote audience participation. At the same time, broadcasters can collaborate with gaming majors and other broadcasters to create local and national leagues to monetize on the widespread virtual gaming community. E-sports will become more mainstream with gaming majors and broadcasters collaborating to create local and national leagues thus, creating the platform to monetize the widespread virtual gaming community

The path to recovery: Redefining business models and accelerating technology adoption

Identifying the products and service that best align with the changing consumer landscape, prioritizing those with the highest margins and shelving poor performing products is crucial to bounce back in the post-COVID era. Media companies must act decisively and provide solutions that help diversify business. For instance, Comcast, AT&T and Walt Disney have held up better than most other ad-dependent businesses due to broadband networks and streaming services. In addition to offering innovative solutions, the media sector could enable tighter integration with smart speakers and other smart home devices to remove dependency on consumption methods such as in-car entertainment. The ultimate goal will be to adopt new ways of conducting business and monetizing value fueled by widespread technology adoption.

Rakesh Roy is a Client Partner with the Media Segment (NA) of the Communications, Media and Information Services business group, TCS. Rakesh brings to the table more than 22 years of engineering experience. He has also served as a functional expert in media and entertainment domain for more than 12 years.