Major Industry Trends
The term “media” refers both to various forms of communication, and to the organizations behind this communication, including the press and news-reporting agencies. It can also refer to different types of data storage. This review looks at the media in all its communication activities.
One hundred years ago, the media was simply composed of the printed press. Today, there is a vast range of communication channels, including TV, radio, cinema, and the internet, as well as print. However, common industry trends can still be identified, despite the increasingly diverse nature of the market.
Convergence
Convergence has been one of the buzzwords in the industry for many years. It relates to the emergence of digital technology, which has allowed media organizations to deliver text, audio, and video material over the same wired, wireless, or fiber-optic connections. The development of the internet has played a critical role in media convergence, as it now allows people to read newspapers, listen to the radio, watch TV, and download music and movies (and play both) on their computers, or, increasingly, on hand-held devices. Consumers are now watching movies on their mobile phones, and making phone calls from their personal computers. Technological advances also mean that consumers can watch TV programs on demand, i.e., when and where they want, rather than when the TV schedulers decide to broadcast them.
The development of in-flight entertainment (IFE) provides a vivid illustration of the way in which the media has been transformed over the past 30 years, and of the convergence of technologies. In the 1970s, IFE consisted of a movie projected onto a screen. Today, most airlines offer personal televisions, usually located in the seat backs, featuring live satellite TV broadcasts. Some airlines offer video games and audio-visual entertainment on demand, allowing passengers to stop, start, and skip through programs, and to select movies stored in the aircraft computer system. Touch-screens and/or handsets allow passengers to choose from a variety of features and content, including feature films, news, and TV programs, as well as giving them the option to select video games and web-based content, create music playlists, etc. The more advanced IFE systems allow passengers to make hotel or rental car reservations in advance from the aircraft seat.
Back on the ground, trends over the next few years, in terms of convergence and technological developments, are likely to focus on increasing demand for personalized entertainment. In March 2009, the mobile-phone giant Motorola and the entertainment firm Virgin said they were holding discussions to provide content to customers at the time they want, and in the place they want. TMCnet.com said that both Motorola and Virgin Media “believe that the advanced multimedia services that will take over the entertainment segment in the next few years will be delivered on the next-generation, service-delivery gateway architecture,” and “will include services such as multi-room TV, which provides the user with the ability to watch recorded content from any TV or PC in the house.” Furthermore, the next wave of technological advances will allow for “converged entertainment services across three screens—PC, TV, and mobile—and the ability to move your content from device to device, and take it on-the-go,” according to TMCnet.com.
New Media Wins Advertising Share from Traditional Broadcasters
Search Engine Marketing Professional Organization (SEMPO), a trade organization for the search-engine marketing sector, reported in March 2009 that internet search engines are continuing to steal advertising market share from traditional broadcasters. SEMPO said that more than a quarter of advertisers in its survey reported that they were shifting budgets into search-engine marketing from print magazines, while 19% said that they were moving their budgets into search from print newspaper advertising.
Part of the appeal of the new media to advertisers is that audiences can be targeted much more effectively than using traditional media. SEMPO’s March 2009 survey certainly found that advertisers were expressing strong interest in new search-targeting technologies. These include “search retargeting,” or targeting search ads to select groups of users based on the websites that they have previously visited, or based upon whether an individual has visited an advertiser’s own website before. The search engine Google is striving to increase its advertising revenues, and is using targeted marketing as one means of achieving this. In March 2009, the company said it was starting to gather information about the websites people visit using an individual web browser, in order to target ads to their interests. “By making ads more relevant, and improving the connection between advertisers and our users, we can create more value for everyone,” the company said. “Users get more useful ads, and these more relevant ads generate higher returns for advertisers and publishers.” Google is also seeking to increase its advertising revenues by offering mobile advertising, including ads that appear within mobile phones’ web browsers.
Other companies have been offering personalized online advertising for some time. The social networking sites, MySpace and Facebook, have targeted adverts at individual users based on their profiles since 2007, while retail sites such as Amazon and iTunes regularly recommend books and music to their users, based on their past purchases.
Technological Developments
Apart from convergence, other technological developments are likely to have a dramatic impact on the media industry over the next five to 10 years. Scientists, for example, are currently working on holographic displays that could lead to 3D TV. Indeed, in March 2009, the UK’s Daily Telegraph newspaper reported that 3D TV could be a reality within five years. Up until now, the vast amount of information contained in holograms has meant that they require a special medium to record them, as well as vast computing power. However, the increasing cheapness of computer power, and new ways to record holograms digitally, using a sheet of laser light crafted by computer, have led to the possibility of 3D TV. The newspaper added that “leading manufacturers such as Philips, Mitsubishi, and Samsung are beginning to launch three-dimensional TVs in which objects appear to leap out at the viewer, without the need for the special glasses used in cinemas, and that can add depth to two-dimensional television.”
Market Analysis
Impact of the Recession on the Media Industry
The media industry earns a large proportion of its revenues from advertising, and is, therefore, highly influenced by the economic cycle. Advertising and marketing budgets tend to suffer first when the corporate sector comes under pressure. The recession appears to be hitting “old” media companies worse than their “new media” counterparts, although the latter are certainly not immune to the downturn. In March 2009, Italy’s biggest private broadcaster, Mediaset, which is owned by the family of Italian prime minister, Silvio Berlusconi, posted a 9% fall in 2008 profit, cut its dividend, and warned that profit could slump again in 2009 as the economic downturn hits advertising revenues, according to Reuters news agency. Mediaset said that advertising revenues in its key markets of Italy and Spain saw a “marked” fall in the first two months of 2009, and were expected to be down over the entire year.
Earlier in March 2009, Michael Grade, executive chairman of British independent TV broadcaster, ITV, described the downturn as a “short-term horror.” He added that conditions in the advertising market are “the most challenging I have experienced in over 30 years in UK broadcasting.” Meanwhile, Germany’s ProSiebenSat.1 said that revenue fell by 5.7% in 2008, to US$3.8 billion, due to a slump in advertising. Reuters said that commercial free-to-air broadcasters were among the media companies most exposed to the recession, because they usually rely almost entirely on advertising, unlike Pay TV rivals, which have subscription income to lean on.
Google contends that its business is more resilient to the downturn, because cost-conscious consumers are increasingly likely to go online to search for the best deals. In January 2009, Google reported surprisingly strong fourth-quarter results that suggested its search-advertising business and cost-cutting efforts had, indeed, enabled it to weather the recession better than rivals. But the company’s chief executive said in March 2009 that the economic situation was “pretty dire,” and that his company was “not immune” to current conditions. The research company, IDC, said in February 2009 that internet advertising could fall by 5% during the first quarter of 2009, marking the first contraction in online advertising spending since the collapse of the dotcom bubble in 2001. IDC forecast that first-quarter search revenue growth would continue slowing, while display and classified ads would experience worse declines than they suffered in the fourth quarter of 2008.
In March 2009, SEMPO forecast that North American search-marketing spending would increase in 2009 by 9%, to US$14.7 billion, from US$13.5 billion in 2008. However, its forecast was downgraded from estimates made in early 2008, in which it said that search-marketing spending would rise from US$15.7 billion in 2008 to US$18.8 billion in 2009. SEMPO said the value of the industry would reach US$19.8 billion in 2011, down from a previous estimate of US$25.2 billion for that year.
Pay TV Shines in the Global Media Sector
Advertising spending is undoubtedly under pressure around the globe, as economies battle against recessionary forces not seen for a generation. Yet, some pay TV companies believe that they can actually profit from the downturn. Louise Sams, head of the giant Turner Broadcasting System (TBS) of the US, said in March 2008 that around the world people were watching more TV because of the economic downturn. Sams said that free-to-air broadcasters in North America were struggling because of their reliance solely on advertising.
The Sydney Morning Herald quoted Sams as saying: “The US networks are not doing as many [TV show] pilots and new series, so it’s going to be interesting to see how they feed their pipeline of programming. Is it going to be less-expensive reality programming, and how long will they keep people’s attention? I have a hard time predicting the demise of terrestrial broadcasting in the foreseeable future, but I think right now in the US they are having a hard time justifying some of the original programming that we are continuing to do at TBS. That shows the benefit of having a dual revenue stream [subscriptions and advertising revenue].”
Growth of the Internet Hits Newspapers
The newspaper industry appears to be one of the main casualties of the growth of the internet. Certainly, the industry in the US appears in deep trouble, according to a report by Agence France Presse in March 2009. The report quoted the Pew Research Center’s Project for Excellence in Journalism 2009 report, The State of the News Media, as saying the outlook for the industry was the “bleakest” since it began doing the annual studies six years previously. The report examined newspapers, online media, network, cable, and local television news, as well as news magazines, radio, and the ethnic press. It found that the newspaper industry “exited a harrowing 2008 and entered 2009 in something perilously close to freefall.”
However, it added that “we still do not subscribe to the theory that the death of the industry is imminent,” noting that the industry overall “in 2008 remained profitable.” The recession is undoubtedly responsible for a significant proportion of the industry’s woes, with advertising revenues falling sharply. The report noted that “audience migration to the web accelerated substantially in 2008.” However, it said that while some US papers are abandoning print to go online, “going all-digital is not likely to become widespread anytime soon,” as “papers still make roughly 90% of their revenue from print.”
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