Doc’s IN: What does the future hold for the broadcast and media industry?

By Dr Amal Punchihewa

A recent IABM study and report provided some insights into the current status and future of the broadcast and media (B&M) industry. One of the key points highlighted in the report was the impact of inflation, which cannot be ignored. Inflation has reached alarming levels in many countries, with central banks continually raising their lending rates.

During the COVID-19 pandemic, the ecosystem of human resources in many sectors was affected. Social distancing, restrictions on travel and limited close contacts made compromises in human resource developments and introduced remote working. While some industries, organisations and staff are trying to adapt to the emerging post-pandemic period, they face various challenges in working conditions and capabilities. 

In the B&M industry, there is a scarcity of the right personnel for functions that are emerging within the converged media landscape. This is creating a cycle of increasing salaries, increasing inflation and a shortage of talent. Rapidly increasing salaries will not be helpful for the sustenance of B&M operations at a time when both audiences and broadcast stations are struggling to manage rapidly increasing costs.

The disruption in the supply chain caused by the pandemic over the last two years introduced longer delays for delivery of physical goods, increased prices dramatically and brought about a shortage of components.

While all of us are adapting and innovating to mitigate the impact of these developments, these will take time amidst a low probability of price or cost reduction. Manufacturers and service providers may start passing costs to their clients, making the maintenance of the market share and profitability much harder for broadcast and media operators. We can see some B&M providers taking different strategies to mitigate churn and attract more subscribers or audiences.

Digital consumption in the form of online or over-the-top (OTT) content increased notably during the last two years as COVID-19 forced us to maintain a high level of social restrictions. As countries continue to relax COVID-19 restrictions and global travel increases, online content consumption is being impacted.

Currently, we are observing a downward trend that is also contributed by the reduction in discretionary spending of audiences due to increasing inflation. 

As we have noted with viewing habits over the years, consumption patterns vary among different demographics. We could observe increased consumption of user-generated content and involvement or tie-in with some form of gaming. In the past, the B&M industry was segmented and many operations were conducted discreetly. These silos could now be broken up and replaced by convergence that is driven by how technology is used to provide more seamless access and viewing experience. Technology associations are consciously working to reduce further fragmentation of B&M consumers with more collaborations and identifying market conditions or commercial needs.

Prior to the pandemic, there has been much discussion around the growing streaming market. As mentioned earlier, limited social mobility helped to sustain at least an upward trend in streaming, if not growth. However, there are now discussions in the B&M industry around streaming maturity. This could be the first time that the industry has started talking about reaching maturity in the streaming industry. 

When you analyse the streaming industry carefully, the streaming business probably had its most lucrative period during 2020 and 2021, driven by the pandemic and conditions that emerged from how the pandemic was managed. We are unlikely to see the streaming industry enjoy the growth it did between 2020 and 2021. Aggravated by rising global inflation, people may no longer have the time and money they had during the pandemic period to continue their viewing habits. 

With consumers reducing their discretionary spending, major streaming businesses such as Disney+ and Netflix have announced the launch of ad-supported offerings. This is a notable change for pure OTT providers, who are moving from providing only subscription-based video-on-demand (SVoD) services to start offering advertising video-on-demand (AVoD) services. These developments may also have a notable impact on national and regional advertising markets.

People in various countries and regulatory mechanisms are compelling OTT providers to produce local content and to offer them in their portals. This requirement is equally applicable to all media and entertainment operators, whether they are public service media (PSM), commercial or large international operators. 

Content production requires substantial investments. This could lead to PSM operators live-streaming most of their content and make it available on-demand through their OTT services, mostly integrated with an engine such as Hybrid Broadcast-Broadband TV (HbbTV). This integration will be further enhanced once service lists can be made available for ubiquitous delivery, that is, terrestrial, satellite, cable or online (via the Internet).  This enables true convergence of services using an electronic programme guide (EPG)-like service discovery for any form of distribution. 

Based on the research information shared by the IABM during the IBC2022 conference, when we analyse the revenue of major operators, linear content has produced the best financial results against direct-to-consumer (D2C) and content sales. Hence, for large operators, linear (content delivered at a prescribed time) will be sustained to produce more revenue, even as margins remain negative. Growing negative margins in the D2C space is an area that we should observe as it will demonstrate the efficacy of D2C for larger operators.

To wrap up the article for this month, let us look briefly at investments, as well as research and development. We can anticipate the industry to keep costs low and do more with less by investing in new digital technologies to increase the efficiencies of distribution models. 

In my next column, we will discuss the challenges that the B&M industry needs to tackle to comply with national and global sustainability issues. Both media technology companies and operators need to work together to achieve sustainability goals set by international organisations such as International Telecommunication Union (ITU) and the United Nations (UN).

Hence, investments in media technologies should be able to address the sustainability needs of the B&E sector and align with the needs of audiences and operators.

Dr Amal Punchihewa is an ITU expert and advisor/consultant to the Asia-Pacific Institute for Broadcasting Development (AIBD), and was formerly Director of Technology and Innovation at the Asia-Pacific Broadcasting Union (ABU). In the first of a new monthly column for APB+, Dr Amal will discuss the latest trends and developments that are impacting the broadcast and media industry.