RESEARCH REPORT
Reinvent for growth: Only the radical survive
10-MINUTE READ
December 16, 2022
RESEARCH REPORT
10-MINUTE READ
December 16, 2022
With consumers shifting away from traditional media options and big tech firms smashing legacy business models, the media and entertainment landscape has been hobbled. The result: slower growth in revenue, profitability and operating cash flows for legacy media business, compared with big tech companies. Big tech companies are expected to grow more than two times faster in operating cash flow than legacy media (10.6% vs. 4.8% )during 2023-25. It’s time for radical strategic moves.
How radical? Traditional media companies must reinvent themselves from the ground up. Legacy media companies need new sources of revenue; they need to take on new roles in the entertainment value chain. They need to rethink the customers they serve and even the industries where they chose to compete.
Getting radical means upending the classic strategic planning theory and exploring new growth areas that are even beyond their core competencies. Out of the more than 50 strategic options we assessed through our proprietary Media Thrive Index, only the 12 options rated as “Radical” show a path for legacy media companies to secure the sound financial footing they need to thrive.
It's an enormous mandate, but a tremendous opportunity. This paper explores the challenges facing today’s media companies and offers a set of foundational imperatives to jumpstart reinvention that delivers.
The traditional media sector’s forays into the streaming arena have contributed to the deteriorating economic health and accelerated a splintering media landscape. This shift complicates content discovery for consumers, turning what should be an enjoyable, seamless search into a cumbersome chore.
The growing customer dissatisfaction has given rise to the serial churner. This group demonstrates fluctuating brand loyalty, subscribing to and unsubscribing from platforms as their content interests evolve.
Findings from 6,000 global consumers about their media consumption behaviors, reveal significant challenges:
Traditional media is rapidly losing customers:
Companies such as Amazon, Google/YouTube, Apple and Microsoft are investing in streaming, gaming, and live sports. Their diversified revenue streams give them a safety net that pure-play media companies don’t have.
Big Tech companies are also supporting consumer's lifestyle with services such as free shipping, grocery delivery, streaming video and music, photo storage, video game streaming, and pharmacy assistance.
We expect consumer spending through these lifestyle bundles to reach $3.5 trillion by 2030
Partnerships in lifestyle bundles could emerge as a strategic avenue for traditional media players, offering a streamlined path to attract and keep subscribers. The trend toward bundling risks devaluing media content in the eyes of consumers, challenging their willingness to invest in media elements of the bundles.
We sought to identify strategies that would position legacy media companies ready and capable of thriving in tomorrow’s media landscape. We analyzed more than 50 different strategic options for reinvention, which vary from modest distribution tactics and cost-cutting to corporate restructuring or entering an altogether new media segment. Then, using our Media Reinvention Scale, we measured the extent an option might require a company to change its current financial or operating model, and capabilities. We then evaluated the options using our Media Thrive Index to assess the extent each option offers a company financially and strategically health.
Our findings were telling. Some media companies made moves that required low or medium reinvention. For instance, some are increasing their live sports programming. Consumers are spending about 53 minutes per day on live sports content, and almost half (47%) said they spent more time on live sports content this year than last year. Similarly, media companies are forming new content partnerships to increase library scale on their streaming platform.
Our findings indicate that these low-to-medium reinvention strategies may have a positive impact on viewership; however, they will not significantly impact a media company’s economic profile or reset its revenue trajectory. (See Figure 1.)
Two strategies that scored high on Accenture’s Thrive Index required radical levels of reinvention:
49+%
of respondents increased their time playing video games
40+%
use cross-services engines to navigate and find their desired content and services
There are two keys to survival and success: get radical and get uncomfortable
1. Get radical: Among over fifty strategic alternatives evaluated, only those considered "Radical" on our Media Reinvention Scale managed to achieve a rating above 4 on the Media Thrive Index. This revelation highlights a clear path forward: for legacy media entities to flourish in both financial and strategic realms, adopting the most audacious strategies is imperative.
Bold approaches require an overhaul of traditional revenue streams, a redefinition of roles within the media value chain, a fresh look at target audiences, and openness to competing in new industries.
2. Get outside your comfort zone: For most companies, even “radical change” means building on existing strengths, or “core competencies.” But for legacy media companies, that won’t work.
This realization necessitates a shift beyond merely enhancing traditional capabilities. For example, legacy media firms are not skilled in navigating social media platform management, nurturing content creator economies, video game development, or the realms of sports betting. However, these sectors represent opportunities and are pivotal to flourish in the modern age.
We’ve identified five actions to jump-start your radical reinvention.
The media industry’s evolution isn’t going to slow down. For legacy media companies, this can be a time of fear and reaction, or bold decisions and rewarding outcomes.
In today’s challenging Media & Entertainment industry, Accenture urges our clients: Only the radical survive.