The Future of Broadcasting V: The Search for Fundamental Growth
The widening gap between future value and current value makes the search for fundamental growth increasingly pressing for broadcasters
OVERVIEW
The Search for Fundamental Growth
In last year’s issue, The Future of Broadcasting IV, we observed that market expectations within the broadcasting sector had soared, and asked where growth would come from to justify these lofty future values. This year, market expectations have continued to climb despite a $171 billion plunge in the value of the wider media market between August 2015 and February 2016. The widening gap between future value and current value makes the search for fundamental growth increasingly pressing for broadcasters.
In this year’s edition we have identified four key industry themes.
1
Content strategies pay off
2
Consolidation for scale drives M&A activity
3
Growth of Direct to Consumer Offerings
4
Diversification of Business Models
The widening gap between future value and performance makes the search for fundamental growth ever-more pressing. Broadcasters have—with some success—turned to content strategies to improve performance. At the same time, broadcasting organizations have sought to create value through increased M&A activity and consolidation in the industry. But it is unlikely that these initiatives alone will be sufficient to close the gap between expectations and performance.
OPPORTUNITIES FOR VALUE CREATION
In response to these themes, we have identified three opportunities for value creation. We believe these value creation opportunities will help broadcasters in their search for new sources of fundamental growth.
Service is King
Content decision-making
Exploiting the broadcast advantage
Accenture’s The Future of Broadcasting series, now in its fifth year, is grounded in our Shareholder Value Analysis of key players in the global broadcasting industry. Our work around the world with broadcasters and other media, entertainment and consumer-technology companies allows us to build on this value analysis, and to draw a set of “moment in time” conclusions about this rapidly evolving sector.
ABOUT THE SERIES
The Future of Broadcasting series is now in its fifth year. Since 2011 we have charted the rapid evolution of the broadcasting industry.
In the first edition of The Future of Broadcasting we saw the market’s clear preference for pay broadcasters’ subscription-based models over the advertiser-funded free to air (FTA) model. By the second issue, enterprise value across the sector had increased significantly with all broadcasters enjoying a recovery in value. By 2012/13 the distinction between FTA and pay business models had become even less relevant, with investors looking for all broadcasters to embrace more sophisticated strategies adapted to an era of constant change. Last year we saw the distinction between business models continuing to disappear and noted another large increase in enterprise value (up 43 percent from 2012), fueled by future value, signifying rising market optimism within broadcasting.
This year we observe that the gap between future value and current value is widening, with future value at an all-time high. We also assess the strategies that broadcasters are implementing to create value: investing in content production and licensing, and achieving scale through consolidation.
