Reinvent for growth: Only the radical survive

In brief

• The traditional media industry is facing dire circumstances
  
  
• To survive and thrive, they must make radical moves to step outside their comfort zone, beyond current competencies
  
  
• The industry can assess the impact of their reinvention strategies through the Media Thrive Index
  
  
• Our report identifies five foundational steps that companies can take to begin their radical reinvention

The time for radical strategic moves has arrived

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 challenges are closing in

They’re numerous, they’re varied, and they are growing increasingly dire

Streaming splinters the landscape

The traditional media sector’s foray 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:

• 55.9% of those surveyed expressed frustration at having to pay for multiple platforms to access their desired content, compared with 55.0% a year ago (2022), reflecting sustained frustration levels and an absence of effective responses to these needs.

• 65.5% found it inconvenient to repeatedly enter personal information to access new services.

• 36.2% said they struggled to find something entertaining, exposing the companies’ inability to provide engaging content. Making it worse, 52.2% said recommended content did not match their interests, exacerbating the problem.

• 53.8% spent more than six minutes on this quest, compared with 49.7% from the previous year.

• The percentage of consumers spending over 10 minutes searching for new content has now doubled, reaching 30%.

Consumers leaving traditional media behind

Traditional media is rapidly losing customers:

• 26% plummet in linear TV viewership since last year, contrasting with the 57% increase in Subscription Video on Demand (SVOD). Consumers increased their usage for social media (52%), social video (52%), and video games (50%), spaces where legacy media companies have little to no footprint.

• Highlighting a seismic shift in entertainment preferences, 59% of consumers regard user-generated content as equally entertaining as traditional media, signaling a competitive upheaval in the quest for audience attention. And 58% place as much trust in the voices of independent content creators as they do in established news outlets.

• There is a clear consumer bias for platform-based content over SVOD services nearly doubled last year, highlighting a significant shift in consumer behavior and preferences.

Big Tech casts a long shadow

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.

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.

Our Reinvention Analysis

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:

• Merging with a gaming studio: 49.8% of respondents reported an increase in their video game playing . Merging with a gaming studio would give companies access to a rapidly growing segment of the entertainment industry, allowing for engagement through another medium, covering more ground when it comes to screen time.

• Buying a Connected TV Operating System provider: 40.1% of respondents Accenture surveyed often use cross-service search engines to find their desired content and services. Additionally, CTV ad spend will grow by 22.4% in 2024, according to Insider Intelligence[1] , making it a compelling strategy for media companies to acquire a CTV OS provider.

Reinvention Imperatives

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.

Radical Actions Require Companies to Think Beyond Their Core Competencies

Foundational moves to get started

We’ve identified five actions to jump-start your radical reinvention.

1. Review your audience against consumer migrations. Consumers are certainly not all the same, but their differences have become more subtle in recent times — and businesses need to be aware of how those differences affect their desire for engagement with digital media providers.
   
   
2. Map your portfolio against the changing landscape. Dive into consumer data to identify differences to discover value pools. Understanding how the more modern and diversified media portfolios stack up against the existing legacy media’s should help companies identify pockets of growth.
   
   
3. Embrace the archetypes. Our Reinvent for Growth report last year introduced three archetypes — content merchant, audience cultivator, and audience aggregator — that position companies to thrive.. The two radical examples we mentioned earlier demonstrate a movement toward an archetype: Merging with a Gaming studio represents the Audience Cultivator archetype, whereas buying a Connected TV OS provider follows the Audience Aggregator archetype.
   
   
4. Take a hard look at your financials and the currency you have available to invest in reinvention. Assess the investment needed to update your portfolio to execute these changes. Look for business opportunities to free up cash to invest in this reinvention. A Are you in the businesses bound to grow and generate free cash flow into the future? How must you reshuffle your portfolio to adapt? Is your best move to position yourself to be acquired?
   
   
5. Rethink everything. Transformation is essential to realize value creation. This includes changing the business mindset, ways of working, organizational structure, technology stacks and talent.

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.