Top five media & entertainment industry trends to watch in 2023

Here are key trends to keep an eye on in the media and entertainment industry in 2023.

In brief

• 2023 will be another year of excitement and change for the media and entertainment industry.
• We will see more media consolidation activity and strategic combinations.
• Streaming companies, regional sports networks and movie theaters will need to innovate or face marginalization.

As the calendar turns to 2023, media and entertainment (M&E) leaders are taking decisive action to achieve ambitious growth plans and position their companies for future success as the industry continues its ever-evolving transformation. The business of content creation, distribution, advertising, and monetization is more fluid and uncertain than ever before, and media companies are racing to adapt. Here are five trends in the media and entertainment industry to watch in the year ahead as competition intensifies and the stakes rise.

1. Streamers bundle up to brave the elements

If we’ve learned anything in the past few years, it’s that long-term success in streaming requires establishing a durable subscriber relationship. Building on the long and successful legacy of the cable TV model, nearly all media companies that are active in the direct-to-consumer (DTC) arena today are now aiming to offer consumers a bundled offering of streaming content and other services.

Along with boosting sign-ups and reducing churn — thereby increasing subscriber lifetime value — bundles allow media companies to improve efficiency in marketing spend and technology investment. Consumers benefit by paying a lower all-in price compared to à la carte buying while also gaining access to a broader array of content in a single offering. Shrinking the aggregate number of subscriptions that consumers must manage is another plus.

Initially, streamers offered “soft” bundles, with separate DTC services packaged together for a favorable monthly rate. Going forward, media companies will fully integrate distinct streaming services into one application, creating a true “hard” bundle of content. Consumers will have the ability to toggle seamlessly within the app for content that was previously delivered through separate platforms and interfaces. By offering a greater selection of content on a common platform, and at an attractive relative price, DTC providers will have fertile ground to keep consumers engaged on, and subscribed to, their app.

To further strengthen the DTC customer relationship and raise switching costs, media companies are looking to attach other services to their streaming bundles, replicating the success that some of the large, digital-native platforms have had linking the video subscription to e-commerce, music, fitness, and other lifestyle offerings. Media leaders will also seek to leverage their portfolios of assets, or those of partners, to encourage lasting streaming relationships.

Streaming companies that lack content scale today and choose not to engage in a bundling strategy risk being marginalized in a market where the consumer holds the power to cancel at any time and is being trained by the industry to seek out a good deal. Owners of stand-alone DTC services will need to double down on their niche offering and core customer base to remain relevant.

2. Media deals are still a big piece of the puzzle

The intensifying pressure from investors to achieve DTC profitability will be a catalyst for further consolidation activity, especially for the group of relatively smaller players that rely on cash flows generated by fading linear assets. Strategic combinations will simplify the streaming marketplace for consumers, generate cost savings that can be utilized to fund investment in better content, marketing and technology, and rationalize an industry landscape that is driven by global heavyweights today.

Predicting when mergers and acquisitions will happen is very difficult, of course, even when the strategic rationale for action is clear. Forces influencing the timing of media deals are varied. Some players are still integrating prior acquisitions and are busy working to realize synergies that will improve future financial positioning. Others are highly focused on clearing tax and regulatory hurdles that will allow for efficient transactions and a more certain path to closing. Conditions in the capital markets and the broader economy are also major factors in any deal — and current visibility is low in both areas.

Regardless of the specific timing and list of criteria for dealmaking, media leaders have a proven track record of executing creative transactions to achieve their ambitions. In the year ahead, asset sales and spin-merge transactions may be more likely than whole-company deals. Reshaping the industry for the DTC era will require fitting the media puzzle pieces together in a manner that creates the greatest strategic value and competitive advantage while simultaneously threading the needle through potentially challenging deal structuring considerations.

If outright M&A is not possible for some media players, the imperative for consolidation is powerful enough that they will look to other options. Partnerships and joint ventures with industry peers can serve to accelerate market entry, share investment and deliver synergy benefits. While often more complicated than executing a straightforward acquisition or a sale, strategic commercial deals and partnerships are alternatives that many players in the industry will explore.

5. Metaverse is on the long-range radar

While the excitement around NFTs and visions of a metaverse-driven future may have cooled in late 2022 as macroeconomic factors took center stage, media companies continue to prepare for the next age of interactivity. Investment areas include strategic planning, research and development, consumer research and technology, with a goal of maintaining optionality as the metaverse comes into view.

Media leaders are studying how consumers will access content, engage with advertising, transact and socialize within an immersive internet experience. Blockchain-based digital assets, including NFTs, are expected to be a key element of the media value chain in the metaverse, enabling digital identity, asset ownership, royalty tracking and payments, and providing offline linkages to “IRL” experiences.

Today’s experimentation will become the business plan of tomorrow and the revenue generation beyond. To execute, media companies will stay on the path of taking purposeful steps, appointing dedicated metaverse champions and supporting them with technology, finance, legal, and creative talent to frame out scenarios and drive innovation. Capital allocation to metaverse-related initiatives will remain modest over the near term, but not minimal — there is commitment across the industry to stay proactive and engaged with this emerging opportunity.

For 2023, all signs point to another year of excitement and change for the M&E industry. These five trends — and many others influencing the industry — will require leaders to make bold moves to survive and thrive during this era of great disruption.

The views expressed in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

An abridged version of this article was originally published in TV Tech.