As we wrap up 2023, many media and entertainment executives are already looking ahead and focusing on growth opportunities in an increasingly complex and fluctuating landscape. Amid shifts in consumer viewing and media consumption trends, and as new technologies and legacy platforms battle for dominance, what should leaders expect in terms of macro influences, deal opportunities, and the specter of generative AI (GenAI) bringing efficiencies and more change? Let’s take a closer look at the trends to watch in 2024 and where opportunities may exist to unlock value and gains.
1. Carriage agreements become change agents
A long-standing gripe of consumers purchasing the classic pay TV bundle is having to pay for dozens — or even hundreds — of channels that are never viewed. The advent of streaming enabled households to “cut the cord” and sign up for direct-to-consumer (DTC) services filled with the programming they wanted, while reducing their monthly bills.
Now, media companies operating networks and streaming services are attempting a high-wire act, trying to extend the life of their profitable linear broadcast and cable network assets while also pushing programming to streaming platforms to drive subscription growth, engagement and, increasingly, advertising revenue. At the same time, distribution companies are growing frustrated by the ever-rising rates demanded by linear network owners — even as viewership slides and the same programming content available in the legacy bundle also appears on streaming services. This dynamic is encouraging cord-cutting and devaluing what has been a decades-old symbiotic relationship.
In 2023, the outcome of an intense carriage negotiation between two industry heavyweights has reset the framework, and it’s about to serve as a template for others to follow in 2024 and beyond. Under the new model, a couple of things will happen. First, network owners will retain linear distribution for their most popular channels, protecting the still-sizable financial contribution from these businesses that fuels investment in streaming and content. And second, cable and satellite companies will, in turn, seek a rationalization of the network portfolio, eliminating from the bundle poorly viewed channels and their associated costs for consumers. More importantly, distributors will aim to package related DTC services with linear offerings to deliver a next-generation bundle of streaming and traditional broadcast and cable network content.
Pay TV consumers who also stream will benefit by not having to pay for the same content twice. Distributors will simplify their offering (fewer low-value channels) and potentially slow the rate of cord cutting. And media companies will stretch the remaining runway of linear cash generation while also gaining access to new streaming customers, especially for ad-tier services that require subscriber scale for success.
2. Deals … or no deals?
Following the burst of mega-transactions over the last five years that created the industry leaders of today, market participants and investors are eagerly awaiting what could be a final round of media consolidation. On the surface, the rationale for mergers and acquisitions (M&A) remains intact: amassing content and sports rights, scaling DTC, cutting costs, and improving competitive positioning against the digital-native behemoths. However, hurdles exist that may slow any push to further rationalize the industry in 2024.
To crank up the deal machine over the next 12 months, executives and boards will focus on several key areas:
