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2023 Media and Entertainment Industry Outlook | Deloitte Global

Five trends shaping a new ecosystem of engagement

Streaming video, social media, and gaming are helping to enable new business models and reshaping media and entertainment. But the real story for 2023 is that these three sectors are increasingly becoming more interdependent as part of a broader and richer media and entertainment ecosystem. Successful companies will likely develop strong visions that span these sectors and pull their entire industries forward.

Adapting to continuous change in the industry

 

In 2023, indications show that change in the media and entertainment business is likely to continue. Studios and video streamers face the reality of their own market disruption, trying to find profits in a less profitable business. They not only compete with each other for attention, time and revenues, but with social media, user-generated content and video games. The latter have evolved more quickly, staying close to younger demographics. 

While streaming video-on-demand (SVOD) services spend billions on content to tempt fickle subscribers, social media services have more free video content than they can manage. Top social media services are leaning into user-generated video (UGC), emphasising users’ interests more than their connections—and looking more like a new kind of personalised TV. While the creator economy has supported social media and brought independent creators closer to their audiences, creator incomes are still lean and unreliable. Leading UGC services seem unsure how best to support their content creators and brand ambassadors while keeping their own costs down. At the same time, more socialising may be shifting into messaging services that lean into utility more than entertainment.

This year’s outlook doesn’t have its own chapter on video games. Instead, gaming is represented throughout. In 2023, the story of gaming is that it is impacting every part of the media and entertainment industry. All entertainment strategies should consider video games, from simple mobile games to massively multiplayer services and rich hyper-realistic narrative game worlds. Gaming may also highlight the tight communities and fandoms that can help sustain and amplify entertainment franchises. In 2023, it may become clear that video, social, messaging and interactive are all part of the same ecosystem of engagement.

Download the full report to learn more about the impacts of media and entertainment industry trends, key actions to take, and critical questions to ask.

It’s been 15 years since the streaming video revolution began and we can now see the impact of its disruption. In 2022, viewership for SVOD services in the United States—the most mature market for SVOD—finally surpassed cable and broadcast TV. Leading US providers have established global footprints, and media companies in more countries have launched their own domestic SVOD offerings. As a delivery technology, on-demand streaming has radically disrupted video consumption, upending the entire entertainment industry.

Operational costs are high and competition for subscribers is fierce. Amid declining economic conditions and expected high subscription cancellations, most US streamers now offer cheaper, ad-supported tiers. Some are launching yearlong contracts at discounted rates. So-called FAST services—free ad-supported television—provide live and linear programming (i.e., not on-demand) with a more lean-back, ad-heavy approach.

These pathways lower the price of subscriptions and can make profitability harder. Providers are testing how much people will spend for content with, say, six minutes of ads per hour, versus a premium, ad-free subscription. Many are raising the prices of premium offerings, exploring whether “business class” can subsidise the economy seats. The year ahead may see more experiments with content windowing, with cheaper subscriptions having to wait 15 or 30 days to see top new releases.

Strategic questions to consider:

  • What is the right balance of pricing, advertising, and spend on content and marketing?
  • What is the best path for a given streaming video company to grow its portfolios, within the video market but also with gaming and UGC?
  • What is the distinct value of streaming video within the broader landscape of media and entertainment? How can streamers reinforce this value, especially to younger generations, who may be more engaged with UGC and gaming?

Streaming video may have disrupted an entire industry, but social media has disrupted the whole world. By amplifying the most fundamental aspect of humanity—communication—social media has helped enabled us to forge global relationships, collaborate beyond our geographies, attain the celebrity once guarded by Hollywood and potentially wield influence over millions of followers. All from the palm of our hand.

Now, perhaps due to the impossible weight of content moderation, the looming regulatory guardrails coming to contain its business model, or simply the need to reinforce its value for advertisers, social media seems to be growing less social.

Communication and socialisation will likely continue to shape the internet, just as it has shaped us before for eons. But in 2023 social media may look more like an open stage for performers than a social network.

Strategic questions to consider:

  • What does it mean for the future of social media companies if they become less focused on “social” and more on entertainment?
  • How can media companies, brands and creators leverage the evolution of top social media services to their advantage?
  • And where is media and entertainment being led by social gamers and digital natives, who increasingly organise their sense of self and belonging around digital networks and virtual experiences?

Creators, and the content they produce, are taking over social media feeds—with around seven in 10 US consumers saying they follow at least one of these personalities online. Creators are directly supporting the social commerce marketplace, creating viral trends and contributing to the time consumers spend watching user-generated videos on social platforms.

However, most creators make less than US$50,000 per year and many are actively looking to diversify their sources of revenue. Currently, creators report that more than half of their revenue comes from brand partnerships, with smaller shares of their income coming from follower contributions. Notably, they don’t receive much revenue from the platforms, despite established “creator funds” on some traditional social media services.

Enter the independent creator. These creators are shifting to rely less on traditional social platforms and, instead, are taking their content, communities, brand partnerships—and their incomes—directly to consumers on different platforms and services. Notably, this model also removes a barrier—the social media service and the algorithms they rely on—between the creator and their community members and allows for more control over their content, creativity, partnerships and livelihood.

For brands themselves, this expanded creator economy model allows them to find creators who truly represent their products and can reach their core, niche audience. However, with so many creators, and so many places to find them, brands may have a hard time tracking down their ideal partner. Traditional social platforms will likely remain the go-to for creators, but they may lose some audiences if creators detach or leave platforms and take their followers with them.

Strategic questions to consider:

  • How can social media platforms form better partnerships with creators and leverage their collective knowledge to improve processes, payments and partnerships for all creators?
  • How can brands continue to strategically partner with a diverse and inclusive cohort of creators—across platforms, services and experiences—given the emergence of this new, decentralised model?
  • How can companies that are building game worlds and metaverses attract the next wave of creators?

The media and entertainment landscape is ever-shifting and evolving to become more personalized, more interactive and more user-created. Much of that evolution is being driven by the needs and desires of Generation Z—or those born between 1997 and 2012—the oldest of which turn 26 this year.

Many members of this digitally savvy cohort were raised in technology-filled homes and had early and regular access to smartphones and tablets, on-demand digital content, and gamified learning and entertainment experiences. In turn, using digital technology comes quite naturally to Gen Zs, and they often gravitate toward more social and immersive media.

Media and entertainment companies and brands should consider paying attention to this budding Gen Z cohort as they mature into adulthood and gain purchasing power. Currently, Gen Zs make up approximately 20% of the US population—and they are more racially and ethnically diverse, and on track to be more educated, than any generation before them. Recognising the diversity of this generation, their increasing spending power, their passion for advancing social issues, and their evolving, digitally focussed entertainment preferences could likely be crucial to companies looking to win favour with this young cohort.

Strategic questions to consider:

  • How can brands better understand Gen Z consumers (and those generations that follow them) and their preferences to help predict what’s coming next and best serve these young audiences?
  • How will the media and entertainment behaviors of Gen Zs shift, or not, as they age? Will generations that follow them show similar—or even greater—digital and connected behaviours?
  • How can brands earn favour and loyalty with these young consumers now so that they remain the preferred brands for Gen Zs as they mature?

Fans and fan communities may be an under-recognised asset in the media and entertainment industry. In an ecosystem filled to the brim with choices, these networks of devoted enthusiasts swarm around content, teams, creators, video games, celebrities, musicians, moments and more—and are often responsible for making something a hit or a miss. While people’s fandom usually maps to a media and entertainment company, object, or experience, their fandom is also usually closely linked to their identity and deeply held beliefs—making them important evangelists for the media and entertainment companies and creators they choose to support.

Media companies and creators have an opportunity to explore existing fan communities for feedback and set up new channels to gather insights directly from fans. They can work to have a holistic understanding of exactly who their fans are, how they came to fandom, where fans are in their fan life cycle and how they can best be served.

Still, challenges may exist for businesses. Simply locating and identifying enthusiastic fan communities can be difficult, since they can often be decentralised across digital properties. At the same time, media companies and creators might do well to remember that they can’t cater to everyone, all the time. Listening to and engaging authentically with loyal fans is likely to only improve the product, expand reach, and build stronger connections—and keep fans coming back for more.

Strategic questions to consider:

  • How can brands, studios, and content creators ensure their relationship with fans is mutually beneficial—advancing their own bottom line as well as meeting the needs of the community?
  • What can brands or companies do to learn more about their fans?
  • Can brands, studios and content creators harness the collective enthusiasm of fans throughout the development, production, and promotion of media and entertainment properties?

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