New Horizons Towards The Digital Turnaround

Transcription

1 State of the Media Industry New Horizons Towards The Digital Turnaround C O N F I D E N T I A L

2 Introduction Looking Back Ongoing slight value growth, but still behind pre-crisis level Development of market cap of top 450 CMT companies (break-down per sector) US$ bn 3,000 2,500 2,000 1,500 1, H11 Fixed & Mobile Telco Hardware Software & Services Media Consumer Electronics Cable & Sat. Recovery trend from 2008 crisis continues Together with Telco, Software & Services and Cable & Satellite, media sector has continued valuation growth trend since 2008 However, like Fixed & Mobile Telco and Consumer Electronics, Media still not reaching pre-crisis valuations 2

3 Introduction Looking Back TV & Online Valuation Up, Publishing & Agencies Down Development of market cap of media companies among top 450 CMT companies (break-down per media sub-sector) US$ bn Broadcast & Entertainment Online Content & Services Publishing Media Agencies Broadcasting & Entertainment and Online Content & Services with continued value growth Only Online has surpassed pre-crisis level Upward trend of Publishers and Media Agencies reversed in 1H H11 3

4 Introduction Looking Back Winners mainly in emerging markets and/or format innovators Top 5 in size, value in- and decrease (per market capitalization) Market cap CAGR 07-1H % 60% 30% GFK Sina 20 Netflix Market cap in $bn Naspers Baidu Tencent Holdings 0% Axel Springer Walt Disney Meredith RTL Group IAC Time Warner Pagejaunes Liberty Media Washington Post -30% Broadcast & Entertainment Publishing Online Content & Services Media Agencies Google 140 Strongest market cap growth in emerging markets Innovation leaders Google and Netflix leading in terms of value size and growth 3 out of 5 top value losers from publishing German players in mid-field Note: Baidu and Tencent among both top 5 market cap and 5 highest value growth companies, German companies added extra 4

5 Introduction Looking Forward Comprehensive Global Oliver Wyman primary research Respondents industry background Respondents company size (revenue in $m) Creative / Media Agency B2B Media Advertising 3% 3% 8% Other 12% 23% Online > $m 5,000 15% < $m % Radio Cable Operator 3% 6% 19% TV / Video 10% 13% Newspapers Magazines 25% $m 1,000 - $m 5,000 21% $m $m 1,000 N=120 5

6 Introduction Looking Forward to understand future expectations of media executives Respondents position General Management (All) 41% Strategy / Business Development 29% Marketing & Sales 12% Finance & Controlling 10% Content Creation 8% Content Distribution 4% IT 4% Product Development 3% Customer Service 1% Operations 1% Other 5% 6

7 State Of The Media Industry 2011 Economic Outlook Digital Turnaround On The Horizon, But Not For All Consumer Time Spend Changing Consumption Habits: New Content & Services And New Platforms Advertising And Consumer Spend Budgets To Finally Catch Up With Eyeballs Media Strategies And Capabilities & Strengths Believe in Yourself, But Prepare For A Dynamic And Volatile Future 7

8 Economic Outlook Majority anticipates growing revenues Future revenue expectations 1 (industry overall) Industry regains growth optimism 1 year 2 years 4 years decrease increase 23% 45% 22% 59% 22% 70% Majority expects increasing revenues Growth momentum to increase 2 1 year: 1.6% p.a. 2 years: 2.3% p.a. 4 years: 2.7% p.a. 1 Share of respondents expecting a decrease (<-1%) / increase (>1%) in average annual growth rate (CAGR) 2 Average expected annual growth rate (CAGR) across all industry segments, figures represent CAGR assumptions 8

9 Economic Outlook Assessment by industry sector differs significantly Future revenue expectations 1 (next 4 years) (by industry segment 2 ) Online most optimistic (~6% p.a.) Electronic 2.3% Print anticipates revenue decrease (>1% p.a.) Print Online -1,2% 5.9% Assessment of own business systematically more optimistic than sector Other 4.1% Print / Electronic +2pp Online / Other more in line 1 Figures represent weighted average expected annual growth rate (CAGR) 2 Industry: Print = Magazines, Newspapers; Online = Online; Electronics = Cable Operator, Movies, Radio, TV / Video; Other = E.g. advertising, B2B media, creative / media agency, e-commerce 9

10 Economic Outlook Optimism also for margins again online > electronic > print Expectations on margin development (weighted average expected annual growth rate , by industry segment 1 ) Online Other 3.0% 6.5% Across sectors, majority sees margin improvement until 2015 (62%, 30% strong growth 2 ) Online most optimistic (86%, 64% strong growth 2 ) Electronics 2.7% Electronic / Other more cautious, but still optimistic Print 0.4% Overall average: 3.0% Split view from Print still 50% expect improvement 1 Industry: Print = Magazines, Newspapers; Online = Online; Electronics = Cable Operator, Movies, Radio, TV / Video; Other = E.g. advertising, B2B media, creative / media agency, e-commerce 2 Strong growth = >10% increase 10

11 Economic Outlook Growing the mix: No major shift in business models Expected Evolution of Revenue Mix Other Syndication Commerce Merchandising Sponsoring One-time-purchase Subscription Advertising Overall mix across sectors expected to remain same Also sector-specific mix (e.g. higher advertising share for electronic media) stable Online expects slight shift towards end-user payments (e.g. subscriptions)

12 Economic Outlook Digital monetization strategies reflect traditional mix Priority of monetization strategies in online business 1 very high high Advertising (own sales) Freemium -basefree, premium paid Customer paid: Subscription Advertising (3 rd party network) Free online subscr. for offline subscribers Customer paid: Pay-per-user Syndication to 3rd parties 15% 31% 23% 41% 39% 57% 56% Across industries, growing ad revenues is #1 priority Freemium models slightly preferred over pure pay subscriptions Online with strongest focus on pure pay subscriptions Print with strong belief in offline / online bundles 1 Priorities ranked on a scale of 1 = very low to 5 = very high 12

13 State Of The Media Industry 2011 Economic Outlook Digital Turnaround On The Horizon, But Not For All Consumer Time Spend Changing Consumption Habits: New Content & Services And New Platforms Advertising And Consumer Spend Budgets To Finally Catch Up With Eyeballs Media Strategies And Capabilities & Strengths Believe in Yourself, But Prepare For A Dynamic And Volatile Future 13

14 Consumer Time Spend Digital eyeball run continues most dramatic in print Share of decrease / increase 1 media usage (average expected annual growth rate ) Offline Online / mobile decrease increase TV / Video 40% 26% Radio / Music 44% 10% Newspapers 91% 5% Magazines 86% 3% Books 66% 2% Games 26% 47% Online 3% 81% Mobile 0% 97% Ongoing shift away from traditional media Slight but noticeable shift away from Offline TV usage Games with stable outlook / usage growth in Offline Dramatic decrease for Print broad consensus of (strong) usage decrease Digital growth strongest in Mobile 1 Decrease = <-1%, increase = >1% 2 14

15 Consumer Time Spend Online significantly more bullish about electronic migration Expected shift from traditional usage (average expected annual growth rate , by industry segment 1 ) TV / Video strong decrease 2 decrease 2 Electronic 36% Print 18% Online 67% Online sector expects greater / faster usage migration to Digital for TV / Video Radio / Music usage Gaming Radio / Music Other 36% Electronic 40% Print 23% Online 67% Print sector expects slower migration Sector consensus on dramatic digital migration in Print Other 43% 1 Industry: Print = Magazines, Newspapers; Online = Online; Electronics = Cable Operator, Movies, Radio, TV / Video; Other = E.g. advertising, B2B media, creative / media agency, e-commerce 2 Strong decrease = <-5%, decrease = -1% to -5% 15

16 Consumer Time Spend Lost in migration? Race to recover offline losses Share of decrease 1 respondents 1 offline TV / Video Radio / Music Newspapers Magazines Books Games Shopping Social Network Communication 91% 86% 66% 40% 44% 26% 1 Indicating average annual growth rate (CAGR) Decrease = <-1%, strong increase = 5% to 10%, very strong increase = >10% (very) strong increase 1 online / mobile 24% 29% 22% 25% 44% 58 % 71 % 69 % 63 % 67 % 59% 80 % 68% 77 % 71% 90 % 59% 81 % Strong growth in digital usage especially mobile TV, Radio and Gaming offline usage losses likely recovered in Digital (online/mobile) Print threatened to lose usage to other media? New media categories taking up consumer usage 16

17 State Of The Media Industry 2011 Economic Outlook Digital Turnaround On The Horizon, But Not For All Consumer Time Spend Changing Consumption Habits: New Content & Services And New Platforms Advertising And Consumer Spend Budgets To Finally Catch Up With Eyeballs Media Strategies And Capabilities & Strengths Believe in Yourself, But Prepare For A Dynamic And Volatile Future 17

18 Advertising and Consumer Spend Budgets catching up with eyeballs Expected change 1 in media usage advertising spend consumer spend Online 47% 31% 16% increase 2 strong very strong 86% 46% 40% 59% 34% 25% Mobile 86% 34% 89% 20% 84% 38% 52% 69% 46% 1 Indicating average annual growth rate (CAGR) Strong increase = 5% to 10%, very strong increase = >10% 18

19 Advertising and Consumer Spend Hard times for publishers TV grows spends, print loses TV / Video Radio / Music Newspapers Magazines Out-of-home Media 1 Media usage - 40% 28% + 44% 30% 91% 5% 86% 3% Expected change 2 in: Advertising spend Consumer spend 26% 18% 37% 44% 45% 33% 30% 23% 85% 68% 6% 13% 80% 61% 4% 14% 13% 32% decrease 1 No figures for media usage / consumer spend 2 Indicating average annual growth rate (CAGR) ; decrease = <-1%, increase = >1% increase 19

20 Advertising and Consumer Spend New guys to take chunks of ad and end user spend Expected growth rate 1 in (share of more than 10% increase responses) advertising spend consumer spend Social media expected to increase share of digital advertising Social Network Gaming Sites Shopping Sites Verticals Search Sites Video & Music Sites Communication News General Interest Portals 69% 49% 45% 42% 39% 33% 27% 24% 16% 48% 49% 54% 35% 16% 30% 33% 23% 18% Social media, Gaming, Shopping and Verticals with strongest growth in digital budgets Lower growth expectations for Search News Sites and General Portals losing touch 1 Indicating average annual growth rate (CAGR)

21 State Of The Media Industry 2011 Economic Outlook Digital Turnaround On The Horizon, But Not For All Consumer Time Spend Changing Consumption Habits: New Content & Services And New Platforms Advertising And Consumer Spend Budgets To Finally Catch Up With Eyeballs Media Strategies And Capabilities & Strengths Believe in Yourself, But Prepare For A Dynamic And Volatile Future 21

22 Media Strategies Ending the diet: Growing the pie instead of tightening the belt Strategic priorities business improvement 1 Increase Topline Reduce indirect cost Reduce direct cost Increase CAPEX very high 30% 29% 27% high 82% Growing the Topline single most important strategic priority Mixed picture for all other main thrusts Traditional media (Electronic / Print) with relatively stronger priority on cost reduction Reduce CAPEX 6% 1 Priorities ranked on a scale of 1 = very low to 5 = very high 22

23 Media Strategies Do it yourself & at home: Innovate, penetrate, diversify Strategies for revenue growth 1 New products Existing products New business area Geo expansion (less developed countries) M&A Geo expansion (global) Value chain integration very high 29% 24% high 75% 68% 58% 48% 48% Organic, home-grown strategies with clear priority over geo expansion Product innovation Product penetration New business areas Print with least focus on new products / highest focus on M&A Online with relatively higher priority on geographic expansion 1 Priorities ranked on a scale of 1=very low to 5=very high 23

24 Media Strategies Birds of a feather : Priority for partnering with peers Priorities of potential partners 1 Other media / Software / Technology companies Device Manufacturer Other industry very high 1 Priorities ranked on a scale of 1=very low to 5=very high high 38% 33% 56% 52% 63% Overall, preference for partnering within the media sector Sector differences: - Electronic media with higher affinity for partnering with other media - Electronic media with highest affinity for Google / Apple partnerships - Online with highest priority for software / technology partnerships 24

25 Media Strategies Analytics & targeting suppliers among the future stars Assessment of evolution of players market position Low Variance High Worsen position other software Agencies Portals Telco Improve position Ad networks Content publishers other hardware other social media Ad servers Exchange platforms Content producers Analytic & targeting suppliers Note: Player's future position assessed on a scale of -2 = significantly worsen to +2 = significantly improve Stars : Google, Apple, analytics & targeting players Expected increasing importance, but high uncertainty: Facebook Slow but sure winners: advertising intermediaries Decreasing importance: Portals, media agencies, Telcos, Microsoft 25

26 Media Strategies Cost improvement focus on streamlining and tech investment Priorities for cost improvement 1 Process optimization Invest in IT Simplify orga very high high 53% 62% 60% Make it smart & simple unanimous focus on process optimization, organization simplification and IT/ technology investments Outsourcing Reduce material cost Headcount reduction 22% 22% 33% Print with relatively highest priority on these topics (also headcount reduction) Reduce CAPEX 8% 1 Priorities ranked on a scale of 1 = very low to 5 = very high 26

27 Capabilities and Strengths Broad marketing & sales agenda data analytics stand out Priorities for marketing & sales capabilities 1 Data mining Shorter time to market very high high 62% 69% Marketing & sales capabilities generally of high importance Top 2 mentions (data mining and time to market) comparatively less in focus for print Branding Crossmedia 60% 60% Cross media capabilities in focus for print and electronic media Multichannel 57% 1 Priorities ranked on a scale of 1 = very low to 5 = very high 27

28 Capabilities and Strengths Prepare for a dynamic future: Innovation speed & go digital Priorities for organizational improvement 1 Innovate more quickly Ability to manage numerous partnership Knowledge management Multinational footprint Governance effectiveness very high 35% 34% 1 Priorities ranked on a scale of 1 = very low to 5 = very high high 49% 45% 84% Innovation speed single most important topic for org improvement Print places less focus on org topics in general Online with relatively higher priority for partnership management High focus of going digital for traditional media Electronic media with highest awareness for multi-platform and mobile capabilities 28

29 Key Takeaways Optimism, dynamic change, new priorities + a problem child Optimism is back in most of the industry regarding revenue growth, margin improvement, and own performance vs. peers Digital usage and budget migration across media types to continue - Different assessments per sector, e.g. onliners expect quicker electronic media migration than traditional sectors - Online, mobile spend (ad & consumer) to catch up with growing usage - New guys esp. social media expected to take large share of growing digital budgets - Print sector strongest loser in traditional usage and budget shifts full recovery in online / mobile questionable Topline growth, organic strategies / partnering, complexity reduction, innovation & time to market and data analytics will be the hot topics Publishers at the crossroads: most pessimistic revenue growth outlook + biggest traditional media usage & budget losses + still underestimation of migration speed & scope? + focus on old strategies (cost cutting + M&A) vs. innovation speed, data analytics = left behind in the digital turnaround? 29

30 Recommendations / Discussion Sector-specific agenda to win the future Electronic Media Publishing Online Key Observations Value Winners King content Usage / budget Value losers Usage / budget migration Value growth? Usage / budget growth Key Theme Defend & secure adjacent revenues (Re-)gain the future Extract value Business Model End-user Digital End-user Diversify End-user Scope Multi-platform OTT Multi-platform Video Geography Cost Adapt operating model Build margins Capabilities Analytics Innovation Analytics Innovation 30

31 Contact For further questions or to participate in the study Denis Burger Niko Steinkrauß