The rise of disruptive technologies and business models in the media sector is causing considerable concern among sector executives, many of whom say that they are not well prepared to deal with increased, and new, competitive pressures. Executives are particularly concerned about the use of social media, customer experience, cloud and broadband based technologies.
Media companies face a barrage of new threats, from new entrants such as Netflix disrupting traditional television, to large advertising platforms such as Facebook, disrupting the traditional revenue models of, among others, newspapers. New technologies are likely to create a host of new threats, from improved competitive business models for competitors, to new entrants taking market share or completely disseminating markets as such.
To better understand how media organisations are rising to the opportunities, and threats, KPMG, for its ‘A call to action Disruptive technologies barometer: Media sector’ report, surveyed 580 senior executives within media companies from 16 countries.
According to the respondents, considerable uncertainty remains around the preparedness of media companies to the effects of disruptive technologies on their respective markets. Around 33% of companies report that they are very prepared in terms of a strategic vision for technology, while 31% say that they are prepared in terms of executive support. Knowledge of available technology solutions preparedness comes in at 27% of respondents, while 25% have their budgets very well in order.
The consultancy firm’s own analysis of the survey results finds that the relative lack of preparedness means that it is likely many companies remain unsure about the direction from which disruption may arise, even while the firm’s research shows that those that are slow to react or respond to changes, risk being left behind.
In terms of the kinds of negative impact disruptive technologies may have on the businesses surveyed, competitive pressures standout – 74% of respondents cite that new competitors have emerged from within their industry as a result of leveraging disruptive technologies. 61% of respondents note that disruptive technology has allowed new competitors into their industry from other industries, while 44% say that incumbents are using disruptive technologies to get an edge over them.
Respondents too are expressing more existential concerns, with 44% saying that disruptive technologies are undermining their company’s business model, 44% say that they can’t invest enough to keep and 43% say that they are only willing to bet on proven technology – leaving them behind if a risk pays off for a competitor.
The research also asked respondents to consider the potential impact of disruptive technologies on their business in the future, and their respective concern about those impacts. The biggest concern is ‘the use of social media to disrupt how media providers engage with consumers’, cited by 87% of respondents. ‘Cloud-based technologies and services disrupting business models’ came in second equal with ‘broadband and mobile growth threatening the suitability of traditional media platforms’, both cited by 81% of respondents.
Further risks, cited by respondents 80%, 79% and 77% of respondents respectively, are ‘disruptive technologies threatening monetisation in the media sector’, linear programming being replaced by non-linear programming’ and ‘core operating models needing to be updated in the face of pressures from disruptive technologies’.
Examples of such concerns are the effect of companies such as Google and Facebook on the advertising revenues of traditional media platforms, such as television and newspapers. These companies, which are themselves not publishers (or so they claim) in the traditional sense, are continuing to ramp up advertising revenues – often leveraging content from traditional publishers – Facebook for instance has increased advertising revenue from 57% in the first quarter of 2016, from $3.3 billion to $5.2 billion.
While the research notes that there are risks for companies that are unable to react in a sufficiently timely manner to disruptive technologies, it too finds that many companies understand that disruptive technologies also offer a range of opportunities to improve their own businesses performance.
When considering how various technologies improve operational performance, in terms of a moderate or significant impact, 80% cite marketing platforms and data and analytics as impactful, followed by ‘mobile’ and ‘digital payments and currency’, both at 79%. Social media too is seen as a key route for deriving tangible business improvement, as cited by 77% of respondents. Lowest scoring are 3D printing, cited by 63% of respondents, and robotics, cited by 62%.
According to Peter Mercieca, Global Chair of KPMG's Media and Telecommunications arm: “Disruptive technologies can act as a driver of change, breaking down old processes and ways of doing things. Its effects, however, are pervasive, requiring business to invest differently, plan differently, let go of old assumptions and habits, act boldly and adapt. Indeed, in order to create sustainable new revenue opportunities for their companies, media leaders need to be early movers or fast followers.”