US media’s digital transformation

By Christy Tanner, Advisor-in-Residence, The Project X Institute

The US media marketplace is currently undergoing a radical transformation, driven by changes in video consumption and shifting preferences, in terms of what audiences find engaging, entertaining and informative. Just how radical these shifts are be a matter of opinion, but it’s clear that we now have a far more competitive market, with many more companies competing for video attention, and a greater diversity of business models.

Picture a viewer, in lean-back mode during prime time, choosing between TikTok, Disney+, Samsung TV+, Pluto, The Roku Channel – and many more. Picture US-based broadcast and cable companies, that once competed in a relatively simple annual Upfront marketplace for advertising dollars, now sharing the sale process not only with social media giants but also with companies like Samsung and Roku that once were categorized primarily as hardware manufacturers and software developers, such as Samsung and Roku, as well as with major retailers like Walmart and Target, now competing for advertiser investment. At the heart of it all is a battle for data that can be used to sell products, goods and services more efficiently to leaning-back viewers.

The companies formerly categorized as hardware, software and retail experts are now building out both advertising sales teams and content development teams. While much of the trade and business press coverage is focused on the streaming wars between a half dozen major media companies, in fact, the definition of media itself is changing – and at an accelerating pace – in the US market.

Where it started

The 2000s and 2010s were years of exploration and cooperation among US media and tech companies. During this time, content creation experts leveraged tech platform hardware and software to reach cord-cutters and cord-nevers, as audiences increasingly tuned away from linear channels.

As the market grew, measuring the rapidly fragmenting distribution and consumption became increasingly difficult – with dozens of devices, services and platforms to measure an exponentially multiplying set of KPIs across mobile, web, social, CTV and more. Through it all, audiences adapted rapidly to a wide variety of new consumption habits, including:

  • Binge-watching.
  • Starting to view a show on one device and finishing on another device.
  • Managing spending by simultaneously subscribing to, cancelling and password-sharing among multiple SVOD services at once.

As barriers to entry fell, incumbent media companies face not just a more complex marketplace, but also a far greater range of competitors – many of them small, but some of them large and well-funded, with significant businesses and important competitive advantages.

How is it going?

In 2021, a Nielsen forecast predicted that linear and non-linear viewing would converge by the fall of 2022, representing equal amounts of viewing for the average US viewer. This simple statistic belies a significantly more complex media environment in which:

  • Content tastes and device usage are continuing to fragment.
  • Far more complex consumption timelines, making viewing behaviors much more complex to understand and analyze.
  • Advertisers now are shifting spending to streaming services and AVOD offerings at an accelerating rate, with new ad-funded tiers likely to drive further shifts.
  • Operating systems and hardware manufacturers now are also programmers and distributors, leveraging their interfaces and access to inventory to compete with incumbent media owners.
  • Executive roles are changing – with linear and digital decision-making converging, creating new needs for training and best practices.

The US media market has demonstrated that consumers will support both SVOD and AVOD offerings. In a Deloitte 2021 survey, 60% of those surveyed said they are okay with watching a light amount of ads (six or fewer minutes per hour) for a lower monthly subscription cost, while 39% of those surveyed said they would watch 12 minutes of ads per hour if the service was free.

As the 2022 Upfronts play out, they reflect the reality of the 2021 Nielsen forecast and 2021 Deloitte study. We’re seeing dramatic shifts in the massive annual transaction of advertising dollars. Media company sales teams that were once split into digital and linear experts now operate as one team, transacting on bundles of linear and digital ad inventory rather than conducting separate sales processes with different timelines.

Meanwhile, the prevalent 2010s existential concern that social media would decimate linear TV’s share of ad dollars has given way to a new set of concerns about much more powerful competitors – those who can tout capabilities in hardware, software, content, and data, including Amazon, Google, Samsung and Comcast. This new phase of competition promises to create new corporate giants, and inevitably, to break a few more corporate hearts.

Where are we headed in the 2020s?

US media companies are at a crossroads, part way through a transition that is still underway. During the 2020s, we can confidently expect to see further significant changes:

  • Audiences will become even more fragmented and harder to reach, as the number of devices, services and platforms continues to proliferate.
  • New entrants will capture a significant share of the ad market, in some cases overtaking traditional players. The incumbents will need to find new ways of competing with companies like Samsung and Walmart, at opposite ends of the market – with luxury Samsung retail environments and lower-priced Walmart-branded TVs, both targeting consumers with precision and personalized ads.
  • Gaming will be a meaningful part of the lean-back mix. Prime time entertainment for many will include simultaneous gaming and video consumption, in what looks a lot like what we now call “the metaverse.”

Though it may seem like the US media industry is nearing digital maturity, it’s still early days in the streaming evolution. By the end of the decade, old and new players alike are likely to be upended once again, but many will continue to be well positioned to provide audiences with new experiences and the marketplace with new value.

About the author:

Christy is a C-level media executive with 20+ years of experience in digital business and culture transformations.

Most recently, Christy spent eight years leading the News and Media divisions for CBS Interactive, overseeing all aspects of the digital businesses and content, including the massive growth of global and local streaming services for CBS News Digital. Prior to this, as CEO of TV Guide Digital, she led its sale to CBSi, after holding senior executive roles with Lionsgate, The Washington Post Company, Wolters Kluwer and Reed Elsevier.

Her expertise includes building entrepreneurial profit- and growth-driven teams; targeted strategies for direct-to-consumer AVOD, SVOD, FAST, CTV, social, and mobile consumer media habits; and creative marketing to reach Entertainment, News and Sports audiences via evolving linear and digital distribution channels.

Before earning her MBA from Columbia Business School, Christy began her career as a reporter and editor for The AP and the Memphis Commercial Appeal.

The opinions expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of Mediagenix or The Project X Institute.