Trends Report 2017 – The Digital Puzzle

How has the new audiovisual value chain been reconfigured? And which players are best positioned to make the most of it?

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The major technological innovations and new digital strategies that have marked the last few years have led to significant changes in the audiovisual industry around the world. In fact, they have redefined infrastructures, uses, relationships with the audience, business models, and the competitive environment.

Content wins... again

While most of the big names in the industry have adapted to the new digital ecology, some fundamental questions remain:

  • How has the new audiovisual value chain been reconfigured?
  • Which players are best positioned to make the most of it?

These questions served as the framework for the 2017 edition of the Trends Report in which the Canada Media Fund examines the value creation opportunities that have emerged from this major industrial reorganization. The digital environment has become a virtual battleground, where competitors battle each other to seize the best opportunities and to position themselves in the evolving value curve.

While previous Trends Reports have provided opportunities to dissect a range of transformative phenomena that remain relevant and evolving, this edition focuses on four fronts: technology and innovation, consumer habits, business models, and markets and competition. We will discuss the following trends, and analyze the opposing forces and the interests involved:

  • Content distribution in the Discovery Oligopoly era. Will the dominant platforms tighten their grip on the Web and the discovery of content? The next tool in the struggle to control user attention: artificial intelligence.
  • The race for winning content is on. In an era of overabundance, what types of content stand out? Live, drama, and children’s programming are content to bet big on.
  • Diversity is a winning business model. While diversity raises crucial social and political issues, there are also many business opportunities for the taking.
  • Towards a new global playing field: the new centres of influence for consumption, content, and investment. The giants of Silicon Valley and Hollywood are no longer the only ones calling the shots. New hubs are emerging in other areas, especially in the Asia-Pacific region.

Notwithstanding the current lack of clarity around creating value in this ever-changing digital economy, one value vector is clear: content. Because the digital revolution is first and foremost about the exponential potential in the modes of production, distribution, and consumption of media content.

In the television sector, this has resulted in a proliferation of Over the Top services (OTT), ‘TV Everywhere,’ and other on-demand viewing models, combined with the prolific production of user-generated content. These new production and distribution avenues have created a content offering unprecedented in audiovisual history and have built up new demand for exclusive, original and quality content that stands out. According to the research team at the American FX channel, the number of original TV series increased by more than 200% in the last six years, reaching a peak of 455 new series broadcast in 2016. The stratospheric increase in supply that started in 2010 is mainly attributed to streaming video services (with Netflix out in front).

The years going forward are very promising indeed. With the burgeoning popularity of video games and the advent of virtual reality, augmented reality, and mixed reality, narrative experiences will become increasingly diverse and immersive, stepping up the solicitation of all our senses. These experiences will further expand the offering and compete with other audiovisual content to capture their share of user attention spans.

The stakes are sky-high. As The Boston Consulting Group noted in its The Value of Content report, the global television industry generated US$530 billion in 2016 (in advertising dollars, subscription fees and public funding), 70% of which is directly attributable to the content economy.

“But one thing is certain: content will be at the center of where the industry goes from here. And those who own and control the content will help steer the direction.”
— The Boston Consulting Group, The Value of Content, 2016

This quote reminds us that the “content” factor will continue to influence the economic landscape and policy decisions over the next few years. More importantly, it raises the fundamental question that guides the thinking in this report: who will benefit from the new equilibrium in the content value chain?

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