Data is the currency of the future in media and entertainment (M&E). Yet companies that monetize their content by licensing to distribution partners are being undercut in one area that’s critical to success in our current media landscape: data sharing.
Other than basic information, licensing agreements traditionally do not require distributors to share viewership data such as content preferences, viewing habits or demographic details. As industry finance executives prepare for the NAB Show in Las Vegas next week, they should consider how to place data at the center of future growth strategies.
Without such data, organizations must make strategic revenue decisions without insight into audience expectations, affinity, and asset performance. That’s suboptimal, especially considering the investments required to acquire and produce content and the complexity involved in determining ROI across traditional licensed distribution and emerging direct-to-consumer models.
Content Centric
This requires a shift in perspective, from a distributor-centric to a content-centric model. It’s no longer a question of, “How are MVPD subscriber counts trending?” Instead, it’s, “How do we maximize profit for season X of series Y through various possible combinations of distribution partners and monetization models?”
For example, even with Olympic viewing on the decline, NBCUniversal pulled in viewers for the Tokyo games through a personalized experience on Peacock and various linear channels, a flagship prime time broadcast, and a savvy social media strategy.
The approach created dynamic advertising options that paid off; NBC’s media unit revenue in the third quarter of 2021, driven largely by the Tokyo Summer Olympics, grew 47.5 percent to $6.8 billion, “reflecting higher advertising revenue and distribution revenue,” the company reported.
As finance teams face the future, they need to be pursuing a similarly multi-pronged data-first approach. How can companies pull in data to build confidence around content investment? And once you have the content, how do you maximize its value across platforms?
Executives will certainly be looking for answers to these questions at NAB. But they’d also be wise to look for clues from two other sectors that have undergone similar shifts: music and retail.
Music: Performance-based Contracts
Most consumers aren’t loyal to record labels, in the same way that they aren’t loyal to film studios or television networks. When it comes to music, they’re interested in artists, genres, and often, rotating playlists that are an eclectic mix of both. At best, they’re loyal to the platforms that offer easy access to their changing tastes, such as Spotify.
That’s why the economics of streaming music royalties are incredibly complex. In addition to subscriber-based revenue share agreements with Spotify, Apple Music, and other platforms, labels benefit from various rate agreements depending on a host of variables (the number and location of streams, to name a few). It’s widely considered advantageous for popular artists and the labels that represent them to negotiate lengthier contracts and per-stream rates. For its part, Spotify has stated that they “don’t believe that a ‘per-stream rate’ is a meaningful number to analyze.”
The parallels to traditional TV revenue are obvious. As finance teams verge upon similarly complex digital revenue models, it’s never too soon to start negotiating licensing agreements that require distributors to provide the audience and content data that will factor into future deal terms. Of course, determining how to most effectively use data to validate distribution strategies if and when it is obtained is an ongoing challenge. Last year, EY found that nearly half of M&E executives believed their companies would fail soon without reinvention.
Those efforts come amid major disruptions in M&E, as many finance teams seek to balance traditional linear and digital/DTC revenue. This is the paradox of linear decline; organizations need to sustain the healthy cash flow still powered by pay TV subscriber models while also betting on the future, which will be digital and data-first. A content-centric approach accounts for both. This requires knowing what the consumer wants, of course.
Retail: Knowing Your Customer
One crucial pivot for M&E financial teams in the coming years is treating audience data as an invaluable asset and recognizing that it is the key to unlocking ROI, attracting advertisers and distributors, and creating long-term resiliency. Few sectors know more about using data to engage customers than retail, particularly the consumer packaged goods (CPG) and e-commerce segments.
CPG companies that earn revenue from distributors (such as grocery chains) can use real-time data to learn what’s flying off shelves and what isn’t, enabling them to adjust storage and supply chain needs proactively to save both money and time. It’s not difficult to extrapolate how media finance teams could apply the same level of data analysis to provide content acquisition and production teams with actionable insight into audience demand, segmented by distributor, user segment, and even title.
Online retailers often leverage predictive analytics to forecast customer behavior based on past purchasing patterns. The same recommendation algorithms behind Amazon’s streaming content services are at work in their e-commerce platforms. M&E organizations that effectively incorporate such detailed forecasting into their financial models will likewise be leaps ahead of their competitors.
“A key is for entertainment providers, digital platforms, and advertisers to understand the nuances between consumer segments and how sentiments vary across media types and generations,” Deloitte wrote in its 2022 media trends report.
Finance executives conversant in these practices add immeasurable value. Whether monetizing content via linear or digital methods, licensed or direct-to-consumers, understanding the data sources available to enable these practices is key. Aggregating internal and external data sets from device ID to payments in order to garner revenue insights will quickly become the domain of M&E finance teams.
Steps for Success
Networks that license content to linear and even digital distributors may not have real-time intel on content performance today. But finance and distribution teams can take the following steps to ensure they move forward:
None of these solves the core problem of limited access to distribution partner data. But if the music and retail industries are any indication, organizations that ready themselves regardless of industry-wide data sharing standards are in the best position to withstand future disruption.
Finance teams can get a head start by using the data they already have to move toward deeper insight. Plenty of CFOs who will be attending the NAB Show have that information at their fingertips. They need only to unlock its value.
