Primary navigation:

QFINANCE Quick Links
QFINANCE Topics
QFINANCE Reference
Add the QFINANCE search widget to your website

Home > Sector Profiles > Media

Sector Profiles

Media Industry


Major Industry Trends

The term “media” refers both to various forms of communication and to the organizations behind this communication, including the press and news reporting agencies. This sector profile looks at the media in all its communication activities.

One hundred years ago the media consisted simply of the printed press. Today, there is a vast range of communication channels, including TV, radio, cinema, and the Internet, as well as print. However, common industry trends can still be identified, despite the increasingly diverse nature of the market.

Convergence

Convergence has been one of the buzzwords in the industry for many years. It relates to the emergence of digital technology, which has allowed media organizations to deliver text, audio, and video material over the same wired, wireless, or fiber-optic connections. The development of the Internet has played a critical role in media convergence, as it now allows people to read newspapers, listen to the radio, watch TV, and download music and movies (and play both) on their computers or, increasingly, on handheld devices. Consumers are now watching movies on their mobile phones and tablets and making phone calls from their personal computers. Technological advances also mean that consumers can watch TV programs on demand—that is, when and where they want, rather than when the TV schedulers decide to broadcast them.

The smartphone is the area where convergence is easiest, with the development of the so-called “phablet” (phone + tablet) category as manufacturers test how big customers are willing to go. However, global regional differences have emerged, according to a report published by Kantar Worldpanel ComTech in February 2014. It warned that “Phablet sales across Europe and [the] US have been gradually rising, but it’s China which is driving demand. Phablet owners are less likely than the average consumer to own a tablet, indicating that phablets are increasingly being used as the primary device to browse online in China. Interestingly, phablet ownership in China is skewed heavily to women, running counter to Europe and the US where it tends to be young, male early adopters.”

Kantar Worldpanel ComTech notes that the first European owners of phablets are now coming to the end of their first contracts and a significant number, 40%, are choosing to get a smaller device. The data from Kantar suggest that over time the phone market will tend toward one where phablet owners make up about 40% of users, those with devices between 4.5 in and 4.9 in (about the size of the HTC One) make up another 40%, and those with screens between 4 in and 4.4 in (such as the present lineup of iPhones) make up the other 20%.

Rumors increasingly suggest that in 2014 Apple will produce at least one phone with a larger screen—perhaps as large as 4.7 in or even 5.5 in—as buyers show a growing tendency to move toward larger screens and a diminishing tendency to buy smaller ones.

Broadcasters Under Threat

Advertising continues to migrate away from traditional broadcasters and toward social media and the Internet. In early 2014, Google’s chief business officer Nikesh Arora said that mobile devices such as smartphones and tablets will vastly expand the number of companies that advertise online and will allow Internet companies to reap more revenue than they have from customers on PCs. Google, the world’s no. 1 Internet search engine, generates the vast majority of its revenue from advertising. But its ad rates, like those of other Internet companies, have been under pressure as more consumers access its online services on small-screened mobile devices, where advertising rates are lower than on PCs.

Arora believes that Internet-connected or smart TVs will be the key driver of this trend as these devices go will from “nice-to-have” to “must-have” in the minds of consumers, forcing marketers to allocate more advertising dollars to online media. Internet TV is attractive to advertisers because it invites the possibility of a two-way interactive user experience and allows advertisers to target niche interests on a truly global scale at a substantially lower cost than the traditional broadcast model.

The newest generation of smart TV consoles is also reinventing the way consumers watch television and shop online. According to Strategy Analytics, smart TVs represented one-third of all global flat-panel television shipments in 2013 and they are expected to grow to 73% within the next three years. Smart TVs will almost certainly become the dominant standard household entertainment device by the end of the decade.

The manner in which people consume entertainment programming is ever changing. As technology advances, content may be distributed solely from a broadband-based platform instead of relying on a combination of over-the-air broadcasting, cable, and satellite providers. Google may already be banking on this concept as it wires major cities across the United States with Google Fiber, which is 100 times faster than basic broadband. It is possible that ultra-high-speed Internet service could strengthen economic development opportunities across the country. As the new generation of smart TVs arrives in consumers’ homes, retailers will need to turn up the volume and fine tune their ads to creatively merge sight and sound with the interactivity of the Internet to attract these hyper-connected consumers, says AOL advertising development person John Gregory.

Technological Developments

Apart from convergence, other technological developments are likely to have a dramatic impact on the media industry over the next five to ten years. 3D TV was launched in 2010, but so far has failed to attract consumers in significant numbers. TV makers are now seeking new strategies to revive their flagging operations, which are suffering as more and more people watch TV on smartphones and tablets. Thus, TV makers are looking at increasing screen sizes, boosting image quality, and making TVs “smarter” and more user-friendly.

So-called 4K, or ultra HD, models are one key trend that is expected to develop in 2013-14. A 4K panel has four times as many pixels as the full high-definition HD panels installed in many current TVs. When screens get bigger, even HD screens become less clear. Thus, 4K was introduced to continue to provide rich, sharp images. With the growth of smartphones and tablets, people can view videos and movies anytime and anywhere. But the screens of these devices are small, so the availability of televisions with rich, realistic images on big screens that provide an exciting viewing experience for consumers is becoming ever more critical, according to TV makers.

Prices start around US$2,000 for a TV, but the picture quality is so clear that it appears to be 3D. However, for 4K to be successful, the timing and rate of consumer and network adoption will need to progress in tandem. For this to happen, 4K content will need to be available everywhere and sets will have to be affordable. The problem remains, however, that it will take a rather larger investment by the networks, as well as advertisers, to be able to distribute and produce 4K content. Yet a large portion of networks and advertisers have yet to adapt to HD, which was introduced back in 2009.

Back to top

Market Analysis

Pay TV Shines in the Global Media Sector

Pay TV has been one of the growth areas of broadcasting in recent decades and has continued to expand in most areas of the globe in recent years. The worldwide pay-TV market reached 903.3 million subscribers in 2013, generating US$249.8 billion in service revenue. Internet protocol TV (IPTV) operators enjoyed significant growth (18.5% year on year) in 2013 to 92 million subscribers, yielding a total of US$37.2 billion in service revenue, according to data from ABI Research released in January 2014.

ABI Research forecasts that the IPTV subscriber base will grow to 161 million subscribers in 2019, accounting for 15% of the overall pay-TV market.

The cable TV market grew at the slowest rate among different pay-TV platforms, with only 3% year-on-year growth and ending 2013 with 570.2 million subscribers. Subscriber numbers in Western Europe and North America declined around 1% and 1.5%, respectively, in 2013. However, cable TV markets in Asia-Pacific and Latin America continued to contribute to the growth of the global market for cable TV, which is expected to reach a total of 634.5 million subscribers in 2019.

The global terrestrial TV market reached 903.5 million subscribers at the end of 2013, according to ABI Research. A declining pay-DTT (digital terrestrial TV) subscriber base in Italy and Spain had an impact on the overall West European DTT market, which dropped around 5% in 2013. Unlike Western Europe, the DTT market in Africa grew a remarkable 45% to 2.1 million subscribers in 2013. “As African countries start to switch over to digital, digital terrestrial TV has become an affordable alternative to satellite TV service in the region. ABI Research forecasts that Africa will have over 4.8 million DTT subscribers in 2019.”

DirecTV maintains its largest market share in terms of pay-TV service revenue, ABI reports. The company had around 20.2 million subscribers in the United States, with an average revenue per user above US$102 by the end of the third quarter of 2013. Globally, the pay-TV market is expected to grow to 1.1 billion subscribers, with US$320.3 billion in service revenue, in 2019.

Growth of the Internet Hits Newspapers

The newspaper industry is in long-term decline as readers migrate to the Internet. In 2001, the newspaper industry in the United States employed 414,000 people, but by 2011 that number had fallen to 246,020. The industry is declining at an average annual rate of 6.4%, according to IBISWorld, and it is expected to continue to decline at an average annual rate of 4.2% until at least 2017. The loss of advertising revenue has been the greatest challenge for newspaper publishers. The industry is banking on developing new digital products and new revenue streams to successfully make the transition from its dependence on print advertising.

According to a report on the American Journalism Review website published in February 2014, revenue earned by US newspapers continued to fall in 2014 as modest increases in revenue from newspaper sales failed to offset bigger declines in advertising, according to the latest earnings reports from the nation’s large, publicly traded newspaper companies.

The only positive news was that the decline in revenue was not as steep as a few years ago, thanks to a small uptick in reader payments from digital paywalls and increased subscription prices. “I wouldn’t call it a renaissance for newspapers, but I would definitely call it a stabilization,” said Gordon Borrell, a media analyst and CEO of Borrell Associates, quoted by the American Journalism Review.

In 2013 total revenue fell at each of five large US newspaper companies—Gannett, McClatchy, The New York Times Co., A. H. Belo, and Lee Enterprises—according to a review of their latest financial filings with the Securities and Exchange Commission, according to the article in the American Journalism Review.

Revenue for all five totaled US$9 billion last year, down 3.3% from what they collectively reported in 2012. The New York Times fared best, with 2013 revenue down only 1.1%, and McClatchy fared worst, with revenue dropping just over 5%. Gannett, the nation’s largest newspaper chain, wound up in the middle, with a decline of 3.6%.

Back to top

Further reading on the Media industry

Reports:

Websites:

Back to top

Share this page

  • Facebook
  • Twitter
  • LinkedIn
  • Bookmark and Share