Consolidate, diversify or perish Arthur D. Little Media Flow of Funds, 2017 February 2017 Content Executive summary 3 1. Key Figures 4 2. Introduction 5 3. State of the industry transformation 6 4. News & Print – every cloud has a silver lining 14 5. Books – from ownership to access 21 6. TV & Video – Content is king afterall 27 7. Music & Radio – the dark days are over 37 8. Gaming – sudden death of physical media 42 9. Online advertising – mobile and B2B as next frontiers 51 10. Summary and outlook 57 Authors: Clemens Schwaiger Principal, Global Head of Digital Media Central Europe
[email protected] With thanks to the many co-authors: Agron Lasku, Carl Reiman, Peter Stegersjö, Javier Serra, Cristina Ortega, Richard Swinford, Camille Demyttenaere, Didier Levy, Eytan Koren, Mayeul Rebaudet, Elisabetta Cafforio, Max-Christian Rath, Iacopo Neri, Morsi Berguiga, Gregory Pankert and Karim Taga for their extensive contribution and comments. Executive summary The media industry is experiencing a massive digital transformation. This creates a complex and volatile environment for media companies and the transformation will significantly affect value flows going forward. Traditional media companies will need to take (tough) portfolio decisions as the digitization of the industry progresses. With a stronger domestic market and a higher share of audiovisual revenue, US-based media groups exhibit a more attractive economic performance than their European peers. Besides smaller scale, most European media groups also have sizeable legacy businesses in News & Print experiencing structural declines. However, as a consequence of this, European companies were forced to diversify aggressively into online segments, with online revenue of some of these companies now accounting for up to 50% (or, in some cases, more) of their total revenue.