Despite the prediction of many pundits that the global media and entertainment industry would stagnate in these challenging economic times, the media market is abuzz with activity. Several high-profile mergers and acquisitions, including the proposed merger between powerhouse media research companies Taylor Nelson Sofres (TNS) and Gesellschaft fuer Konsumforschung (GfK), highlight the profound changes affecting the industry. Such activity provides marketers with interesting
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media and entertainment companies currently face. But, perhaps more importantly, savvy marketers can gain a better understanding of the broader market forces driving these changes, and can apply this knowledge to improve client service across a range of industries.
A Flurry of M&A Activity in 2008
Even as scores of media companies worldwide struggle to turn a profit, the current climate for deal making in the media and entertainment industry remains as robust as it has been in |
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plethora of prominent mergers, acquisitions, and sales proposals were still dominating the headlines in the business sections of major news outlets:
- Media Research.
The U.K.–based market research giant and industry pioneer TNS and Germany-based competitor GfK are discussing what has been dubbed a “merger of equals.” According to the publicly-disclosed terms of the proposed deal, each company would retain 50 percent controlling interest in the newly-formed entity. Global advertising and marketing firm WPP added to the intrigue surrounding this deal by expressing its own keen interest in snatching up TNS. Elsewhere in the media research sector, Cambridge, Massachusetts–based Forrester Research recently acquired erstwhile competitor Jupiter Research for U.S.$23 million in an all-cash deal.
- Print and Publishing.
In perhaps the most publicized prospective deal of the year, U.K. media conglomerate Reed Elsevier is reported to be shopping its Business Information division .The division encompasses more than 80 popular trade publication titles, including Variety and Publishers’ Weekly. Analysts speculate that bids for the business could start as high as U.S.$2.5 billion.
- Broadcast, Film, and Music.
Time Warner appears to be mulling a new acquisition, possibly leveraging the U.S.$9 billion it received from the successful spinoff of Time Warner Cable. Experts suggest that Time Warner has included Scripps Networks Interactive, the self-proclaimed leader in lifestyle media, on its short list of potential targets. Meanwhile, in Europe—the epicenter of M&A activity throughout 2008—Central European Media Enterprises agreed to buy two additional television stations, bringing its total to more than 20 broadcast operations worldwide.
Though the dollar value of the deals currently on the table pales in comparison to those struck in the heyday of media consolidation less than a decade ago, the shear number of deals proposed is nonetheless impressive.
Top Three Trends in Media and Entertainment (and beyond)
The most recent round of media consolidation is a response to the continuation of at least three prominent industry trends:
- Digitization—Escalating demand for digital information access is causing many traditional media companies to retool their business models to engage more consumers online. Many market watchers see the decision by Reed Elsevier to unload its Business Information division as part of larger strategic plan by the company to push more of its content offerings to the Web.
- Globalization—Media firms across all industry sectors are facing the challenge of providing multimedia offerings relevant to a global audience. During a press conference to announce the GfK-TNS merger, Donald Brydon, Chairman of TNS, explained that the demands of managing global marketing campaigns have made combining the assets of the companies a strategic necessity.
- Personalization—Consumers expect on-demand access to content that is highly personalized to their individual life experiences, interests, and needs. Many analysts think that Time Warner’s recent courting of Scripps Networks Interactive is driven by a need to expand its portfolio of niche programming offerings.
It is certainly possible that some of the deals mentioned above could fizzle out before year’s end. But the consumer behaviors and market trends that have fueled consolidation in the media and entertainment industry for more than a decade seem persistent. This means that, in order to survive and thrive in an increasingly competitive marketplace, media companies need to pioneer new ways to reach consumers—all while delivering a highly personalized and interactive experience. Because this environment tends to favor big companies with massive research and development budgets, the continuation of the consolidation trend seems likely.
Lessons for Marketers
A closer examination of the media and entertainment industry reveals applicable lessons for marketers on at least three levels:
- Marketing firms can use this information to approach media companies with a greater awareness of the business challenges they face. These firms can also use a deeper understanding of the industry to make better informed media buy decisions.
- If marketers understand that the trends cited here affect a range of industries, they can adapt their content offering to anticipate client needs. For example, companies can hone their ability to produce and deliver complex, multimedia content, or master Web 2.0 tools to align with a client’s emerging business strategy.
- Companies can take advantage of new communication channels and tools to further develop their own brand identity and connect with niche customers in the most relevant medium.
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