Shifts in consumer spending and speed of tech change a threat to M&E

21 Apr,2014

 

Internationally reputed consulting major PricewaterhouseCoopers (PwC) has revealed the findings of its 17th Annual Global CEO Survey where it surveyed 72 Media & Entertainment CEOS in 33 countries, and conducted in-depth interviews with three media CEOs: Michael Roth, Interpublic Group, Donatella Treu, II Sole 24 Ore SpA and Nigel Morrison, Skycity. While the main report can be downloaded from www.pwc.com/ceosurvey, here are the salient features:

 

There is growing optimism amongst M&E CEOs as they transform their businesses and collaborate in order to capitalise on opportunities presented by technological advances and demographic shifts. However, the same business threats remain: shifts in consumer spending and behaviour and speed of technological change.

 

In ‘Fit for the future: Capitalising on global trends’, we also explore three forces that business leaders think will transform their business in the next five years: technological advances, demographic changes and global economic shifts. We show how these trends, and more importantly the interplay between them, are creating many new – but challenging – opportunities for growth through: creating value in totally new ways; developing tomorrow’s workforce; and serving the new consumers.

 

We also show how, in responding to these trends, CEOs have the opportunity to help solve important social problems.

 

In short, the demands being placed on business leaders to adapt to the changing environment are increasing exponentially; CEOs are having to become hybrid leaders who can successfully run the business of today while creating the business of tomorrow.

 

This sector key findings report takes a closer look at responses from M&E CEOs. It is based on 72 interviews, conducted in 33 countries around the world. We also cite in-depth conversations with two sector CEOs.

 

Sector snapshot

Product and service innovation will provide the greatest opportunity for revenue growth and is likely to play a pivotal role in addressing their greatest concerns in M&E: shifts in consumer spending and behaviour and speed of technological change. However, risk management is the area of the business least prepared moving forward.

 

Growing optimism, but the same business threats remain

There is growing optimism amongst M&E CEOs; 93% (compared to 80% in 2013) are somewhat or very confident in their company prospects for revenue growth in the next three years. They are also more optimistic about the global economy despite some concerns. 39% of M&E CEOs believe that the global economy will  improve in the next 12 months, compared to 20% last year. However, there are concerns about Government response to fiscal deficit and debt burden and growth in developed economies.

 

The same business threats remain this year. The top three business threats M&E CEOs are extremely concerned about are: shifts in consumer spending and behaviour; speed of technological change; and new market entrants.

 

Innovation will drive growth, but is more Government support needed?

Over half of M&E CEOs surveyed (56%) see product/service innovation as the main opportunity to grow their business in the next 12 months, more than any other industry surveyed. As such, a majority of M&E CEOs are focusing on developing an ‘innovation ecosystem’ which supports growth. However, 58% also think that the Government in their country has been ineffective/greatly ineffective in developing such as ecosystem.

 

Growing optimism in company growth prospects…

There is growing optimism amongst M&E CEOs in their company prospects for revenue growth in both the short and medium term:

 

• 83% of M&E CEOs surveyed (compared to 70% in 2013) are somewhat or very confident in their company prospects for revenue growth in the next 12 months

 

• 93% of M&E CEOs surveyed (compared to 80% in 2013) are somewhat or very confident in their company prospects for revenue growth in the next 3 years

 

Entertainment and media CEOs are also more optimistic about the global economy despite some concerns

39% of M&E CEOs believe that the global economy will improve in the next 12 months, compared to 20% last year. However, M&E CEOs also have some concerns: 74% are concerned about Government response to fiscal deficit and debt burden and three quarters are concerned about the continued slow or negative growth in developed economies.

 

The same business threats remain

 

Shifts in consumer spending and behaviours, and the speed of technological change continue to keep CEOs awake at night and are their greatest concerns:

 

• 71% of M&E CEOs are somewhat or extremely concerned about shifts in consumer spending and behaviours, more than any other industry surveyed (and compared to a global total response of 52%)

 

• 65% of M&E CEOs are somewhat or extremely concerned about the speed of technological change (compared to a total global response of 47%)

 

But what gives entertainment and media CEOs the most sleepless nights?

Top three business threats M&E CEOs are extremely concerned about

 

Shifts in consumer spending and behaviours

M&E CEOs, more than any other industry surveyed, are extremely concerned about shifts in consumer spending and behaviours.

 

Speed of technological change

Technology continues to transform the industry and M&E CEOs, more than any other industry surveyed, are extremely concerned about the speed of technological change.

 

New market entrants

M&E CEOs, more than any other industry surveyed, are extremely concerned about new market entrants.

 

What are entertainment and media CEOs saying about shifts in consumer spending and behaviours and the pace of technological change?

 

What PwC is saying

New technology and changing consumer spending patterns will continue to dramatically shape the M&E industry at great pace.

 

For example, in 2014 we forecast that consumer spend on mobile Internet will overtake that from fixed broadband. Clearly this provides great opportunity for those businesses best prepared.

 

Innovation will drive growth and help address entertainment and media CEOs greatest concerns…

 

M&E CEOs are optimistic about their growth prospects, but what will drive this growth?

Growth will be mostly organic:

 

• Over half of M&E CEOs surveyed (56%) see product/service innovation as the main opportunity to grow their business in the next 12 months, more than any other industry surveyed

 

• Innovation in product/services will play a vital in role in addressing M&E CEOs greatest concern: shifts in consumer spending and behaviour and the speed of technological change

 

Innovation will drive growth and help address entertainment and media CEOs greatest concerns [continued]…

 

Constant innovation is critical to meet the demands of a more ‘connected’ consumer, as such:

 

• 56% M&E businesses are focusing on developing an ‘innovation ecosystem’ which supports growth as a priority

 

• 61% have either completed or are carrying out technology investment change programmes or have concrete plans in place to do so

 

…but is more Government support needed?

Most M&E CEOs think the Government has been ineffective in developing an innovation ecosystem which supports growth

 

Ineffective in creating an innovation ecosystem

More than half M&E CEOs think that Government has been ineffective in developing an innovation ecosystem that supports growth.

 

Innovation should be a priority

Compared to the global response, more M&E CEOs think that developing an innovation ecosystem that supports growth should be a top priority for Government.

 

Regulation has impeded innovation

Some M&E CEOs believe that as a result of regulation they have not been able to innovate effectively in the last 12 months.

 

Innovation: what are the rewards?

For companies willing to invest in the right innovation strategy the potential rewards are significant…

…the most innovative 20% of media, technology and telecoms companies we interviewed, in a recent survey (Seizing the innovation edge), have collectively benefited from an additional US $45 billion in revenue over the last three years, compared with the least innovative companies. This is the equivalent of more than US $1 billion per company, or a 14% revenue uplift.

 

For further information on PwC’s Global telecoms, media and technology innovation series visit www.pwc.com/TMTinnovators

 

 

A more collaborative approach in 2014…

Nearly two thirds of M&E CEOs surveyed (61% compared to 44% cross-industry response) plan to enter a new strategic alliance or joint venture in the coming 12 months, more than almost any other industry group surveyed.

 

This is a significant increase on last year; only 43% of M&E CEOs said they planned to enter into a new strategic alliance or joint venture in 2013.

 

Of those planning a strategic alliance or joint venture, 55% plan to do so in the more mature markets, which are driving digital growth: North America and Western Europe.

 

…but not top of the growth agenda

Even though more M&E CEOs are planning on entering into a new strategic alliance or joint venture in the coming 12 months, they are not top of the growth agenda:

 

• Only 11% of M&E CEOs surveyed believe that strategic alliances and joint ventures will be the main opportunity for growth

 

Business transformation is underway

 

M&E CEOs have been busy transforming their businesses in order to capitalise on global trends namely: technological advances and demographic shifts

 

• More than any other industry, 94% of M&E CEOs rank technological advances as one of the top three global trends that will have the most transformative effect on their businesses over the next 5 years

 

• 68% of M&E CEOs rank demographic shifts as one of the top three global trends that will have the most transformative effect on their business over the next 5 years

 

Customer growth and retention and technology investment is a priority…

M&E CEOs have been busy transforming their businesses in response to global trends.

 

With shifts in consumer spending and behaviours and the speed of technological change being key concerns for M&E CEOs, it is no surprise that nearly two thirds are making changes in the areas of customer growth and retention and technology investments.

 

…but what about risk management?

However, they are behind in some key areas such as risk management and strategy and organisational structure, with fewer change programmes either underway or completed than the total global response (38% compared to 53%).

 

M&E CEOs also believe that risk management is the area of the business least prepared to make changes in response to global trends.

 

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